All Forum Posts by: Brian Larson

@Justin R. - Let me know how it turns out for you.  I am not familiar with the San Diego Market but I am still interested in hearing about your experience during sale.

@Dan H. - You are right.  It is probably conservative.  Essentially, I just want folks to know that it is not a short term investment.

@Dan H. - I think your bottom line is generally true.

I usually tell my real estate clients not to add an ADU unless they are planning to hold the property for more than 30 years because the real value is the cash flow over time.

@David Maldonado - I think all of your comments and scenarios are spot on.  Appraisers are still generally valuing properties with ADUs as additional sqft for the home.  I think this is wrong.

I hope they come up with a standard ADU valuation process soon. I am curious to see if anyone else has any updated info on this topic too.

@Emil Pinlac - I think you will find way, way, more success in SFH with an ADU than you will with straight multi-family. I had a client do exactly this 6 months ago. He purchased a SFH in the downtown area with an existing ADU. If my memory is correct, he put down 5% and got a really, really low interest rate on a 30 year fixed. He currently lives in the main house and rents the detached ADU to a nursing student. The ADU pays most (but NOT all) of his mortgage on his $315K home purchase.

Furthermore, cash flow is determined by the down payment and loan terms.  If you only put 3.5% down and try to house-hack, I think it is very unlikely for you to make a positive cash flow.  HOWEVER, you will live cheaply, create some tax write-offs, and possibly gain some appreciation over a period of years.  All of this will place you in a better position for future real estate investments.

Good luck with your property search and feel free to private message me if you want any representation for a real estate purchase.  I am a licensed realtor and even though I live in San Jose, I spend lots of time in Sacramento because I grew up there and all my family is there.

@Emil Pinlac - the short answer is....”it depends”.  What are your goals?  If you are trying to maximize a monthly cash flow, there are better markets than Sacramento

You MIGHT...MIGHT be able to find something in Sacramento for 1% Rule but you would most likely need to find something off-market.

Agreed. Very unlikely.

@Susan Tan - Please check out:
https://www.buildinganadu.com/

These guys are some of the original ADU consultants in the US. They focus specifically on the Portland, Oregon Area but, if I recall correctly, the website and their book contain some good local knowledge that might be useful across the river in Vancouver, Washington too.

@Jeff Copeland is absolutely correct.  Ordinances vary all over california.  You need to talk to your local city and/or county.

@Dan H. and @Matthew Forrest are both right. Essentially, the opportunity for ADUs is there but it is not easy to make the numbers work for all situations. I think an ADU works best for people with large equity in highly appreciating markets in california (i.e. the Bay Area). In this situation, folks are in positions to tap large HELOCs to build an ADU.

This is what I am doing and as long as I am careful with my construction cost, I hope to achieve a 1% Rule return.