House hacking in San Diego

[Sam K.]

Idea is to get an outdated SFR or a multi-unit. Where I can add value either by renovating and adding more square footage or an ADU if it makes sense. Depending how outdated the property is, I'll either get a contractor or do some work myself.

• Have a down payment of $150K
• Can arrange for another $50K to $100K for rehab
• Stay in one bedroom and rent out other bedrooms
• Either add an ADU or square footage if it makes sense for the property
• Idea is to live in this place for 2 -5 years top and then sell or rent it out

Question: 

Even if the San Diego market sees a correction in the next 6 months, is still worth to get a property and work on it, since I do have some have some extra time on my hands right now and can gain experience. 

How do I find real estate agent with an investment focus on this community?

[Sherry Chen]

Hi Sameep, I'm a San Diego Realtor that specializes in ADUs. With an ADU you have a few options. Garage conversions are the most cost-effective way to add an ADU to your property, with a typical project falling between $60K-$85K -- all in. An SFR with a detached garage against an alley is an ideal scenario so that your tenant can have their own access, and you get the separation from your main home.

This year, the state of California allowed ADUs to be added onto multifamily units as well. If you choose to go the 2-4 unit route, this means you still have the option to add an ADU either now or in the future. The great thing about multifamily is that the state recently allowed non-livable spaces such as garages and laundry rooms to be converted into ADUs. There are a few important rules and regulations to consider, but it definitely opens up the possibilities.

ADUs are a great investment because you are adding an additional residential dwelling to your property. This means turning an SFR into essentially a multifamily duplex that's income-generating which will appraise much higher than a say a guest house. Since your strategy is to live on the property for 2-5 years, I especially recommend an ADU because of the state's recent owner occupancy waiver. If you build within the next 5 years, you're grandfathered in, meaning that you are allowed to rent out both the ADU and the main dwelling and you're not required to live on the property.

There's a lot to consider when identifying the right property for an ADU, but the investment will give you both short-term gains through rental income and long-term gains by adding immense value to your property. I hope this helps with your decision-making!