All Forum Posts by: Brian Larson

Yep.  I'd move forward with an increased deposit.  The deposit should mitigate the risk.

@Jaron Walling is correct.  You should look at the bigger picture.  Can you afford to buy another place for similar costs (around $80k)?  If so, why not buy that and rent it for a discount?  It would probably be better than dealing with construction.

What is the priority here?  Helping family?  Or making a sound financial investment?  It seems like you just want to build this structure to keep family close and help out but still provide separate living spaces.  If that's the priority, do it.  But do not pretend that it is a financial investment.  It won't be one from a cash position but you may grow rich in family relationships.  Best of luck.

@Deepak Bhosale

This is a really difficult question because of all the variables.

Personally, I decided to build a detached ADU but there are plenty of days that I have thought purchasing a rental property would have been better.

I think only time will tell if I made the correct decision because the appreciation of the property and increased rents in the bay area are big unknowns. If both go up drastically over the coming decades, this will probably work out to be the better investment. However, if it slows, I will probably regret building this ADU.

Good luck with your decision and let us know what you decided.

@Joel Calkins is right.  There are lots of document resources here.

Additionally, you should find a quality site to screen your potential tenants through.  I would not recommend allowing tenants to bring you their own credit report.  You should run that report independently, and also search for legal actions (evictions & unlawful detainers), and any criminal convictions.

As a former property manager to a few large apartment communities, I tell you that 90% of problems come from poor tenant screening.  The other 10% are mostly communication issues so I highly recommend a signing appointment to review the entire lease with tenants before they move in so that there are no "I didn't know that" conversation later on.

@Edward Stevenson - FYI - There are already groups working in this consulting space.  Here are just 2 random examples:

https://maxablespace.com/

https://www.housable.com/

All these comments are true.  ADUs are too much money and not enough return on the appraisal for most investors.

However, you can still make it work if you are creative.  You need to work really hard to decrease the upfront cost.  Two big solutions are to do the project on an owner-occupancy site AND be a self-builder (aka your own general contractor).

Check out this random YouTuber.  His cost is insanely low because he did exactly these 2 things.

https://www.youtube.com/channe...

Speaking from personal experience; this process is way, way harder than most people make it look online. In other words, I am spending way, way more money on my ADU Project.

Hi BP Folks.

Anyone have some good OOS online research and investment tools that they can share?

Also, any commentary on sources like city-data.com or niche.com?

This is a very specific questions.... My best advice it so talk to the local planning office and get something from them in writing.

I believe JADUs need to be attached to the main home and be converted from existing space.  Sounds like your situation should qualify.

@James B. - Sounds like big risk and big reward.

Sounds like you are excited to make this work.  Have you ask the question "What other investments are available for this kind of return?"  Perhaps there is another real estate investment opportunity.  If you have done that "homework" already....I would say that your post is just about fear of the unknown.  Everyone has different risk profiles.  If this works for you though, do it.  Look at it as a learning opportunity.  Even if you just have a "base hit" as the BP folks like to say....It should be worth the time and energy.

Lastly, I would advise you to double-check and ensure that your rental projections are very conservative.

If you move forward with the deal, come back and let everyone know how it goes.