You know how California is, it is so amazing we have more people than housing. And instead of building up, which is starting to happen more, we think of a way to make existing square footage and street house more people. In January of 2020, ADU (Additional Dwelling Unit) and JADU (Junior Additional Dwelling Unit) became more mandated and allowed by the government for the cities to figure out.
What does this mean and what does this look like? Let's break this down one by one:
Additional Dwelling Unit - Detached
The simplest way to separate them is Detached versus Attached. For this example, we will use a decent sized lot with a house in front and a small back house in the back. The back house would be the ADU. If you were leasing both homes out, you would receive two rents as the owner.
Junior Additional Dwelling Unit - Attached
A JADU is usually smaller than an ADU and attached to the home in question. For this example, imagine you have a 3 bedroom 2 bath home with a large California Green Room. Some renovations and plan approval later, that is a JADU that is getting it's own rent.
So why are we creating a new category for housing? Because California is expensive to live, with lots of people living here, and the state wanting to make sure all those "tax paying" people have an "affordable" place to live. You would not believe some of those ADU's go for up to $1,500/mo. If you spent $30,000 to create the ADU and leased it out for $1,500/mo...You would make your money back in 20 months. Obviously, each ADU case seems to be special and that means range of outcomes and pricing.
In this current market, housing prices are not going down and Real Estate has not stopped happening due to COVID-19. If you have money and you are thinking of buying and can't, renovate. This is a great time to put money into a home and get it ready to sell for a higher price. ADU's in most cases are being sold as Duplexes, they are two doors and great for families and Investments. Cities are having a heck of a time trying to turn various Bills that Washington has put out into an actionable plan that citizens can do for their investments, but they are getting there. Cities have a lot to deal with when it comes to ADU's, not just the planning, but the streets. There are so many things that will get affected by every house essentially doubling up.
There are some things, that are not mandatory, that I believe should be thought through before applying and doing an ADU. If you have tenants currently, have a plan in place to work with them as work is being done as well as once a second tenant is in place at the ADU. Make sure your lot size actually works for having another person/couple/or family live on the same lot. Things to consider would be entrances, parking spots, and storage. Maybe try to live there yourself for a day or so and see how it feels and plays out. It would be awful to put that money into the ADU and have it not be leasable because for the same price of rent, they can have more space or privacy. Check with your local city at the planning comity. Whether you plan to sell in the short term, or pass down to your kids in the long term, its always a good idea to have all your permits in place. You could even get the permits, not do the work, and sell the idea of it with your home and have someone else do the work-a pretty priceless piece of paper if you ask me.
Many tenants who live in a home, even if they rent it, are choosing to do so for the mere fact for a similar amount of rent for an apartment, they can have some space from their neighbors. It is not all that hard for housing with too many ADU's to feel like apartments and have them cheapen the rental income of housing. The US is in some ways, and often overlooked, a place with so much space. If anyone has gone to Europe, or even watched Formula One on TV, most of the world builds very close and very tall to properly house all their people. We are so lucky here to have as much space per person as we do, but one would hardly know it until they see the other side of the world.
Orange, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn
What does this mean and what does this look like? Let's break this down one by one:
Additional Dwelling Unit - Detached
The simplest way to separate them is Detached versus Attached. For this example, we will use a decent sized lot with a house in front and a small back house in the back. The back house would be the ADU. If you were leasing both homes out, you would receive two rents as the owner.
Junior Additional Dwelling Unit - Attached
A JADU is usually smaller than an ADU and attached to the home in question. For this example, imagine you have a 3 bedroom 2 bath home with a large California Green Room. Some renovations and plan approval later, that is a JADU that is getting it's own rent.
So why are we creating a new category for housing? Because California is expensive to live, with lots of people living here, and the state wanting to make sure all those "tax paying" people have an "affordable" place to live. You would not believe some of those ADU's go for up to $1,500/mo. If you spent $30,000 to create the ADU and leased it out for $1,500/mo...You would make your money back in 20 months. Obviously, each ADU case seems to be special and that means range of outcomes and pricing.
In this current market, housing prices are not going down and Real Estate has not stopped happening due to COVID-19. If you have money and you are thinking of buying and can't, renovate. This is a great time to put money into a home and get it ready to sell for a higher price. ADU's in most cases are being sold as Duplexes, they are two doors and great for families and Investments. Cities are having a heck of a time trying to turn various Bills that Washington has put out into an actionable plan that citizens can do for their investments, but they are getting there. Cities have a lot to deal with when it comes to ADU's, not just the planning, but the streets. There are so many things that will get affected by every house essentially doubling up.
There are some things, that are not mandatory, that I believe should be thought through before applying and doing an ADU. If you have tenants currently, have a plan in place to work with them as work is being done as well as once a second tenant is in place at the ADU. Make sure your lot size actually works for having another person/couple/or family live on the same lot. Things to consider would be entrances, parking spots, and storage. Maybe try to live there yourself for a day or so and see how it feels and plays out. It would be awful to put that money into the ADU and have it not be leasable because for the same price of rent, they can have more space or privacy. Check with your local city at the planning comity. Whether you plan to sell in the short term, or pass down to your kids in the long term, its always a good idea to have all your permits in place. You could even get the permits, not do the work, and sell the idea of it with your home and have someone else do the work-a pretty priceless piece of paper if you ask me.
Many tenants who live in a home, even if they rent it, are choosing to do so for the mere fact for a similar amount of rent for an apartment, they can have some space from their neighbors. It is not all that hard for housing with too many ADU's to feel like apartments and have them cheapen the rental income of housing. The US is in some ways, and often overlooked, a place with so much space. If anyone has gone to Europe, or even watched Formula One on TV, most of the world builds very close and very tall to properly house all their people. We are so lucky here to have as much space per person as we do, but one would hardly know it until they see the other side of the world.
Orange, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn
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