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Updated over 4 years ago,
Investing in ADU's in California
Hi everyone, I recently purchased my first property in Los Angeles. I paid 800k for a 4 bedroom newly renovated house thats around 1700 sqft and includes an additional 400 sqft detached ADU in the back that I am renting for $1500 a month. Based on the new legislation that past in California in January, single family houses are allowed to have one detached ADU and one Jr. ADU on the same property. I am wanting to build the second unit and rent that out for an additional $1500, but I am worried the second unit may not force appreciation of the entire property by at least 100k so that i can refinance and pay off the 85k loan I will take to build the additional unit. Because this program is new, there are very little if any single family houses with two ADU's on them to compare against. I am not looking to sell my house, but rather rent all three units out and benefit from some significant cashflow in a market that has traditional been better for flipping or appreciation long term. I will be at the mercy of a banks appraiser. After the construction loan payment of $750 per month, i will still cash-flow 750 but i dont want to carry a 80k loan for longer than 5 years. Does anybody have experience with building multiple ADU's and doing cash out refinances? Is this deal still worth it or should i look for other properties to buy? Would an appraiser put more than 80k value on a second brand new ADU? Thank you for your thoughts!