Las Vegas ADUs (Accessory Dwelling Units aka granny flats)

[Omar Merced]

Hello Las Vegas landlords. I'm starting to install some ADUs on flips on some local properties. I am looking for anyone with experience. If you have had one installed or thinking about it I would love to hear how its been and what it has done for your cashflow, appreciation, and financing. Are they worth it and what was the cost you had? Thanks

[Andrew Maxion]

Hi @Omar,

I specialize in prefab ADUs and work with many investors in the Bay Area. I can confidently say it is worth it for a Buy n Hold investment! Why? Building ADUs tends to be a much lower cost than buying another SFR, and it can provide just the same monthly cash flow like any other rental with impressive cap rates and returns.

However, if this will be a fix n flip project, there will be uncertainty because appraisers might not provide absolutes. Commonly they use sales comps analysis and look for similar homes with ADUs sold previously. Most likely, the area won’t have enough data for an appraiser to provide a fair comp analysis for a flip project, thus potentially leading to a loss in returns.

The new laws for CA beginning this year have made ADUs a popular topic in the real estate world because of the relaxed regulations. Undoubtedly it is a safe bet to build ADUs to hold on for 5-10 years as the market catches on to this trend.

As goes for financing, the most common alternatives that I’ve seen are as follows:

1. Refi/ Heloc- This has been the most preferred alternative since the historic low-interest rates we’ve seen in the market.
2. Construction loan- May allow loans based on future projected value.
3. Unsecured/ Hard Money- This is another alternative but typically with a much higher interest rate.

I hope this helps, and glad to discuss more!