ADUs in the Bay Area

[Account Closed]

Early this year, the State made it easy for homeowners to add an ADU on their property. On a cap rate basis, it seems like a great deal for homeowners or investors who want to earn some extra income for their property. If you install an ADU for ~$250K, you can rent it out for $2500-$3000 a month. Satisfying the 1% rule in the Bay Area is HUGE!

My question to you is this: What's holding more "buy and hold" investors from constructing an ADU on their property and how can new investors acquire finance the cost of building an ADU if they don't have a lot of equity in the home?

[Dan H.]

Originally posted by @Myo Thein:

With the new statewide law, SFH with ADU will be under rent cap and just cause eviction law unless owner lives in one unit.

 This is incorrect.  New construction is exempt from rent control for 15 years.   The authors of the rent control ordinance did not want to reduce new construction so the rent control does not apply.