Quote from
@Rob Massopust:
Originally posted by @Mayra B.:
Hello,
My husband and I are looking to buy a SFH in SOCAL with a big lot (>7,000 sq ft.) to build ADU unit in the back yard and we would live in the SFH.
Does any one in this forum could recommend any Lenders that specialize in ADU's?
We are looking to get approved for a home loan.
Any suggestions?
Thank you,
Mayra B
HI Mayra
What city are you looking in and at what price point.
Are you looking to buy the home and build the ADU simultaneously?
FHA/Fannie Mae have a buy and rehab program all in one that allows you to do both. The challenge is the price point and ultimate loan amount. I know a few lenders that are working direct with the housing director at CAR [California Association of Realtors] and the state government. They are really wanting to push this agenda through. 2020 has really made the process alot easier.
Once you own the SFR maybe through conventional financing, if the case may be, you can get a construction loan or a hard money loan to build the ADU specifically.
I have several sources based on your goals I'd be happy to share with you if you DM me.
One other thing to consider is you can now do what is called an Junior ADU and a regular ADU all on same property and with same loan [again depends on the price point and how much down you have.
IE: $750k Price Point, ADU Cost $200k Total is $950k - Will not qualify for conventional financing and would have to go jumbo unless you had the loan less than $750k of so.
But as an owner occupied you can go with as little as 3% down and borrow up to the $750k amount, or if you put down $100k you can borrow that much to do the rehab as one loan.
By being able to get the numbers as a conventional loan you have more options.
I also have a lender that will do ADU and he is a non QM lender, seemingly aggressive on the concept. And an aggressive HML for ADU's
Once you buy and build, you should be able to refinance out to a new mortgage if it makes sense. But a word of caution many appraisers and lenders are still trying to figure out ADU's and might not give you even full value of construction, let alone the added value add of income.
But a better way to look at it is to say ok its going to cost me $200k to build and that is about $900 per month in mortgage but I can rent it out for $2000 that just offsets your mortgage by $1100 which can debt service over $200k off your part of the mortgage.
Go as big as you can and depending on the city, max out the size ie : 2 Bedroom, no parking [near transit], corner lot etc. The incremental cost is not that much more than building a minimal size ADU.
Here is what I see as an interesting Project
City of Orange, Tustin, Santa Ana, Garden Grove, Anaheim
Purchase Price $750-$850k, 2300 sq ft on 7000 sq ft lot.
Convert part of the existing 2300 sqft house [150-499 sq ft] as a junior ADU [Extra bedroom, attic or basement etc] attached to the existing structure - $30-50k in cost - Market rent $1500+
Use the 1800 sq ft or so for your part of the house. Adjust as needed, if you only need 1200 sq ft even better.
Build up to a 1200 sq ft 2 Bedroom on a corner lot[for division of privacy between you and your tenant], near public transportation [to reduce your parking requirements] - Market rent $2500 [More as a furnished rental]
Total income is $4000 which will debt service about $800k or so you are living there for about a $200k-$300k value for an 1800 sq ft in a nice part of town. Ultimate House Hack. So much better than a duplex or triplex.
🏠Interesting Project, Keep us posted with more details and I can get more specific.
