All Forum Posts by: Ray Martinez

ADU's aren't valued as traditional additions because they don't add square footage to the original house. Instead, they're valued as an amenity, like a swimming pool or wooden porch. Most appraisers these days are valuing ADUs at $40K-$50K, which is less than you're paying to build it, I'm sure. So don't expect to recoup your costs in a sale.

However, if you keep the home and rent out the ADU separately from the main house, you'll be getting an excellent ROI. What's a 1/1 rent for in your area? $1500/month? If you building an ADU for $100K and it generates gross rent of $18K/year, you're probably looking at a net return of $15K/year or 15%. That's AMAZING in LA!

So if you're planning to sell in the next year, stop construction. If you're planning to hold for a couple of years, keep building.

Good luck!

Best,

Jon

I like the idea of renting out, but I believe there's a restriction in the City of San Fernando about utilizing both the main dwelling and ADU as investment properties. Either one needs to be owner occupied.

I agree with the potential ROI. Perhaps I'll find value in a Rental Property purchase instead.

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Originally posted by @Matthew Forrest:

@Ray Martinez Every situation is different, but if I had to bet on it I would say no. Building an ADU has not proven to be a very good forced appreciation strategy.

Thanks for the feedback!

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Hey there BP Community,

I'm in the early stages of constructing an ADU and I've just been offered an opportunity for a job in AZ. (I'm currently in CA)

If I continue with the construction of the ADU, will I get the investment back if say I have it for at most 12 months?

Will the resale recoup the investment?

I'm constructing a 1 Bedroom/1 Bath 360 Sq Ft Garage Conversion in San Fernando Valley.

Thanks everyone!

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Originally posted by @Matthew Forrest:

@Ray Martinez I do not have any LLCs or other entities and I am able to write off the expenses associated with my real estate expenses.

Hey Matthew,

Do you use depreciation by a 5/7/15 year list or do you do the 27.5 avg depreciation? I heard you can itemize your expenses to do a 1 year depreciation total but it needs to be supplied with a cost study done by an engineer.

Thoughts?

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@Matthew Forrest

Thank you for the feedback! Appreciate all the reasons to think about electric.

The run to the garage would actually be very easy, however the guys I'm using to do the sewage and water will not be allowed to touch the gas. I'm assuming So Cal Gas will want to trench their own run for gas, which is so unnecessary but understand the liability issues.

Thanks again!

I've posted another question in the forum about ADU on a LLC. If you have time to review, I would appreciate it!

Ray

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Hey BP community,

I have an ADU in the works and was looking at the cost associated with a Gas Hookup. So Cal Gas has to do the work and the costs using the estimator seem pretty steep!

What feedback would you have for an All Electric ADU vs. Gas?

Thanks for your input in advance!

Ray

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Hey everyone,

I'm currently in the beginning stages of converting my garage into an ADU. I wanted to see if there are any experiences with creating a LLC prior to construction to help with tax liabilities for the costs of the conversion.

If this is the case, how did you approach this and how did it benefit you?

Thanks in advance for the insight!

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All Forum Posts by: Ray Martinez

Ray Martinez has started 11 posts and replied 28 times.

Post: Small Business Sale to Investment Property

Post: ADU Worth the Investment?

Post: ADU Worth the Investment?

Post: ADU Worth the Investment?

Post: LLC your ADU to Save on Taxes?

Post: Gas Connection for ADU in CA?

Post: Gas Connection for ADU in CA?

Post: LLC your ADU to Save on Taxes?