All Forum Posts by: Nicholas Spinazze

 Hey Chad! Really great points! I'm not sure how to do a CCROI calculation since I will have gotten all my money back out on completion...in theory. I'm self-managing for this one, but long term will probably want to find a property manager. 

Thanks so much for the feedback Alex! Ok good deal, just wanted to see if that was a relatively normal return for a BRRRR!

 Arkansas! These are all projections though, whether or not it will actually cashflow really depends on how well the numbers I've done will match up with reality! So fingers crossed!

Thanks for the feedback Eliott? Why aren't you a fan of BRRRR out of curiosity?

 Thanks so much for the feedback! That's a great point I hadn't considered on tax assessment! I need to redo my calculations at a higher tax value. I'd done it originally on the costs as it seems like in this area the tax assessed value is significantly less than what it sells for. Hopefully that doesn't completely wipe out the positive cashflow.

 Thanks for the feedback Paul! Well it's it will cashflow now at higher rates of interest, but will be better in future if rates were to go down.

I know this question is fairly subjective, but assuming you got your entire initial investment back, including closing and holding costs and the property was only cashflowing 300-500 bucks after accounting for mortgage, interest, taxes, maintenance, utilities, vacancy etc. is that still a decent enough amount that you guys would still do deals like this considering the present interest rate environment?

Thanks so much for the feedback Dan! Definitely seems like from an equity perspective that ADUs don't really make sense. Which is a real shame because the laws as they stand in the area, its much easier to get an STR license on an ADU than on a normal property and they do tend to cashflow very well around here if you're close to the university for sporting events.

Thanks so much for your prompt reply Jaron! The Razorback greenway is definitely something we make full use of here! At any rate, using AirDNA average data we are expecting roughly 3k per month in revenue, we feel this is actually pretty conservative as we have an excellent location walking distance from baseball stadium and easy bike trail access. We expect the single family to rent out for 2400 a month. So all in all we would hope to generate 5400 a month for each of the 2 lots we have with mortgage of 2500 roughly on each depending on the interest rate when we complete construction including taxes and insurance. 

Hey there Bigger Pockets community! My wife and I have plans to build to build a 3BR single family and an 2BR Accessory Dwelling Unit(ADU) on one of the lots we split recently. Our plan is to use the ADU as a short term rental and the single family as a long term rental. We had planned something similar to a BRRRR except we are creating value by building as opposed to creating value by rehabbing.

The trouble is the way lenders in this area value ADUs. They value them at a flat 90k regardless of the condition or rentability of the unit. The ADU we are building costs approximately 150k to build and has a significantly higher cost per square foot for construction than our single family unit. Our lender said that after a year of seasoning we could come back and they would evaluate the value of the ADU based on the cashflow it generates.

So it would take approximately 2 years to get the total amount of our initial investment back and I don't have any guarantees that they will even value it at its cost of construction. We are also concerned about how the buyer's appraiser is going to value the ADU if and when we choose to sell the property. As having the ADU is taking our value per square foot down from $235 psqft (which is what the single family appraised at by itself) down to $189 psqft.

Do other areas value ADUs the same way? Given all this does it make sense to build an ADU still? We haven't broken ground yet so can we go back to the bank and tell them we just want to build a single family now? Greatly appreciate any thoughts/advise/opinions!