All Forum Posts by: David Maldonado

Hey everyone,

I am in the process of closing on my next home to BRRRR. I was planning on starting the process to build an ADU as soon as I close, but I just found out the SFH is on a r-3 lot! I'm debating whether to build an ADU or a duplex on the back yard. Permits would be significantly cheaper for the ADU and would not require their own meters, but the equity gain isn't going to be nearly as much as adding another legit unit to a multifamily. On the other hand, I believe adding a dulpex would be much more expensive in permits and I think they require their own meters, but comps for multifamilys are high in my city.

I'm in it for the cash flow but I'm getting this propety for 290k and comps for mulitfamilys are very high in my city.

my estimated cost for a detached adu would be 40-50k (I've already built one for 35k before the reduction in permit costs for those who are about to say that's way to low) and I can only assume adding a duplex would cost much more due to higher costs in permits and meter installations.

What do y'all think is the better strategy?

For my 1bed 1 bath 488 sq ft jadu I spent a total of 37k. 

permit-12k

architect fees- 2k

Materials-15k

labor- 8k

keep in mind that I did a lot of the work myself. Only hired out electrical, drywall (with taping and texture) water heater install.

I'll have a more detailed spreadsheet when I build my ADU. Still waiting on the permit. Its been 6 weeks!

Hey everyone,

Is it possible to refinance out of a va loan into a non-owner occupied conventional loan? My 1 year requirement is met at the end of September for my va loan. I would like to refinance out and then use my va loan again to house hack. I have about 25% equity in my home on the lower end. If I have anymore, I plan to pull out the cash.

 ADUs are cash-flowing machines out here in Cali. Its a great investment if the rents are high in your area and if you could keep the building costs under 100k. The only con about this is when it comes to funding and refinancing.

The goal is to add enough equity in the home to pull out everything that was invested and do it again. I don't see why ADUs wouldn't add same amount of equity in a mulit-family property since mult-familys are appraised by income. At the end of the balance sheet it would still give you the gross profit, regardless of ADU or another mult-unit.

Thanks Brian,

I am creating a spreadsheet with all the costs associated with the ADU from what materials were used, quanity, and cost, labor, permit costs etc.

I believe this is a game changer, but it all depends on how much equity the adu will add so I can pull it out for the next unit.

Hey everyone,

So my first attached 488 sq ft ADU project on my SFH went great. Spent 35k (before 2020 when permit fees were decreased) and it added 60k of equity on my property. I am planning on buying an owner occupied duplex to brrrr in a relatively high market and was thinking about adding an ADU. Since multifamilys are valued based on income, would a duplex with an attached ADU be appraised like a triplex? The cost would be about 50k for a 2bed 1 bath 749 sq feet in a market where it will easily rent for $1800 per month. I am also aware that I can add a 2nd ADU on a multifamily, but it will cause lending issues when it comes to refinancing or selling. Im a buy and hold guy, so cash flow is my priority, but I would like to refinance and pull out all the cash invested in the ADU(s) and repeat with another owner occupied loan after the 1 year occupancy. For anyone about to say that 50k is a unrealistic number, I am an owner builder, do most of the work myself and only hire out a few parts for the labor.

 I can only imagine the frustration. In my hometown there was a tiny 1 bed 1 bath home about 500 sq ft that sold for 200k and thats close to the same size as my JADU. Hopefully new appraisal guidelines for adus come out soon.

 Thanks for the response Brian,

Do you think it would also depend on the area where ADUs are popular? I heard in Fresno CA a garage conversion to ADU actually devalues the property because people prefer to have a garage. But in my area of Santa Maira, people prefer the extra income.

Hey everyone,

So from my understanding of how a detached ADU is appraised, is by comparing similar properties with detached ADUs that have recently sold in the area, but there aren't much homes with detached ADUs to use for comps since this is still fairly new.

On the other hand, would an attached ADU be appraised differently? I bought my home in late 2018 for 360k and then converted my garage into a 488 sq ft ADU. I recently got an appraisal letter from the county appraiser and my property is now valued at 418k. Not bad, considering I spent 35k to convert it. I got in touch with the building inspector and she sent me info on how the city views ADUs. Attached ADUs are considered "additions" thus add square footage to the main house, but detached ADUs do not.

Would an Appraisal done for refinance purposes count an attached ADU square footage together with the main house?

Just coming up with Ideas on how to pull out everything I put in on an ADU to keep on repeating the process since there is not much financing options for funding ADUs besides using HELOCS or Personal loans.

Hey everyone,

Can lenders cancel out personal loan payments from a loan that was used to build an ADU when applying for another owner occupied loan? Would a lease and proof of deposit be enough to not get that perosnal loan payment counted towards my debt to income ratio?