garage ADU conversions for house hacking in SoCal

[David Haan]

Hi, first time poster, please let me know if this is a good plan....

I'm planning on purchasing a 1M property with a 400sq ft garage. I have enough for 20% down, but rather I will put 10% down and save the remaining 100k to put towards a garage conversion to ADU. After purchasing the home we will setup an LLC and get STR license from the city and to begin a STR in the master bedroom suite. (we will cordon off the rest of the house, so it will be a private room with bath, no kitchen). We will begin construction on the full garage conversion to a studio apt which we plan to rent out as another STR or MTR. Once conversion is complete we will reappraise the value of the home to (hopefully) get rid of the PMI. Does this sound like a decent plan?

[Christie Gahan]

October 2023, HUD issued new guidelines on loan requirements. Now 75% of legal ADU rent can count toward income to loan. They also said that they would have new rules on how appriasers value ADUs. Goal is to get more standardization from the appraisers. This may ( should) make purchase and refi easier plus get more money for the ADUs.