Building ADU in San Jose, California

[Chen Zhou]

Investment Info:

Single-family residence other investment in San Jose.

Cash invested: $200,000

Attached ADU built in my San Jose property backyard (630 sqft). 15% annual CoC return.
3D visualization: https://my.matterport.com/models/hRAxQheq93H?section=media&mediasection=showcase

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

1) maximize the value of the land, generate cash flow to pay off mortgage faster.
2) increase the value of the property itself
3) San Jose is one of the most ADU friendly cities in California. The city streamlined the ADU permit process with increasingly relaxed rules now. One of the only cities that doesn't require owner occupancy. More here: https://abc7news.com/society/s...

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

Hired the architect and contractors and negotiated the contracts myself.
Most important factors when you evaluate a contractor: expertise and experience in building ADU in the specific Bay Area city, quality, speed, price including payment schedule.

How did you finance this deal?

Family and savings by myself. Work with the contractor to figure out payment schedule that works for you!

How did you add value to the deal?

Worked closely with the architect to make sure the floor plan is going to not only attract the best tenants, but also increase resale value.
Picked the final materials myself to make sure everything is appropriate for a rental, but also attractive as a home for the next buyer.

What was the outcome?

15% annual CoC return. $2500 monthly rent over $200,000 investment into the project.

Lessons learned? Challenges?

It's well worth the effort and time! Glad to see it paying off now!

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

Hiring the right team is the key. I spoke to many lenders, architects, contractors in the process

[Sandeep S.]

@John Sherwood - Thanks for posting the new ADU guidelines for San Leandro. I looked up Alameda County site and they have also published new ADU guidelines. These will also apply to the unincorporated parts of Hayward and San Leandro.

https://www.acgov.org/cda/planning/landuseprojects/documents/AccessoryDwellingUnitsHandout_January2020.pdf