ADU investments

[Shay Reynolds]

Austin, TX Real Estate Investment Opportunity

A 1482' house on a .84 acre lot that includes a 535' Small House- vacation house

Seller is willing to sign an over market lease back of the property for 2-5 years.

The MLS listing pics are here:

https://lnkd.in/bz577JX

Is this a good deal? What pros and cons to this type of investment?

[Alex G.]

@Shay Reynolds Current zoning for this property is SF-2 (single family, i.e., only 1 unit is allowed on the lot). In Austin you usually need a lot with SF-3 zoning (duplex) to allow for a construction of the second unit, or ADU. If there is already a 2nd structure there - it's in violation of the zoning.

Moreover, if you're planning to use the 2nd unit as an STR (short term vacation rental), AirBnB and similar, you'll likely need to get a license from the city allowing that. Recent ordinanced were passed that made it difficult to get such a license IF you're not using the main property as your primary residence.

The surrounding properties are also all zoned SF-2, so there is no existing precedent of a duplex land use nearby that would help your re-zoning application, from SF-2 to SF-3.
See this map for zoning profiles of any Austin address: 
http://www.austintexas.gov/GIS/ZoningProfile/

Rezoning is quite an expensive, lengthy and costly proposition in the city of Austin,  including 3 public hearings at the Austin City Council zoning commission at the City Hall. If you  are seriously looking into buying this property and possibly using it as 2-unit now or in the future, I'd suggest spending $150-200 with a land development consultant who could explain to you the issues and challenges related to such rezoning process.

All that said, City of Austin code enforcement is very complaint driven. You could possibly quietly get away with the use of that 2nd dwelling on the property as STR.... UNTIL somebody complains.

Two other things to check are Deed Restrictions and the presence of the HOA and their CC&Rs. Deed Restrictions go with the land and may only allow one unit per each lot. That means the neighbors who know about them could complain if they see you renting out the extra building. And of course, the HOA could have restrictions that don't allow that sort of thing and the HOA is very likely to actively enforce their CC&Rs.