What kind of financing should I get to build ADU on primary home?

[Michael Sueoka]

Hello! I'm hoping to buy a primary home in Los Angeles (30% down) where we can add an ADU (as a rental) and also remodel the primary home (the remodel will be light cosmetic work).

What would be the best way to go about financing the addition of the ADU and the remodel of the main house?

[Paul Dashevsky]

The expert I know on ADU financing is Meredith Stowers at Loan Depot

[Whitney Hill]

Sounds like a good candidate for a renovation loan, 203K or Homestyle, depending on what you're building for the ADU.

Renovation loans allow you to finance a renovation project (including ADUs) into the mortgage. There are two types of renovation loans that can be used for ADUs… FHA 203K allows for attached ADUs or conversions. Fannie Mae Homestyle allows for construction of detached ADUs. Both loans have a limit of $701,500 and may be based on the "future value" of the property after adding the ADU, which will be based on appraisals (not rental income). Renovation loans typically offer up to 95% financing of a primary residence or 85% of an investment property.

Meredith is a good place to learn more about the process as Paul mentioned!

[Jon Schwartz]

Originally posted by @Michael Sueoka:

Hello! I'm hoping to buy a primary home in Los Angeles (30% down) where we can add an ADU (as a rental) and also remodel the primary home (the remodel will be light cosmetic work).

What would be the best way to go about financing the addition of the ADU and the remodel of the main house?

Michael,

Not to go off-topic, but have you considered buying a duplex?

Best,

Jon 

[Bill Rich]

Hi Michael 

You have to basic options, the FHA 203K or the Fannie Mae HomeStyle. Both work generally the same way however since you are putting 30% you are better off going with the HomeStyle so you would not have to PMI. With any type of FHA loan, you pay PMI no matter how much you put down so its probably not the best fit you for you. I do a lot of renovation loans and if you have any questions please feel free to use me as a resource.

[Michael Sueoka]

Originally posted by @Jon Schwartz:

Originally posted by @Michael Sueoka:

Hello! I'm hoping to buy a primary home in Los Angeles (30% down) where we can add an ADU (as a rental) and also remodel the primary home (the remodel will be light cosmetic work).

What would be the best way to go about financing the addition of the ADU and the remodel of the main house?

Michael,

Not to go off-topic, but have you considered buying a duplex?

Best,

Jon 

Good question - looking at those as well. However, I do have experience in add-value real estate so hoping to find something we can buy, do some cosmetic work for the existing structure and then build out an ADU. So, definitely looking for that add-value opportunity if possible.