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Is there an easy way to identify lots good for ADUs?

I’ve been following the ADU conversation for the last few years. I guess I’m surprised it has actually stuck but it look like it’s here to stay. I’m thinking about using this as a way to keep my crews busy but not sure if there’s an easy way to find appropriate locations easily.

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Hi @zorikmatos - I’ve been following ADUs for the last few years and believe California doesn’t have a choice but to leverage ADUs as a way to meeting housing goals. When I present, I include maps of potential opportunities. The criteria I use are as follows:

  • 7,000 square foot lot minimum
  • Properties around 2,500 square feet on that 7k lot or 36% coverage ratio max.

I interviewed a few contractors and ADU installers about a minimum of what they look for before they are willing to engage. They also use mapping programs with overhead views to see where the house is located on the lot.

That makes sense. Why go on site if there’s no potential. Especially during COVID. Have you seen financing options?

Then again, JADUs are garage conversions. So, don’t rule them out. Actually, one of the latest bills Newsom signed forces HOA association to stop the practice of including ADUs in their rental totals if they happen to have a rental cap.

You know, I’m still hearing there are issues with financing. Let me see if I can get someone in here to chat about that. I met in her in San Diego and she’s been working really hard on that on consumer-facing, long term loans. Part of the problem is the appraisal.

Thanks, Aaron! Appreciate being invited! I agree with your earlier comments and can add on:

7500 sqft+ lot
Smaller house (1800 sqft or less)
2 car garage if possible
Purchase price between $400-650k depending on your county loan limits. For example, LA and OC county loan limit if $765,000 for government-insured renovation loans. So your purchase price _ construction budget can’t exceed that. It’s trickier between investor vs. owner-occupied.

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@MeredithStowers can you share anything about the investor vs homeowner issue? What is the price range you’re seeing it take to stuck-build one of these? Are lenders starting to loosen up about funding purchase loans with ADUs on the property?

Thanks, Aaron. I’m seeing prices as low as $130,000 for stick built, and where else can you buyer a brand-news 2-3 bedroom home in California for that? In financing terms, that’s about $500/month.

To purchase a property and build, primary owners would need at least 3% down payment at around 2.99% (average) up to the max loan amount (usually $765,000). Investors need 20% down payment at least, and refinancing requires 75% future loan-to-value. If you have enough equity, you can just cash out. Kinda complicated so we built an ADU Estimator at https://GrannyFlat.loans. Of course if you don’t want to deal with the hassle of a traditional mortgage, hard money is a great option and then you just refinance when done.

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I know it really depends on the size. I have some contractors in Riverside saying they can build for $80k range but I can’t say I know the size and quality. Berkley did a study that showed on average the cost was $150,000. Definitely a very affordable option all things being considered.

HA! Maybe these were done under the permit radar or they are very small. Maybe these were conversions of some sort.

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Those might both be true.