ADU in South Los Angeles, Updated Figures for 2023

[Shannon Shue]

Investment Info:

Single-family residence buy & hold investment in Los Angeles.

Purchase price: $642,000
Cash invested: $135,000

BRRR is possible in Los Angeles! It is just a carefully planned process.

Bought a 2 bed 1 bath layout in Leimert Park (average price point as of Jan 2023 is $1M), remodeled the existing 1924 craftsman bungalow plus added a 3/4 bathroom/HVAC/200amp panel. Permitted an Accessory Dwelling Unit (ADU) by converting the existing 2-car garage and studio (720SF total) built in 1996 with a Certificate of Occupancy. The ADU is now a 2 bedroom 1 bathroom house with its own private yard. The plan is to short-term rent it but may switch to renting long term. The average rent for the rear ADU unit is $2400/month.

I BRRRed this house (Buy, Renovate, Refinance, Rent and Repeat). I was able to cash out and refinance $94,000 to pay myself back for the ADU renovation. My interest rate went down, the PMI went away (I originally only put 5% down) and my payment stayed the same, so that is a win. Refi value came in at $950,000 (which is $308,000 in equity in 19 months). I was delayed with COVID to start construction on the ADU, the City of Los Angeles Building and Safety Department has no system to issue and review permits digitally until at least 6 months after the pandemic hit.

I live in the front house. I rent out the back house until I find my next project. I am negative cash flow but I pay $1300/mortgage offset by the ADU income. Pretty decent rent to live in a completely renovated 2 bed 2 bath craftsman with a front and backyard in Los Angeles.