Compton Casita ADU in my back yard

[Danielle Gries]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $350,000
Cash invested: $148,000

This is my primary residence. I just completed a 406 sf ADU in the back yard with intention to rent it out as an MTR. I have not secured my first tenant yet so I can't determine cash flow. The going rate locally ranges from $1600-2100/mo, depending on time of year and if I choose to allow pets.
The cash invested includes my original down payment and an estimation of what the building and furnishing costs have been for the ADU.

What made you interested in investing in this type of deal?

I had the opportunity to buy this property off market. I owned a small attached home across the street and when the owners were ready to retire and move out of state, we negotiated a price they were happy with and I was able to purchase this home for significantly less than it would have sold on the open market. It has a huge back yard so I knew that I would be able to open a HELOC with the amount of equity I would already have after purhcase.

How did you find this deal and how did you negotiate it?

I told the neighbor to let me know first if and when they were ready to sell. We met multiple times to discuss numbers. We had been friends for years and I had spent ample time in and around the property so I had a good idea of what I would be buying. Plus, my brother-in-law remodeled the bathroom and spend time in the home. He gave me confidence that an as-is purchase of this property was likely a safe risk to take.

How did you finance this deal?

Conventional financing, 20% down.

How did you add value to the deal?

I have invested about $80k into building and furnishing the ADU.

What was the outcome?

So far, I have only just listed it on Furnished Finder. I am working on an AirBnB listing now.

Lessons learned? Challenges?

Biggest challenge I am currently facing is getting a tenant. It's definitely the slow time of year in this area.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nick Nelson with Keller Williams was my advisor through this purchase, it was a FSBO, off market. He sold my previous home for me and guided me through the purchase of this property.