Rental Property Investor · Santa Maria, CA · Member since 2019 · 158 posts · 81 votes
Hey everyone,
I am in the process of closing on my next home to BRRRR. I was planning on starting the process to build an ADU as soon as I close, but I just found out the SFH is on a r-3 lot! I'm debating whether to build an ADU or a duplex on the back yard. Permits would be significantly cheaper for the ADU and would not require their own meters, but the equity gain isn't going to be nearly as much as adding another legit unit to a multifamily. On the other hand, I believe adding a dulpex would be much more expensive in permits and I think they require their own meters, but comps for multifamilys are high in my city.
I'm in it for the cash flow but I'm getting this propety for 290k and comps for mulitfamilys are very high in my city.
my estimated cost for a detached adu would be 40-50k (I've already built one for 35k before the reduction in permit costs for those who are about to say that's way to low) and I can only assume adding a duplex would cost much more due to higher costs in permits and meter installations.
I am in the process of closing on my next home to BRRRR. I was planning on starting the process to build an ADU as soon as I close, but I just found out the SFH is on a r-3 lot! I'm debating whether to build an ADU or a duplex on the back yard. Permits would be significantly cheaper for the ADU and would not require their own meters, but the equity gain isn't going to be nearly as much as adding another legit unit to a multifamily. On the other hand, I believe adding a dulpex would be much more expensive in permits and I think they require their own meters, but comps for multifamilys are high in my city.
I'm in it for the cash flow but I'm getting this propety for 290k and comps for mulitfamilys are very high in my city.
my estimated cost for a detached adu would be 40-50k (I've already built one for 35k before the reduction in permit costs for those who are about to say that's way to low) and I can only assume adding a duplex would cost much more due to higher costs in permits and meter installations.
What do y'all think is the better strategy?
If you have the funds, I'd build the duplex.
How much more cashflow would you get out of the duplex? How many years would it take for that extra cashflow to make up the difference in cost between the duplex and ADU? That's probably the most important number to nail down here.
@David Maldonado Having experience building an ADU and looking at the appraisal afterwards, I would build the duplex. Consult an appraiser in your area, but I expect the valve for the duplex to be significantly higher... you get what you pay for.