Lenders that appraise ADUs accurately so I can increase my HELOC?

[J Kilroy]

Does anyone have a recommendation for a lender that values ADU's in CA "accurately"?

We completed our ADU earlier this year at our primary residence and it has been a great cash flowing investment. We used a HELOC from First Bank and they were great to work with in getting us a HELOC at a great rate. We would now like to increase our access to cash via a HELOC that incorporates the new ADU in the appraisal. In talking to First Bank they are not able to tell me if the ADU will add value to our home when being appraised so I am looking at other lenders.

[Dan H.]

Quote from @J Kilroy:

Quote from @Dan H.:

ADUs additions in single family zoned areas add less value than the hands off cost of the ADU addition. You will likely get what you consider a poor valuation from any appraiser that a lender will use. Small units in single count are expensive development.

The negative equity position is one reason (there are many reasons) why adding an ADU is one of the worse RE investments.  

Good luck

 Thank you for the insight. I had not considered the valuation could be that low.  I realized we would not get the same valuation as the main home but at $130k for 440sq ft I did not realize we could be in a negative equity position. 

 I go to a meet up in San diego called private lending masters.   It is comprised of people who lend money, those that want money and those that want to learn more about RE.   It is perhaps my favorite meetup that is not associated with a larger group (such as SDRE, NSDRE, SDCRE).

For the most part the lenders only lend on non owner occupied ADU, at low percentage of ADU addition costs because they know that usually the value extract will be significantly less than the ADU addition costs. It is discussed at most of these meet ups I go to (usually in the networking that is before and after the organized meeting). So this is common thought and why it is a real challenge to get debt secured by the ADU value add at higher than 50% of the addition cost.

There are exceptions. My wife has an acquaintance in InvestHer that does flips in beach areas of Orange County that often adds ADUs. Most flippers will only add the ADU if there is already under utilized living space (not garage conversions but craft rooms, bunk house, etc) to convert. However, she seems to do great adding ADUs on select properties in super high value area. Note this does not imply that these are the typical home. Most ADU additions will get valued far under hands off cost of the addition if garage conversion or especially if ground up addition.

Good luck