Adding a basement unit to an Oakland duplex

[Stephen G.]

About a year ago I purchased a duplex in North Oakland and have been successfully house hacking it. The upstairs units rent pays the mortgage and a little extra, so I'm really only on the hook for a portion of the taxes and insurance, and that amount is a net decrease from what I was previously paying in rent. If I stopped house hacking and just rented the whole building it would cash flow at conservatively $12k/yr. My plan when purchasing the building however was to ultimately development the basement into a third unit and turn the building into a triplex. Before finalizing the purchase I called the planning department and spoke to them of potential plans and they confirmed that I was able to do that and the building was zoned (I think RM-2?) which allows for that. An architect that I recently sold something to on craigslist spoke to me about it just out of curiosity and said that due to location adjacent to the freeway and close to bart, it would likely qualify for some sort of transit oriented density bonus, possibly allowing me to build even more units (though logistically I'm not sure how I would add more than a single unit without dramatically altering the structure of the building by raising it or something similar). 

The building has dirt floor basement with a ceiling height of 8' 4" and runs the entire dimensions of the house making it about 1,200 ft2. My understanding is that basement units must have a minimum floor to ceiling height of 7'6". Assuming a 4" concrete slab for floor and a 1/2" of gyp board for the ceiling that would effectively give me a height of 8' 1/2" which acceptably checks that box. There are some structural considerations with the way the previous owner dug out the basement to achieve that height, so I've engaged with a structural engineer to work those out and have a visit scheduled for the middle of December. 

I'd like to keep some amount of storage area in the basement for water heaters, maintenance equipment etc. so am targeting roughly 1,000 ft2 of habitatal space and a 200 ft2 maintenance room with no finishes. Using ROM construction costs of $250/ft2. Is that a reasonable cost projection given a mid range rental unit target? I'm actually thinking this is somewhat on the conservative end given that I will be most likely be GC'ing the project and self performing some amount of the rough and finish work myself and with personal contacts. That gives me a rough project cost of $250k. Tentatively planning to finance through some combination of a professional income and a HELOC, which will then be refinanced into a more permanent debt structure upon completion and leasing.

Wondering if anyone here has any experience with type of project and could give me helpful insight into potential pitfalls, lessons learned, professional contacts (looking for an architect experienced in these types of builds currently if you know one let me know!), or really anything you think might be useful in this endeavor. Thanks!

[Eric Baldosser]

Hi @Stephen G., Yes, there is a state density bonus but it is intended for large multi-family developments that devote a certain percentage of the units to affordable or senior housing. You can read about it here:
http://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=65915.&lawCode=GOV

It's quite likely that your zoning limits the ability to add additional units. For most residential zones in Oakland, a conditional use permit for an additional unit can be obtained if your lot area is above a certain threshold. If it is, and you meet all other zoning requirements, there is a unique ordinance in Oakland that allows mini-lot subdivisions, meaning you could build a new home on a new fee-simple lot that you could then sell or rent. 

Alternatively, you can create at least one ADU (Accessory Dwelling Unit) and perhaps a Junior ADU on your property. This will yield the best ROI, especially if you can build within the existing envelope of your basement. Until just a couple of weeks ago, ADU's were not permitted on multifamily properties in Oakland however, a series of state assembly and senate bills were signed into law that requires local governments to permit such development, regardless of your zoning density limitations. There are several advantages to ADU development, including reduced fees and expedited permitting.

I'm an architect who also owns a duplex in North Oakland and I'm designing an ADU in the existing garage on my property utilizing the new state law governing ADUs. I'm quite familiar with ADUs, including all of the new ADU laws that you can take advantage of, so send me a dm if this is something you are interested in and would like to learn more.

@Calvin Kwan, yes, RM-2 zoning requires a minimum of 7500 square foot lot to add a third unit. I would suggest you look into utilizing the state ADU law too since zoning density requirements do not apply. Feel free to contact me if you would like to know more about how to optimize the potential of your property.