Better to Buy with an Adu Built or to Build

[Robert Reynolds]

I've recently been working with a lot of clients from the BP community here in LA and everyone wants to buy a home with an adu or the potential to have an adu. So it's made me think a lot about the benefits of buying one done already and buying one with the potential of adding one. For example, would it be better to buy one with an ADU done and ready to go for $900k or buy a house for $800k and convert the garage for $60-80k.

My personal conclusion is that it’s better to buy with one already done. Here are some of the benefits I see:

1. At $900k, 20% down you are paying $180k (about $195k after closing costs) cash out of pocket. At $800k, you are at $160k (about $175k) cash out of pocket. But still need another $60-$80k cash to build the ADU. So $195k cash out of pocket vs $235k-$255k cash out of pocket.
2. It will take about a year to go through planning, permitting and building and if built already you can rent from Day 1. 

Please let me know your thoughts.