An accessory dwelling unit (ADU) is defined as a self-contained living quarters inside of, attached to, or on the same lot as the property’s existing single-family home. Many people refer to ADUs as an “in-law suite.” To be considered an accessory dwelling unit, the specific area must have certain characteristics, including:
- Living area;
- Sleeping area;
- Kitchen; and
An ADU does not need to be large. In fact, ADUs can be as small as 250 square feet. Hence, many house flippers consider adding an ADU to a remodeled home by updating an attic space, basement or garage. In addition, there is the option to add an ADU that is a standalone structure with multiple bedrooms and more than one story built on its own foundation.
Review Local Ordinances and Regulations
When it comes to adding an ADU to a home, it is important to thoroughly review relevant zoning laws in your particular jurisdiction. This is important because zoning laws vary greatly depending on the local municipality in which your property resides. Here is a summary of the ADU ordinance in Los Angeles county
The Impact of an ADU on Resale Value
Whether an ADU will actually increase the resale value of the home depends on a myriad of factors, especially local market conditions and trends. Other relevant factors include:
- Population size in the local market;
- Housing availability;
- HOA restrictions.
The decision to add an ADU in a house flip is typically influenced by inventory shortages, aging-in-place trends, and other market forces related to what home buyers are looking for in a particular property.
As with any decision made during a fix-and-flip, the overarching objective is to maximize the ROI on the project. Reason being, you should invest the time in determining the following:
- The as-is value of the property;
- The construction costs associated with project improvements; and
- The potential after-repair value (ARV) those improvements will return in the existing market.
Once this analysis is done, you can gauge whether the ARV will generate a significant return on investment to the point where adding an ADU is worth the additional time and expense. If you need funding to add an ADU to a renovation project, consider applying for a hard money loan in Los Angeles.
Interested in a Hard Money Loan in Los Angeles for Your Next Project? Contact PB Financial Group Today
When you are renovating a home, (which could include adding an ADU to the property), it is perfectly understandable to want to maximize resale value as much as possible in as many different ways as possible. With the addition of a new dwelling unit, the hope is that the increased value will result in higher profit margins for the investor.
PB Financial Group is a premier direct hard money, private money and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans. Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner. For further information or to schedule an appointment please contact PB Financial Group at 877.700.3707 or visit www.CalHardMoney.com to learn more.
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