Return for Adding an ADU

[Alecia Loveless]

I have a duplex that I'm thinking of adding an ADU to. The space exists above the garage. I will have to raise the roof some and add dormers to create enough height for the shower which is increasing the cost. The estimated cost for the entire project is $70,000.

I can rent the space for $800/month. It will be pure cash flow because I will pay cash as I go for the project.

If I choose to do this the ARV of the building will likely only go up by about $40,000 now but with time and appreciation will catch up eventually.

If I choose to do something else with the $70,000 it will likely be to buy another building that will require a $100,000 or more down payment. Depending on the number of units I am able to find I’m sure it will cash flow at least $800 but I don’t know how much more and I will be taking in a substantial amount of debt, at least $300,000 to obtain that cash flow. I would however be growing equity and gaining tax benefits.

Would you recommend the ADU or to wait for a different building to come along?