“Progress always involves risk. You can’t steal second base and keep your foot on first.” Fred Wilcox

If you own an existing apartment building, California just handed you two stackable ways to add units without a full new-construction entitlement process — and a lot of owners don’t realize it yet.

NEW LAW Under SB 1211, effective this year, multifamily properties can now add up to 8 new detached ADUs — up from the old 2-unit cap — capped only by how many units you already have on the lot. A 4-unit building can add up to 4; an 8-unit-or-larger building can add the full 8.

NEW CHANGES Separately (and stackable with the detached-ADU rule), you can convert non-livable interior space — basements, storage rooms, boiler rooms, unused parking garages, even a leasing office — into ADUs, up to 25% of your existing unit count. A 20-unit building could qualify for 5 conversion units; a 12-unit building for 3.

A few things worth knowing before you get excited:

  • State law bars cities from imposing a minimum lot size requirement for ADUs
  • Parking requirements are waived in many cases — especially within a half-mile of public transit
  • As of SB 543, cities now have just 15 days to tell you if your application is missing anything, and 60 days to approve or deny it (or it’s automatically approved)

IS MY BUILDING WORTH MORE? I’ve had clients ask me over the years, “Is my building worth more than I think?” This might be one of the clearest answers I’ve seen in a while. Extra units without a ground-up build is about as close to “found value” as this business gets — worth a call to your contractor and a look at your city’s planning department.

We’ll keep tracking how local jurisdictions implement this.

ONE MORE THING. Even if you don’t plan to build ADU’s yourself, just checking to see what actually can be done, along with cost estimates, could add value when you decide to sell.

“If you live right the first time, once is enough.” Forbes Riley

 

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 45 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.