All Forum Posts by: Matthew Forrest

@Miho Y. You should check out the 2020 state ADU legislation, but off the top of my head I recall two ADUs for 2-4 unit properties and a max quantity of attached ADUs equal to 25% of existing units for 5+ units.

@Alex K. The ADU construction capital getting locked in the property at this time doesn't necessarily mean it doesn't work. It definitely boosts cash flow! I would also say that going through the ADU process is a good (but expensive) education. At this point I think the best ADU strategies are applied to 5+ unit multifamily properties where the lenders look at rental income for property valve.

@Stephen Bjorgan BiggerPockets never goes dark! Same here on your appraisal experience. Definitely not great... I like your idea to include the ADU within the square footage of a house. However, the small pessimist part of me imagines the appraiser saying something like "there are two kitchens so we can't count the additional square footage."

If you figure out how to parcel our the land for separate sales let me know! I signed a document stating I wouldn't do that for the property I currently own, but it would be a cool plan for the future.

@Hsiang Lo

In order to give my opinion in response to your question I feel like I would need more information. What’s your strategy? Are you going to house hack? How long do you want to hold for? Do you assume there will be appreciation? Do you plan on living in the house? What’s the purchase price? Etc.

I know Torrance very well and would be happy to talk about if you would like to connect.

@Roman Rida From experience and from stories from others I read on BP, building ADUs does not do much to force appreciation so you'll have trouble with a cash out refi to recover capital put towards construction. You'll often find that it's difficult to get the property to even appraise for the original purchase price plus the cost of the ADU. That being said I don't think you'd get another $80k of value from an appraiser. ADUs are typically a good ROI in terms of cash flow for SFHs, but if that's not what you're interested in I wouldn't go for it.

@Justin Knighten I'm not in your area, but I feel like the question is general enough that it applies to ADUs across the country. I wouldn't worry about wasting the contractors time in your case, especially since you seem to be so conscious of it. It seems like you have serious intent to move forward with project if the price is right and you need accurate information. Where better to get the pricing information you need than the person who is going to charge you? Finding a contractor that specializes in ADUs in your area and asking them what the typical project cost per square foot is would be a reasonable inquiry. Good luck!

@Dennis Maynard Was that a link for the market update? I could't click on it.

I'm not a fan of the garage ADUs, ADUs with awkward access, or ADUs with inadequate parking situations, but I'll take a stand alone ADU over a duplex with no room to build at todays valuations all day long. Sign me up!

@Ray Martinez

You should contact an accountant for more details. 

I don't think the cost segregation study will be be beneficial enough to justify the cost. Those are typically done on properties that have a higher improvement value. 

The biggest benefit I've seen from the prefab homes (I have not had one built) is cost savings, but I would take a hard look at if this is actually true. Get in touch with an architect and GC in your area to determine what the traditional build cost would be for what you're thinking of that would mesh better with your main house.

The tenants you attract depends on your neighborhood and the type of ADU you build. If you live in a family friendly neighborhood, you could build a 1200 sqft 3/2 ADU and attract a family, a 800 sqft 2/2 and attract young professionals in a roommate situation, or a 700 sqft 1/1 and get eligible bachelor. Build the ADU for the type of tenant you want.