Spent 250K to add an ADU in South Bay or buy a condo in East Bay in 2024

[Felix Shi]

Hello everyone,

I'm a newcomer to real estate investing and this forum. I'm seeking insights into the pros and cons of investing in Accessory Dwelling Units (ADU) in south bay versus buying a condo in east bay, particularly in terms of appreciation and cash flow. My current understanding is that ADUs may offer better cash flow, although they may not necessarily provide superior appreciation compared to condo investments, considering the anticipated decline in interest rates over the next couple of years.

Thank you for your expertise and guidance!

[Denver McClure]

Hey @Felix Shi, your decision really should be based on your risk tolerance and goals. If you need the cash flow for portfolio expansion, go with the ADU. Adding that extra unit will reduce your risk since you are adding another income stream to a property you already own. Condos can be tricky. Everything depends on the HOA and what they will allow as far as amount of rentals (within the complex) and the type of rental (LTR, MTR, STR). The HOA can easily close your rental down without much notice so be careful there. I also wouldn't say condos have superior appreciation either.

I've built an ADU and operate it as a MTR. It's been one of the simplest and most profitable investments in my RE portfolio.