Convert basement into ADU or another unit?

Question

My wife and I are currently looking at townhomes in DC. Every house that we're looking at has the zoning code that allows for a second unit. Would it be more beneficial in terms of equity when we go to refinance to put an ADU in the basement, or turn it into a duplex? Most houses that we're looking at are currently 3 bed and 1-1.5 bath with the below grade space allowing for 1 (maybe 2 with a tight squeeze) bedrooms and a bath. Any help is greatly appreciated!

Reid Chauvin · Answer

Account Closed - looking at it from a cash-out refinance standpoint, you will be more limited in the equity you can tap into if you convert it into a 2-unit (75% Loan to value) than if you keep it as a 1 unit (80% Loan to value). Also, the interest rate pricing on 2-units tend to be less favorable than on 1-unit properties.

Account Closed · Answer

I appreciate your help!

Eric Teran · Answer

I hit the reply button before typing anything. Anyway, the RF-1 zone requires a completely separate unit. This is significantly more than an ADU. The new unit will need the following: Fire sprinklers, separate electrical meter, separate heating/cooling, 1-HR fire  separation between units, own exterior door, no interior connection to the upper unit, egress windows for the bedrooms, and a minimum 7’ ceiling height. Once construction is done a certificate of occupancy is required. In DC this type of project for a new investor is around $125k to $200k. There are a lot of things that will affect the cost. The biggest one is if you have to drop the slab to obtain the ceiling height. The great news if you can afford it the new unit can become its own unit and you sent rent or sell it off independently of the other unit. This is a condo conversion. Good luck and let me know if you have any other questions.

Jack Seiden · Answer

Assuming it’s zoned for a duplex, the regulations for a duplex and adu are extremely similar if not the the same, usually an adu is just a legal duplex that is only allowed by owner occupants where a duplex can be used regardless of if it’s a primary residence. But that’s more of a zoning issue than a construction one.

Russell Brazil · Answer

Adding an ADU is substantially easier than a multifamily coversion. In each case zoning must allow it, but zoning on ADUs is available in many more locations than a multifamily conversion. The process for ADU is also substantially quicker.  However, your total value is higher with multifamily.

Joaquin Camarasa · Answer

It all depends on the cost of one or the other.

You would need to determine how much would it cost to fully turn it into a duplex and also go through the permitting needed. It takes a long time in DC but if you live in it as you start the process could be doable.

Make sure to check basement ceilings and the feasibility of adding egress windows in basement.

Check how much duplexes have sold to calculate what yours could sold for if you were to sell it today and based on that you should be closer to the answer you look for. Another option that can give you good info is to check the comps for sold basement units in case you only sell the basement in the future and keep the top or viceversa.

Account Closed · Answer

It’s in a RF-1 zone that allows for up to two dwelling units.

Account Closed · Answer

Though I am worried about how much I can pull out, I’d be more concerned about what’s the total equity I’d have in either option. Are duplexes typically worth more than a house with a basement ADU?

Tim Jacob · Answer

@Eric Teran

This last post was informative.  I really like the note about the underpinning. I found costs can really get up there and get even worse if you have certain types of preexisting foundations that are common in old buildings as many in DC and other east coast cities have.  Where I looked at adding units in other jurisdictions they said they needed the entire building upgraded with sprinklers instead of just the one unit that is being added.  It seems either case you are looking at street construction to upgrade the preexisting water line diameter for fire flow from the street which will be a decent amount if you need to reroute traffic.  Based on a need for housing are places giving variances on this as well as voiding the need to run new fire flow lines in the other preexisting units.  It seems at minimum they should be reasonable about the other units.  Can you get around the street line upgrade by putting a hot tub sized tank somewhere like a fire pond and cistern in rural areas or being close to a hydrant with a siamese connection like in commercial.  It seems everyone is complaining about a lack of housing in certain places it seems they are willing to bend on atleast firecode but not others.

Convert basement into ADU or another unit?

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