All Forum Posts by: Chen Zhou

You wouldn't be negative if you use the right lender. Try figure.com. They value ADU sqft the same as main home sqft.

Also don't overspend on ADU. Use an affordable contractor is the key.

 @Brian Larson Have you tried Figure.com for refinancing? They value ADU sqft the same as main home sqft.

You can, with JADU:) 

Yeah, no multi-unit (duplex - fourplex) in South Bay and places like Fremont can give you positive cash flow anymore. The market is indeed crazy. Good to know that 6% cap rate is still possible in Contra Costa County. I think cap rate on ADU can easily be 15%-20%, even with the high construction cost in the Bay Area today.

Got it! That's amazing timing! If you are buying primarily for appreciation, then definitely there are better options than ADU.

ADU is mainly for great cash flow today and appreciation in the future. Good for long-term holding, not for quick flip.

That's amazing! So I assume it's not in the bay area then.

Appraisal in the short term is challenging, but hopefully in a few years it's going to get better with more comps.

Hi Carlos, thanks for sharing. Do you mind sharing the numbers for the Duplex? Is it in the bay area as well? I considered that as well, but realized that I would need a lot more capital and cannot achieve the same cash flow.

 Great point on the importance of a good design and your earlier post on appraisals! 

Great question! I would pick ADU appropriate lot in an ADU appropriate neighborhood.

ADU appropriate lot means that 1) the lot has to be big enough (ideally over 7000 sqft with deep backyard) so that adding a 500-1200 sqft ADU is not going to make the yard super crowded and can allow both households to maintain privacy. On these big lots, adding an ADU would NOT decrease the quality of life of the people living in the main house.

Neighborhood appropriate means that the main demographics buying houses in the neighborhood would appreciate an ADU that they are willing to pay $$ for it. Typically neighborhoods where a lot of young families live (since they need child care support from family, or need to take care of elderly family member, or appreciate separate home office space, etc.)

I think it depends on the neighborhood, the lot size, and the design of the ADU.

If it's a high-end wealthy neighborhood (think Los Altos, Menlo Park, Palo Alto) where all the main houses are giant, maybe the potential buyers would just think of an ADU as a bonus, but not as something they want to pay a lot of $$ for, since they are most likely not going to use the ADU as a rental, but more like a guest house or an office.

However, if it's in a neighborhood where most buyers are younger folks who have young kids and elderly parents (think Santa Clara, San Jose, Fremont, etc.), then ADU is very appropriate as child care and caring for elderly parents are big & real needs among this demographic. Also, a lot of these young professionals want to have separate office space (to maintain work life separation) and can use the quiet space in ADU to WFH. More space is definitely not a bad thing, and nobody is required to rent the ADU out. However, they would have the option to, if they feel like they need some extra cash flow.

Lastly, it's important to know that not all the lots are appropriate for ADUs. If the lot is too small, might be better to just do an addition instead of a detached ADU to create more living space. If the lot is big enough, then a well-designed ADU (with their own private yard and entrance) should NOT interfere with the life of people living in the main house NOR should it decrease the quality of life of the people living in the main house. It should increase the quality of their life by providing more optionality.