179 percent); Los Angeles-Long Beach- Anaheim (up 127 percent); and San Diego (up 71 percent). One Southern California developer smells opportunity for a new niche in real estate development thanks to the state’s legislative changes. “I think there’s a ton of money to be made in these ADUs,” he said, asking not to be identified by name in the article to prevent other investors from copycatting his strategy. “It’s sort of like a gold mine. You don’t want to tell the other miners where to look.”

outline of his strategy to the Housing News Report. He said he dove into the legislation and determined which type of streamlined ADU would work best for him as a developer and then identified cities that have a large number of properties with good potential for that specific type of ADU and are most accommodating to ADU development. “Go where they are going to roll out the red carpet for you,” he said, noting that some cities have resisted the statewide legislation. He highlighted Inglewood as one city that refused to issue any ADU permit in 2017 — confirmed by the ATTOM analysis of building permit data from Buildfax.

“There are other cities that actively want this type of development. Go do development there.” The ADU Advantage Focusing on ADUs provides real estate investors a competitive advantage on several fronts, according to the Southern California developer. First, it provides a less risky alternative for investing in a housing market boom that has overstayed its welcome. “We are far closer to the top of this real estate cycle than we are to the bottom … how can we get in and out of things quickly so if the party ends we aren’t left holding the bag,” he said, noting that ADU development allows for this because it typically involves little or no actual addition of square footage. “The envelope is already there so the construction time is relatively short compared to adding square footage from scratch.” Secondly, because most homeowners and other investors aren’t familiar with the law, they often undervalue properties that are prime for ADU development. “Most developers don’t know the ADU law exists. Homeowners don’t know it exists … it isn’t priced into the home,” said the Southern California developer, adding that most flippers avoid oversized homes, but those overdeveloped homes could now be good candidates for a streamlined ADU. “You can’t just keep doing the

The Southern California developer was willing to provide a general, high-level

“I think there’s a ton of money to be made in these ADUs. It’s sort of like a gold mine. You don’t want to tell the other miners where to look.” SOUTHERN CALIFORNIA REAL ESTATE DEVELOPER WHO ASKED NOT TO BE NAMED TO PREVENT OTHER INVESTORS FROM COPYCATTING HIS ADU INVESTING STRATEGY.



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