Adding ADU To House, Duplex May Not Be The Best Idea

The climate is ripe for adding housing in San Francisco, and that extends to the city’s efforts to make adding an accessory dwelling unit (ADU) to a property easier. But whether you should move ahead with “legalizing” an existing in-law apartment—or creating one—depends upon what type of property you own.

If you own a building with three or more units, adding another one won’t really introduce new use restrictions on the building or resale complications.

However, that’s not the case with a two-unit building/duplex or a single-family house. Adding an ADU to either of those property types will result in some pretty significant changes:

Use restrictions: Adding an ADU to a house or two-unit building changes the legal description of the property. In the case of a house, your property will subsquently be subject to rent control and eviction limitations. Adding a third legal unit to a duplex will turn it into a three-unit building, which means future condo conversion won’t be happening.

Resale value: A single-family home and a duplex are arguably worth more on their own than they are with an additional legal unit. Most buyers for houses aren’t placing a high value on having a separate dwelling unit, and most two-unit buyers appreciate the future opportunity to condo convert. The ADU removes those popular uses, and can also decrease the buyer pool in the process.

Loan options: A buyer qualifying for a single-family home loan may not qualify for a duplex loan because part of that loan relies on a unit generating income. If he or she can qualify, the interest rate will likely be higher. And refinancing may be more complicated if the property changes from one category to another. It’s definitely important to check with your existing lender to see what you can expect if you add a legal ADU.

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Get in touch:

Eileen Bermingham

Corcoran Global Living

415.823.4656

eileen@insidesfre.com

DRE# 01352627

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