Great first step. Now abolish that racist planning commission.
I have been pro inlaws for eons now. Yes, it changes the status of a SFH, but if that is the game now, that is the game now. Cash flow is king!!! Let your tenants pay down your mortgage, I say. As long as you are getting decent rent (near market) what do you really have to complain about? Make money and go make some more…
I’ll be the contrarian here — I’ll never build an ADU attached to a SFH so long as Costa Hawkins at the state level still applies.
If Costa Hawkins gets repealed, then that is another matter entirely …
But WITH Costa Hawkins, the reasoning goes like this —
- SFH subject to “just cause eviction” but not rent control
- If you have someone living in the house and you want to sell the house, you can raise rent to induce renters to leave.
- Now build ADU attached to house.
- Nearly all proposed ADUs to SFHs need a planning exception of some sort (exception for setbacks, etc.), and the city (rent board) is adamant that these ADUs that need an exception are subject to rent control
- Now let’s say you are living in your SFH and you have a renter in the ADU. You want to sell. But you can’t get the renter to leave. They are protected with “just cause eviction” and you cannot raise rent b/c of rent control.
Noooooo waaaayyy Jose. Get some sh*tty rent-controlled cashflow at the expense of giving up my property rights?
Right. Never ever buy multi-fam in Bay Area, esp in SF.
Then, one can argue then that you should just exit the business entirely. Owners are being hit with every BS law anyway, so what are you going to do? Do you want some profit or not? It is simple as that. Your competition is putting in inlaws and reaping the rewards while you want to stand your ground. Ok…
It is tradeoff — income vs. appreciation. Now vs. Later. Putting in an ADU will realize a bit more income now, but limit the appreciation relative to an SFH. I am fortunate enough not to need the additional income — but the appreciation is nice - it is a way to pass on assets to the next generation as my death washes away depreciation recapture from a tax perspective.
900 units is fighting a forest fire with an eye dropper.
With the way construction costs are and prefab still in its infancy, ADU action is one way to max profit. Who doesn’t like max profit?
If anyone honestly thinks by avoiding ADUs you will so be somehow free from bad, scheming tenants who are out for your deep pockets, well, you have been warned…
Well, I would agree with you there - exposure to malicious tenants is always universal. In my specific case, I am avoiding an ADU to prevent the remedy against malicious tenants from being taken away from me.
It is the combination of both rent control AND “just cause eviction” applied to any property that severely limits what the property owner can do to remedy against a malicious tenant.
I don’t understand, if your ADU is fully compliant with the codes of the local jurisdiction in all ways it is just another unit. Why would an ADU itself be more of a concern than a regular 1 bedroom unit? Sure, we have covered the fact that an ADU would change the status of say an otherwise SFH but let’s be honest every other home in the Sunset or Richmond has one. No one is crying about them unless illegally done and not to code or well you happen to get a bad tenant. Who hasn’t had a bad tenant?
Hi, you and I are concerned about different things. I am concerned about the status change of an SFH, exposing it to both rent and eviction control, and reducing the property’s liquidity.
You have already moved past that concern … but I cannot get past that concern.
Ok, let’s use your SFH example. As you quite know, just because you have a lease with say a couple for that said SFH that does not mean that they can not bring in additional roommates up to the stupid guidelines via Jane Kim’s ridiculous law right? Say your SFH is a nice 4 bedroom house and you have a lease agreement with 2 people. Well, under the rules that you want to play by says they can bring in what, another SIX individuals to live in that house and you can’t do squat about it. I would be more worried about scenarios like this than anything associated with an ADU.
Good point. Jane Kim’s ridiculous “tenant can bring more roomates” law is also a huge huge concern … big time! I would never rent out a house to some roomates that I would guess might want to do that.
That worry, however, is not mutually exclusive to the worry of ADU causing recharacterization and resultant illiquidity. I worry about all of it.
No need to argue. Why convert a SFH into a multi-unit? It’s a SFH for a purpose. If you need a rental, buy another house.
Agreed, there is so much to worry about anyway. So, my thing is that then for that “worrying” part of ownership then I should max my profit to counter for that evil. When I had the 4 unit, I had onsite coin op laundry machines. Sooo, every month or so, I have to roll up a few hundred bucks in quarters and bring em to the bank for exchange. That part of it, I didn’t complain too much about…
BTW - You could raise rent to cover wear and tear and additional risk of having more tenants bc Costa Hawkins excludes SFH from rent control.
As far as I know, the owner must occupy one unit when the house has ADU permit (not duplex) and owner wants to rent out ADU.
I am not sure how easy to revert ADU permit, but how many SFR buyers want to share their house with other family?
By definition, they can never rent out SFH with ADU to 2 other families. If they do, it becomes MFR and violate the SFR zoning.
Completely detached small studio unit in large lot may be OK (however, that won’t add value when they sell either) but ADU larger than that will be clear negative when they sell. There is a reason why MFR appreciation is slower than SFR. ADU is worse than deplex since owner must occupy the property to rent out ADU.