“Building is about getting around the obstacles that are presented to you.” Jeremy Renner

ADU’s or Accessory Dwelling Units have been approved for California beginning in 2016. Thee requirements have been streamlined, in may cases, since then. It is true that the cost of construction in increasing, both labor and materials. Would it make sense to add an ADU to your apartment building? It may be worth your consideration as a way to increase income and add equity to your property.

IS IT FEASIBLE? First question you need to ask is whether there is sufficient space for another unit. Could you build a unit over garages? Could you convert a storage room or a garage into living space? There is a housing shortage and this may be a chance to add a unit where you could not have in the past. You may be missing a space that could provide another couple of thousand dollars per month in income. Do you have an unused laundry room? It is a great idea to have a general contractor who is experienced in ADU construction have a look at your property. Your contractor could easily spot something you have been missing.

CHECK WITH YOUR CITY There may be restrictions unique to your jurisdiction requiring things you may not want to do. There could be other restrictions based on an individual property. I spoke to a contractor the other day who was looking for approval for an ADU project, but there were issues with contamination under part of the property which cased the project not to be approved.

ADVANTAGES Even though you can spend a hefty sum developing your ADU, it will be vacant when complete and brand new so you should be able to rent the unit at market value (always check with your municipality to make sure there are no new restrictions before renting). If you get long term refinancing on your building, the income should more than cover that cost and leave you some cash flow. Building an ADU should also increase your GROSS SCHEDULED INCOME which should increase the value of your building. If you are planning on selling or refinancing, this could put additional funds in your pocket. It involves a lot of planning, substantial cost and a good amount of effort on your part as a housing provider, but it may be well worth it.

ANOTHER THOUGHT If you don’t want to do the project yourself, you might consider putting together plans and bids, if you are thinking of selling. This won’t create additional value like the ADU would but it could be a “value add” addition to your building which could help in the sale.

“Don’t underestimate yourself. You are capable of more than you can ever imagine.” Les Brown

What we at PRS PROPERTIES CAN DO. We can give you a good idea of the current value of your building. We can suggest changes you might want to make before sale to give you an idea what type of building you would be able to exchange into. You may decide to stay in the rental business or you may want to move into a more passive real estate investment, such as a triple net or a DSL.. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparable in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We are currently looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We can offer a 7 day escrow and all cash at closing. Give us a call. We have also put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.

We look forward to a prosperous 2025 and we look forward to be of any help we can to buyers and sellers of multi unit properties.