When is it worth it for an accessory apartment, ADU, cottage etc?

[Ben Magee]

I am looking for alternative perspectives on what I am finding. I have read about the various ways to finance building some version of an Accessory Dwelling Unit (ADU) [basically a small guest house of some sort added to a home]. (home equity loan, renovation loan) but because they are not as easy to pay for / finance like a small home, and not as guaranteed to raise the value on an appraisal after it has been built

-> It seems like they aren't super popular because a lot of people don't want to drop 60-90 K, go through the Hassell of permitting/building when they could just be using that money for multiple down payments on properties. 

It does seem that they are worth it in very high rental places in California, Oregon, Seattle, especially if you can find a company that does all the work at a price that justifies the rent you'll get back.  

Now, my take away is that in not as high rent places, it's better to try and find properties that already have them, pay that premium on purchase price, especially if you can find a deteriorated home where you got a deal that is far cheaper than if you had to build one yourself. 

I am also curious if anyone is finding it worthwhile or profitable to locate properties and build the ADU as a part of your fix and flip or hold moves?

[David Song]

Originally posted by @Ben Magee:

I am looking for alternative perspectives on what I am finding. I have read about the various ways to finance building some version of an Accessory Dwelling Unit (ADU) [basically a small guest house of some sort added to a home]. (home equity loan, renovation loan) but because they are not as easy to pay for / finance like a small home, and not as guaranteed to raise the value on an appraisal after it has been built

-> It seems like they aren't super popular because a lot of people don't want to drop 60-90 K, go through the Hassell of permitting/building when they could just be using that money for multiple down payments on properties. 

It does seem that they are worth it in very high rental places in California, Oregon, Seattle, especially if you can find a company that does all the work at a price that justifies the rent you'll get back.  

Now, my take away is that in not as high rent places, it's better to try and find properties that already have them, pay that premium on purchase price, especially if you can find a deteriorated home where you got a deal that is far cheaper than if you had to build one yourself. 

I am also curious if anyone is finding it worthwhile or profitable to locate properties and build the ADU as a part of your fix and flip or hold moves?

ADU is only worthwhile in very expansive markets. In IOWA, WHERE LAND is cheap and plenty, there is no need to do that.

In SF bay area, land value is usually higher than house value. That is where ADU makes sense. A piece of land about 5000 sf will cost 1-2m on the peninsula, and about 400k - 1m east bay. FYI.