ADU permit or not; financial implications

[Saika Maeda]

Hi all, 
I'm almost in escrow with this single family home in LA with an un-permitted large ADU with a Certificate of occupancy. An architect told me that even though ADUs should not be bigger than 50% of the main house, I should be able to permit this one with SB09 if I pay a fee (about $8k according to my agent). Given there is a decent fee, I'm also considering the option of not getting the ADU permitted and just rent it as is for "roommates". I'm trying to weigh my options, and could use help to decide the best path forward.

With permit, benefits are 1) get depreciation and other tax write off benefits since it's a permitted investment purpose ADU, 2) probably better for resell value, 3) have a separate address and don't have to bother sorting out mails for our legal tenant, etc.

without permit; benefits are 1) no hassle to get the permit, 2) no permit fees, 3) no tax on rental income (as it is more like a “roommate”)

Has anyone gone through a similar situation before? Please let me know what’s the best option, or if I’m missing anything. Please let me know the financial implications. 

Thanks! 
Saika 

[Dan H.]

I agree get the permit but …

@Bruce Woodruff & @Jonathan Greene likely are unaware the state legislation keeps passing laws to protect safe, unpermitted units.  Initially SB13 provided protection for 5 years for unpermitted units that pre-date the ordinance.  The pre-date was to discourage further unpermitted units be added to the inventory.  But of course there were unpermitted units added after SB13 and the state wants to be sure that local jurisdictions do not remove safe unpermitted units so ab2533 extends the unpermitted unit time limits that were in sb13.  It certainly sets an interesting precedent as it means if you add a safe unpermitted unit today, it may be protected in the near future so that safe units are not removed from the market. They’re done for a while actually most of college is done for a while. Lotta people have finals before Christmas and.

However, get the permit.  I suspect it will add more than $8k of value.  In addition, you will not be relying on the legislature to continue to protect safe unpermitted units.  I do fear your cost may be higher than you predict and may result in a property tax increase.

good luck