ADU Case Study
What is an Accessory Dwelling Unit?
ADU is a unit that is smaller than the main house but also has its own kitchen and bathrooms. An ADU may or may not be attached to the main house.
Why is the Accessory Dwelling Unit a great investment?
By adding ADU, you will increase the value of your property as well as have a unit ready for rent. And on top of that, starting 2020 California allows TWO accessory dwelling units on a single family zoned property, which means you can add even more value and get another unit for rent.
How can you earn over 15% return?
Let’s go over numbers and see how one of our clients was able to do it with his property:
The original value of the client’s property was $515,000-$525,000 for 2 beds 1 bath – 839 sqft – Canoga Park, California.
The client decided to invest and add a 430 SQFT detached accessory dwelling unit in the backyard. By adding an ADU, the property’s value increased up to $635,000(by appraisal) and on top of that the client rented out his unit for $1400 a month! To get plans and permits, and build an ADU took him about 90 days.
$1400×12 months = $16,800 a year
With plans and permits, to build 430 sqft ADU cost $85,000.
Financing was obtained through a regular conventional refinance at 3.375% for $375 a month.
Thus, he is getting a yearly return of 18% on his ADU investment. Keep in mind he added only ONE adu to his property.