Podcast - 094: ADUs are the future of real estate

In this episode, realtor Anthony Luevanos and lender Angel Luevanos cover everything ADUs. They interview ADU Specialist Eric Escobar.

What is an ADU? 

An accessory dwelling unit is a secondary housing unit on a single-family residential lot.

Usually consist of a garage conversion but can also be a new build in your backyard.

Why do people build ADUs? 

 Most people build ADUs because of affordability. Dollar-for-dollar makes the most sense. 

A two-bedroom, two-bathroom ADU will cost you roughly $200,000. Where can you find a home that prices in Los Angeles County?

Frequently, people build an ADU for their elderly parents.

Can I build an ADU on my property? How big can I make my ADU? 

Most single-family residences or multi-family properties will qualify. If you have a home in a commercial zone, then it will be more complicated to build.

The state law is 1,200 square feet. However, many cities have subordinances that limit the size to 1,000 or 800 square feet.

How much does an ADU cost? 

A garage conversion is about $100,000 to $120,000 for a two-car garage.

A new build two-bedroom, one-bathroom, 700 sqft ADU will cost about $200,000.

How do people pay for an ADU? 

Most people pay for an ADU with a cash-out refinance or a home equity line of credit.

Only about 20% of people pay cash.

If you have at least 30% equity in your home, you may want to consider using some of it to build an ADU.

Is an ADU a good investment? 

ADUs can be priceless! Where else can you affordably put your family or your parents in housing?

Investment-wise, the rent you generate from the ADU is almost always higher than the monthly payment to build the ADU. So yes, it’s an excellent vehicle for cash flowing immediately.

ADUs also increase the home's value, and as more ADUs are built, their value will continue to increase because there will be more comparable sales. In Seattle, for instance, ADUs are valued almost at the same cost as the house.