purchased a triplex lot with an SFR on-site, the investor could scrape and build a new triplex and add three ADUs to the site for a total of six units. Although there are six separate units, when it comes to financing, this is a triplex with three ADUs, which qualifies for 1-4 SFR financing. SITE-SPECIFIC Some cities have particular areas where ADUs are easier to implement for a variety of site-specific reasons including oversized alleys, detached garages, utility location, or corner lots. BUILDING TYPE The Retrofit1 example of turning multifamily properties with tuck-under parking into new income units while meeting new builder code is an exciting win-win example. In public records, you could do a search for multifamily but specific construction will have to be researched. Using a tool like PropertyRadar, you can search public records for the data mentioned above to start identi- fying ADU opportunities in your area of choice. BUILDANADU As mentioned, ADUs can be con- structed in various ways including stick-built, manufactured, 3D print- ed, and even tiny homes. Your local building ordinances will guide you as to what is possible. Adding a new stick-built struc- ture to an existing property may not always be the fastest or least expensive but offers the flexibility of design to perfectly match the exist- ing structure. Timelines and costs will vary greatly. If you haven’t toured a manu- factured home lately, do so. Man- ufactured homes look nothing like the wobbly boxes of the 70s. Today, manufactured homes can be of bet-
partnership with Escape offering a 187-square-foot model starting at $47,551. The site lists financing available for $350 a month.
ter quality due to their factory-built environment. With investors com- plaining about finding labor and high material costs, there’s something to be said about being able to place an order and having the structure delivered and ready to rent in just a few months. The biggest frustration investors will face by mixing inventory on a property is financing. If you buy a manufactured home from Berkshire Hathaway’s Clayton Homes and plop it in the backyard on an existing resi- dence, a lender will have a hard time getting it appraised and they may give you very little, if anything, by way of financing for the ADU. Manufactured housing should not be confused with modular, flat-pack, or prefab construction. While all are constructed in a factory, a prefab home is built, shipped, and assembled on a permanent foundation. Even - tually, prefab will play an increasing role in making construction cheaper, faster, and at higher quality. 3D printed housing has made some strides in the past few years. ICON and Mighty Buildings are both now building projects in the U.S. and others are popping up. Since 3D printing manufacturers specialize in smaller units, their product is per- fectly timed with ADU trends. Costs vary greatly by the manufacturer with ICON really pushing boundaries to push costs to new lows printing with their own substrate. Tiny homes are typically regulat- ed under the department of motor vehicles. These units are personal property, not real estate. Investors exploring tiny homes are purpose- fully doing so because of the price point, speed of product delivery, and typically no impact on property taxes. Amazon started promoting container homes on its site a few years ago. IKEA just announced its
WHAT IFADUSARE NOTAN OPTION INYOUR CITY, YET? Apologies if I’ve gotten you excited about the concept that’s not available in your state or municipality yet. This is where you come in. Over the years as I’ve served on nonprofit boards, I’ve picked up one of my favorite sayings: “When you’re not at the table, you’re on the table.” This simply means when you don’t show up, not only is your voice not heard, you get volunteered for things you would have never agreed to do. From the investor perspective, it means we are continually positioned as the wealthy landlord with no heart that doesn’t care about the commu- nity or neighborhood and we’re only there for profits. Municipalities need investors to make affordable housing work. Investors involved in their local communities are not only first to be aware of opportunities, but they are also often the ones shaping opportu- nities. Be it serving on the planning commission, showing up to coun- cil meetings, or pitching ADUs to the mayor, we have a role to play in housing. ADUs are a creative strate- gy that’s now on your radar. •
Aaron Norris is VP of Market Insights with PropertyRadar. He writes and speaks nationally on data, trends, and technology. He’s a licensed real estate and mortgage broker and has been in the industry since 2005.
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