ADU Appraisal: Income-based, or....

[Jesse Aizenstat]

I live in a really expensive market, in Santa Barbara, CA. Buying a small 2/1 home starts at around 800k. Taking advantage of California's new ADU law, I decided to buy one of these small homes and permit an ADU. (A value-added play that I can control makes the most sense to me in this high market.)

My main house is 930 SF 2/1, and the ADU I want to build would be a 800 SF, 2/2. I estimated that this ADU would cost me $200k all in to build and generate $3,000 per month. That would be pretty good, considering how saturated multi-family is here in Santa Barbara. Most multi-family scores around a ".50" here: monthly rent / price * 100. Example: ($6,000 / $1.2M)100 = .50. These are the projected numbers on my deal and a ".50" is a typical score for multi-family here.

So, to mine the wisdom of the BP forum, what do you think this property would be worth when the ADU is completed? Can it be treated just like any other multi-family in my neighberhood, with an income-based approach?

I've read on another post that someone built a 2/2 in Portland that cost him 300k and the appraiser only added $75k worth of value. That seems crazy to me. But perhaps I'm just looking too hard at cash-flow and ROI. Since my property is in the multi-family zone, it does not need to be owner-occupied, so it really could be treated as a duplex to some investor if I decided to sell it. But I don't want to sell it. I want to eventually do a cash-out REFI, so what an appraiser thinks would be critical here.

Looking forward to hearing your thoughts in the comments section. Thank you.

PS: Best Reads I've found on the internet thus far: 

• - https://accessorydwellings.files.wordpress.com/201...
• - http://www.buildinganadu.com/adu-blog/adus-from-an...

[Cory Carlson]

Looking at Comps on houses with ADU's in your area what is the market saying? Mr. Appraiser may just not know how to value it. Thats the issue with 4 and less units is the appraisers view it almost entirely on comps and not on the numbers. If you can find the added value that coincides with your end goal, you can provide that to the appraiser to hopefully get what you're shooting for. I had an awful appraisal on a four plex recently then we switched lenders, and got the appraisal that was more fair.