Anyone building ADUs/JADUs in the Fresno/ Clovis area?

Question

Hey everyone,

I am looking into investing in long-term rentals in Fresno sometime toward, specifically single family homes with the intention to build both an ADU and JADU on every property. The plan is to BRRRR fixers with hard money or funding partners, and then build the ADUs (home equity loan maybe?). I'm in it for the cash flow (although I wouldn't complain if the ADUs added a decent amount of equity). Has anyone built an ADU/JADU in the Fresno area? Did you get an appraisal after the build? If so, how much equity did the ADU add to the property?

I would like to know if ADUS add or decrease property value in Fresno and if the rents are worth building the ADU as an owner builder (I have built 1 JADU and 3 ADUS as an owner builder at about $90 per square foot).

ADUs in my hometown, where I invest in, add a significant amount of value to a property, only problem is that my market still has buyers paying over asking (not nearly as much as when rates were low though, $10k-$15k is common) for a move in ready house). Just not enough supply and buyers are going in with two families on a single family house.

Dan H. · Answer

it seems like you may be unaware that a JADU requires owner occupied.  The is no JADU without OO.

In most CA markets the added ADU adds less value than the cost to add a hands off ADU addition. Seeing you are owner/builder, you may not have the negative equity that most people adding an ADU will have, especially if you can really build a stand alone ADU all in at $90/ft (I am a bit skeptical).

ADU additions have other issues (other than the initial negative position) such as 1) no income until complete which can easily take a year 2) limited finance options 3) detracts from existing unit (yard, privacy, garage, etc) 4) less potential purchasers at exit as their are many more people looking to purchase personal home than RE investors 5) lots of work. Likely as much or more work than a BRRRR, but at much lower return 6) cheaper and less work to buy property with an existing ADU. let some other chump pay more for adding the ADU than the value added by the ADU.

Good luck

Thomas Jameson · Answer

I'm actually going through them and already did all my paperwork stuff.

Travis Beck · Answer

Company is called self help enterprises.

https://www.selfhelpenterprises.org/

Christopher Deforest · Answer

Travis,

Any chance you could share the name of that loan program with me? I'd appreciate it!

Chris

Travis Beck · Answer

Thomas, it will be north of $150,000. But without more info it’s hard to say exactly. Need to consider the rental value it will bring. It’s true that appraisals seem to value ADU low, but I think that will change over next 5 years as more and more are built and we see more ADU comps being sold. If building on your primary there is a very cool loan program to help primary owners build ADUs. I have client that got $140k loan for 2% interest. Let’s discuss further if you are interested.

Jeff Zimmerman · Answer

Hey David, sorry to hear that you had to go through cancer but congrats on beating it!  awesome!  Yeah that's basically correct, the main thing to consider is area of town and layout.  Some families don't want a garage and would prefer to have an extra house/room for family, these are mostly in B or C neighborhoods.  A neighborhoods likely wouldn't want an ADU IF it takes away from the yard or garage.

does that make sense?

Jeff Zimmerman · Answer

@David M seymour what's up David, there are a few nuances that change with each home, different parts of town will have different things you can do to improve value.  i.e. with the ADU, in some areas of town that may be a bit of a nuisance as buyers prefer a larger backyard and would rather just by a 4 bed rather than a 3 bed with an ADU in the back.  In other parts of town an ADU can make the home a lot more attractive and raise value because it's likely that a larger family will purchase it and wants older kids or a grandparent to live in the back.

Apart from that, adding value to your home is better done when you are getting ready to sell it unless you want to enjoy your improvements prior.  As an example, if you upgrade the bathrooms and kitchen now, which is typical to raise value, it may be done in a really trendy way  but in 5 years the trends can change, so it's best to wait until you are ready to sell it to improve it so you are as trendy as possible with your materials and design.

as far as rent goes, the ARV in the backyard may improve your overall gross rent if you can create a separate entrance to it so that someone can rent the back separately and now you have a duplex, your rent will go down in the house slightly because you are taking away their yard space but usually that's worth it.

there could be a lot of other things that may help you improve value but you'd just need to have a walk through with a trusted realtor who knows what they are doing and they can give you some good thoughts on where to spend money and where not to.  Good luck!

Dan H. · Answer

In most coastal southern CA markets, the ADU addition will cost more than the value added by a hands off ADU addition.  I would be surprised if the typical ADU in Fresno can be added for less value than it adds in value.

You can search bigger pockets for many posts on ADU appraisals that were far less than the costs of a hands off ADU addition.

Good luck

Anyone building ADUs/JADUs in the Fresno/ Clovis area?

Most Popular Reply