New to Real Estate 路 San Diego, CA 路 Member since 2020 路 25 posts 路 4 votes
We live in San Diego, Ca and have a small multi family property. The current detached garage is getting turned into an ADU (1 bed/1 bath) and has a flat roof. We are going to add a roof top deck (the same size as the unit (about 425 sq feet). It's all getting permitted and legit, so my questions are:
1. Does that increase the appraisal value when we refi (currently doing a brrrr)?
2. We were planning to rent it for about $1,700 before the roof top addition, how much more should we be able to ask (it will have 1 dedicated parking spot, all new interior/exterior, jacuzzi)?
Investor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votes
6y
Originally posted by @Account Closed:
We live in San Diego, Ca and have a small multi family property. The current detached garage is getting turned into an ADU (1 bed/1 bath) and has a flat roof. We are going to add a roof top deck (the same size as the unit (about 425 sq feet). It's all getting permitted and legit, so my questions are:
1. Does that increase the appraisal value when we refi (currently doing a brrrr)?
2. We were planning to rent it for about $1,700 before the roof top addition, how much more should we be able to ask (it will have 1 dedicated parking spot, all new interior/exterior, jacuzzi)?
Thanks!
I appear to be the contrarian. It is my view that unless the deck has a view it will add less value than the cost of the deck. If it provides a view then that is different scenario and likely will add value. The extent of the value depends on the quality of the view. View of water (ocean, bay, lake, etc.) will add more value than a view of city lights but they should both provide value.
I am interested in the BRRRR aspect with regard to the ADU. A prot茅g茅 of mine recently sold a SFH with ADU. The appraisal on sale did not hit the agreed upon selling price. Selling appraisal are significantly less conservative than refinance appraisals. I hope you did your research on the value of ADUs reflected in refinance appraisals (typically significantly below hands off construction costs).
Real Estate Agent 路 San Diego, CA 路 Member since 2016 路 308 posts 路 173 votes
6y
@Account Closed
The deck isn't technically adding Sq. Ft. but will it raise the value of the home? I would lean towards Yes. It should also bump up your rents. 馃憤馃徎
How much of an increase in value will you get? Hard to say because of the many variables. Location of the home?, How good of a view? How big of a deck? Appraiser's will vary on their opinion. Comps may or may not be hard to find for this sort of thing.
People's opinions will vary on this, but personally I am a big fan of adding a deck. And it doesn't have to be an extension out back to an extended view, or an additional rooftop story. It could be as simple as a front porch. Overall they are low in cost, and I believe ad a great return. Harder to quantify though.
Investor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votes
6y
Originally posted by @Account Closed:
We live in San Diego, Ca and have a small multi family property. The current detached garage is getting turned into an ADU (1 bed/1 bath) and has a flat roof. We are going to add a roof top deck (the same size as the unit (about 425 sq feet). It's all getting permitted and legit, so my questions are:
1. Does that increase the appraisal value when we refi (currently doing a brrrr)?
2. We were planning to rent it for about $1,700 before the roof top addition, how much more should we be able to ask (it will have 1 dedicated parking spot, all new interior/exterior, jacuzzi)?
Thanks!
I appear to be the contrarian. It is my view that unless the deck has a view it will add less value than the cost of the deck. If it provides a view then that is different scenario and likely will add value. The extent of the value depends on the quality of the view. View of water (ocean, bay, lake, etc.) will add more value than a view of city lights but they should both provide value.
I am interested in the BRRRR aspect with regard to the ADU. A prot茅g茅 of mine recently sold a SFH with ADU. The appraisal on sale did not hit the agreed upon selling price. Selling appraisal are significantly less conservative than refinance appraisals. I hope you did your research on the value of ADUs reflected in refinance appraisals (typically significantly below hands off construction costs).
Rental Property Investor 路 Escondido, CA 路 Member since 2017 路 679 posts 路 550 votes
6y
@Account Closed I live in San Diego county myself and it all depends on the view. If you re looking longer term, which really is an important aspect of your own goal setting, you would want to consider if you see that property to stay in your ownership long term or not. You probably saw that the county just reaffirmed the commitment to creating more living space using ADU's. Still, I think you want to ask:
If I don't keep this property long term, will I want to sell it as an investment property or for owner occupy ownership? I know a lot of my friends in the county who do not go for the ADU option because someone in the family does not like to have another person or couple living that close or on the property.
I can see that that is also a possibility in Dan's example. If the area is not something like Ocean Beach and you try to sell to a family, the ADU might not get much consideration in an appraisal.
I know I keep writing this here on BP, but its really important to be clear about your goals and your strategy.
There are scenarios where the value is irrelevant if you make great cash flow. In others, it is the one thing that drives your decision making.
You know the answers. Just ask yourself the right questions. If you like to chat about it, let me know. I am only a few miles away...
New to Real Estate 路 San Diego, CA 路 Member since 2020 路 25 posts 路 4 votes
6y
@Kenneth Donaghy and the best view is going to be a west facing view (which is also the direction of the other two properties, not sure how visible those units will be once the roof top is built)
New to Real Estate 路 San Diego, CA 路 Member since 2020 路 25 posts 路 4 votes
6y
@Maxwell Ventura it should have a decent sun set view as there aren鈥檛 many tall building in the way. There鈥檚 a few 2 story buildings in the immediate area, but I think it will have a decent amount of privacy as well. The property is in normal heights, so very little artificial light, so it鈥檚 nice at night time.
The deck will be the same size as the roof, so about 425 sq ft. It鈥檚 a small lot, so there鈥檚 not much usable space at ground level
I think it will add a lot of value. Recently I viewed a duplex where it was all house and 0 curb appeal or ammenities. You will be surprised how much a balcony or deck will add to peoples interest in a property. The garage in that case was also flat roof and in my mind i just thought that it was a huge waste of space not having use of the space above it.
Real Estate Broker 路 San Diego, CA 路 Member since 2016 路 355 posts 路 195 votes
6y
@Account Closed, That being said, I would expect you will be able to raise the projected rent at least $200 maybe more. I have a client who recently purchased a 4 unit in Normal Heights, and is renting his 1/1's for $1750ish, with a smaller yard space than your 425sqft deck.
When your ready for the refi appraisal, reach out, and i will share you some tips how to get the appraisal you are looking for. I recently helped a client get 200K higher evaluation in 8 months without doing any upgrades.
New to Real Estate 路 San Diego, CA 路 Member since 2020 路 25 posts 路 4 votes
6y
@Dan Heuschele I appreciate the contrarian view as I鈥檓 usually more skeptical and conservative in how I view things. So the property is in the city, no special views of landmarks/water etc; but it does have a decent sunset view (which I鈥檒l see better once we鈥檙e up there). There鈥檚 very little city and ambient light, so it鈥檚 pretty nice at night time in the city.
There's very few comparables in my area for something like this (with an ADU), but there were decent comps on properties that have 3 units.
We鈥檙e doing the roof top deck not because of the sunset views, but because it adds significant usable space for that unit.
New to Real Estate 路 San Diego, CA 路 Member since 2020 路 25 posts 路 4 votes
6y
@Axel Meierhoefer We are planning to keep this as a long term rental and we鈥檙e going to live in that unit (with the roof top) for a year or two. We鈥檙e not going to cash flow for a few years, but we鈥檝e planned on that.
The reason I care about the appraisal is because of the cash out when we're done with our construction next year, so we're trying to maximize our ARV (which is hard in our area, especially with an ADU).
We鈥檙e super excited though about the ADUs and TIny House on Wheels (THOW鈥檚), and definitely looking to take advantage of that for all the rentals we can acquire (but we won鈥檛 do that for flips). Thank you!
Rental Property Investor 路 Escondido, CA 路 Member since 2017 路 679 posts 路 550 votes
6y
@Account Closed Sounds good. I think you have a good plan. Depending on the overall cost yu might be OK to have a combined appraisal of the main house and the edition and I always strongly recommend to be onsite when the appraiser visits. That way you can ask how they see ADUs. Some recognize both the value and the intentions of the government in the region and some seem to think it is either not really a big deal or potentially a detriment to the overall value. Also, don't forget that you can ask for a second appraisal. Some people have looked at me as if I am strange or weird, but everybody in appraising and inspecting will tell you that there is a substantial amount of interpretation of the rules, both when it comes to which properties to compare to as well as the valuation of improvements in your property. I compare it to a second opinion when you suspect an illness.
You might run into a little bit of an issue with the lender, but in my experience, when I offer to pay for a second appraisal it has not been problematic. If you think about the values in our area, spending another $500 for a second opinion could be well worth it.
By the way, the same is true for lending. I had a huge struggle with the first lender of my property in Escondido and then did some research and found one that was way more flexible and worked several times faster than the first one.
In one of the training events I attended years ago, someone said something really important that I feel applies here as a reminder:
"We are running the show (regardless if you do your investing with an LLC or not). We are the CEO of our operation. Acting as the CEO means we make the executive decisions and we decide who we work with, how many opinions we consider, who our final lender will be, etc."
Be the CEO of your deal! - that has helped me a lot when sometimes feeling I am pulled in all kinds of directions.
Investor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votes
6y
Originally posted by @Account Closed:
@Dan Heuschele I appreciate the contrarian view as I鈥檓 usually more skeptical and conservative in how I view things. So the property is in the city, no special views of landmarks/water etc; but it does have a decent sunset view (which I鈥檒l see better once we鈥檙e up there). There鈥檚 very little city and ambient light, so it鈥檚 pretty nice at night time in the city.
There's very few comparables in my area for something like this (with an ADU), but there were decent comps on properties that have 3 units.
We鈥檙e doing the roof top deck not because of the sunset views, but because it adds significant usable space for that unit.
>There's very few comparables in my area for something like this (with an ADU), but there were decent comps on properties that have 3 units.
I have concerns if you are trying to comp a triplex to a SFH with ADU. Maybe @Kenneth Donaghy has some appraisal tricks, but an appeal that attempts to use a triplex as a comp to SFH with ADU is very unlikely to work. A triplex has freedom that an ADU does not (such as STR).
Hopefully the ADU was not the primary value add and that you purchased below market price.
Real Estate Broker 路 San Diego, CA 路 Member since 2016 路 355 posts 路 195 votes
6y
@Dan Heuschele, I'm only was comping rents. ADU appraisals are unique. And shouldn't be compared to multiple units. No tricks, There are helpful strategies to help with appraisals.