Thoughts on SFH with ADU for First Investment

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Thoughts on SFH with ADU for First Investment

Kyle McGrath
Jacksonville, FL · Member since 2018 · 20 posts · 11 votes

I am considering purchasing a SFH with an ADU in the backyard, with the plan of living in the SFH and renting the ADU.

I am concerned about our exit strategy on this. The ADU does not have a private entrance; you enter on the side of the SFH and they both share the same back yard.

It is at the top of our budget already and needs potential mini-split HVAC added to it to bring highest Air Bnb value. The ADU would offset our mortgage enough to where we would be paying on average around $1,100/month as opposed to the $1,600/ month we are paying currently for rent. Ideally, I would like a traditional duplex for a long-term buy and hold position.

This will be our first home purchase so I want to make a solid decision.

Duplexes are going very fast in my area with multiple sight unseen offers just hours after posting. I don't know if something will come up down the road, which then we will have to rethink our REI strategy.

Just would like to hear some of the communities input. Thank you!

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  • Brad HammondBusiness Member
    Real Estate Agent · Portland, OR · Member since 2016 · 1k+ posts · 605 votes
    5y

    Hey @Kyle McGrath, I think that sounds like a great plan! I see lots of properties with ADUs that have their entrance on the side of the SFH. Sharing the same backyard is not ideal but not the end of the world. Maybe at some point, you could put up a privacy fence to split the yard if that makes sense. I think it would be a great house hacking plan for you.

    As far as your exit plan goes, selling a property with an ADU isn't always straightforward. Some people love them and actively seek them out while others don't care and would spend money to convert it back to normal. Since that is so hard to predict, I think you should move forward if that is the best option for you right now.

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  • Jason CrowePro Member
    Real Estate Agent · Jacksonville, FL · Member since 2019 · 213 posts · 47 votes
    2y

    I do this and it is great.  Jacksonville

    [email protected]
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  • Minna Reid
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 633 votes
    2y

    Hard to say without all the numbers, but I will say this not an unusual set up for the area....and also we have very few duplexes here in Jax, so if the numbers work I am not seeing an issue with the ADU.

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    2y

    I think it is great to get started, and so I do not want you to take my comments as being against this purchase as much as to enlighten.   

    When you rent, maintenance/cap ex, insurance, pm, vacancy, misc are included in the rent. 

    You will pay $1100 (hopefully this will cover what remains of PITI as insurance in Florida is costly), maintenance/cap ex ($400/unit), pm (or do the work of the PM), Misc (book keeper, umbrella policy, office supplies, etc).

    It is not as trivial as comparing your rent to the PITI that is not covered by the other unit(s)' rents.

    The reality is you likely will initially have less cash than renting.  However rents increase   Most mortgages are fixed.  Inflation is real and even appreciation equal to inflation produces a good return from appreciation when leveraged.

    Virtually no one starts with a perfect initial property purchase.  Compromises are made due to financial realities.  

    Good luck

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  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Kyle McGrath I share the backyard with my duplex tenant and it’s no big deal. We mow it and he likes to landscape and garden. We rarely see each other.

    I've had an ADU in every home I've lived in and it's always been fine. Sharing an entrance is no big deal. You'll get used to it.

    I don’t think you’ll have a problem selling it as it will be highly desirable for either an investor or a home owner looking to house hack. You may want to keep it long term to help build your portfolio.

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  • Jason CrowePro Member
    Real Estate Agent · Jacksonville, FL · Member since 2019 · 213 posts · 47 votes
    2y

    I like this.  I have one myself.  Mortgage is covered.  Multiple years have been doing this house hack trick.  Started bedrooms then upgraded to adu.

    [email protected]
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