How much should my ADU increase the value of my property

[David Yee]

Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.

Thank you in advance!

[Dan H.]

Quote from @David Yee:

Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.

Thank you in advance!

This is a much higher valuation than I typically am hearing about in single family zoned areas of San Diego. $250k valuation would be the highest I would have heard about on an ADU addition in single family zoned area for a refi appraisal. This likely would come close to the cost of a ground up 3/2 ADU addition which is rare.

It still would not alleviate the other issues with an ADU addition such as revenue out long (often many months) before any incoming revenue, the worse financing associated with the ADU, that it likely makes your primary a rent controlled unit, that it detracts from the primary even if it is just yard, that adding an ADU addition is work (likely more work than a BRRRR with much lower returns), etc

Can you post the valuation you receive when you receive the appraisal?

Good luck.