duplex vs adu (accessory dwelling unit) in an expensive market

[Daniel Gima]

Hello! My name is Daniel and I love bigger pockets and have been  following the podcasts sporadically for the past few years. But besides that, I'm brand new to real estate!

I plan on moving to the Torrance, CA area and really liked the idea of house hacking. The market in Torrance is very expensive and there doesn't seem to be a whole lot of affordable duplexes available. I had also heard of people house hacking by converting an ADU on their property and renting it out.

What are some pros and cons of each for the purpose of house hacking and getting started in real estate?

Thanks in advance!!!

-Daniel

[Dan H.]

I see a lot of answers from people not in CA.

As I suspect the OP is aware, in CA the state has set minimum criteria for allowing ADUs that no CA jurisdiction can be more restrictive than the state regulations. In addition, various cities have started waiving development fees for ADU construction.

So this is my comparison of duplex to quad (I own quite a few duplex to quad but no ADUs (yet)).

Duplex has less residency rules. Some jurisdictions require the owner to occupy the ADU property. Duplexes can be bigger. The state ADU limits sizes of ADU to the larger of 1200' or 50% of the existing structure but a jurisdiction can be less restrictive (i.e. a jurisdiction can all larger but is not required to).

The real benefit I see for the ADU is that they can be placed in higher class neighborhoods than duplexes are often found. I can buy in a large lot in an A class area and place an ADU on the property creating two units where there was only one. I do not view this as an entry move in Coastal So Cal. For example purchase a home a block from the beach in Encinitas with a larger lot for $1M. Encinitas is real ADU friendly and has pre-approved plans. I use the pre-approved ADU plan and build a 1200' ADU having saved development and plan costs so that the cost really is solely a function of the quality of build. Now I have 2 units in and area where the RE sells for $1M+.

If I were staying with B- to C class area I would stay with the duplex option. There are enough available and you should be able to find some with simple rehab value adds.

Good luck