All Forum Posts by: Nicholas LaGatta

Hi BP,

I have a retired neighbor in an in-town historic Atlanta neighborhood that's paid off his house and now he's looking to finance building an Accessory Dwelling Unit (ADU) that he can rent out for supplemental income. He's got modest but steady retirement income, 750s credit score, and minimal debt. The house recently appraised for around $350k in current condition and the ADU would cost around $125k.

He's done some preliminary research and has found a 2nd mortgage will be easier to get than a construction loan or HELOC. I'm going to talk with him tomorrow morning about some considerations for finance and construction and I'd like to crowd source some ideas.

What do you think is the best way for this guy to finance the project?  What kind of interest rate could he expect?  What are some other finance considerations we should talk through?

Thanks in advance!

Extensive AirBNB experience tells me this is going to be a logistical pain in the neck, unless you happen to connect with the one guy who's got the opposite of your schedule. Consider how baffling this will be to your accountant, logistics for managing maintenance and repairs without you there, how you will market and find crashers, do you want long or short term, what kind of turnover rate is acceptable, how this will work if you're renting other rooms, if this is something your lease/HOA allows (if applicable), who's going to change the sheets and clean, what about common area/kitchen/fridge/bath rules, how will you handle damages and deposits, what about squatters...I could go on and on.

I also live half in Atlanta and half in whatever city my client needs me, so I understand the impulse to take advantage of an underutilized asset.  The way I scratched this itch in a condo I used to own was to convert a sun room and part of a utility room into my own crash pad, then I rented out my room to a grad student.  

The other consideration is that we will submit the house, including the addition, on the as-built drawings.  If the addition is already on the as-built drawings (even if they don't match the tax record), what would even prompt the inspector to require footer inspections if we aren't proposing building a new structure?  I'm not sure if this is even a hurdle we would be asked to clear, given the circumstances.  

My father is a licensed GA architect and would sign off.  However, it looks like it has to be a structural engineer according to calling the office of inspections this morning and this document https://www.atlantaga.gov/Home/ShowDocument?id=19891.  However, in reality, an inspector might accept an architects sign off.  I'd like to go an speak with the inspector to see what they would accept, but I'm out of town and I travel every week and it's realistically extremely difficult for me to do this.  

I've reached out to several engineering firms today through Yelp, Thumbtack, Google, etc. and I haven't found anyone that offers the services I am looking for.  Also, my contractor has been unable to get his engineers to sign off on his other client's work and I'm sure they're willing to do just about anything to avoid demolishing and rebuilding the footers and foundation.  

Not yet.  I need someone 203k certified.  My top contractor bidding right now is the one who hasn't been able to get engineering firms to sign off on another similar project.  

If I know from the start that I can't get the addition all the way through permitting and inspection, I'll just specify tearing it down to begin with and save $5-10k in fees to redo the drawings and go through Urban Design approvals again to come to the same conclusion.  

Know where I could find one who would do it?  

Far be it from me to dabble in grey areas of real estate investing...but I've got a question for those investors and contractors more familiar with dealing with the city of Atlanta than I am.  I purchased a property which I knew at the time had an unpermitted addition and a Stop Work Order from the prior owner.  I knew the risk I was taking on and that the property would have to start from scratch and have everything brought into compliance with the city.  

Since the addition is already built and no longer a "proposed structure," it will be included in the drawings showing the current structure of the property.  I've gotten conflicting information from different contractors about how this scenario will play out.

Since we aren't proposing building an addition, would footing inspections still be required?  Of course, there is no practical way to inspect the rebar on the footings in the current state.  

If footing inspections are required, I understand certification from an engineer can be used to satisfy this requirement.  However, one contractor has had a real challenge getting an engineer to sign off on a similar project for another client, since they don't want to accept the liability.  I have an architect willing to sign off on the structure.  Would architect sign-off be an acceptable alternative to getting an engineer to sign off?

Correct, but I would not advise the latter.  I love my non-conforming duplexes.  

Is there a way to combine the attic and the unit below in such a way where there's kind of a conjoined suite situation, so it's convenient to rent it out as one unit which includes a suite, but technically the attic could be considered a 3rd unit?  

Tacobout a "supreme" response...

Do you recommend a guac addendum or how is that typically handled?