In this episode of the Optimized Real Estate Podcast, host Rod Wilson sits down with ADU expert Stephanie Gutierrez to unpack the world of Accessory Dwelling Units (ADUs). Whether you're a homeowner looking to add value or an investor aiming to generate cash flow, this episode is packed with actionable insights. We cover the latest regulations, zoning updates, financing options, and design strategies to help you build and profit from ADUs in today’s market.
✅ What you’ll learn:
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✅ What you’ll learn:
- 2025 ADU laws and how they impact your project
- Creative financing and investment tips
- Common mistakes to avoid when planning an ADU
- How to make ADUs pencil for long-term wealth
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hey, everybody, welcome to another edition of the Optimized real
Estate Podcast. I'm your host Rod Wilson, and today we're
covering everything ADU. My guest, Steph Guterres, is actually an
expert at at eighty u's. She's focused primarily in southern California,
(00:21):
but you know, obviously this applies a lot of these
strategies do apply across the country. She has a podcast
called All Things a tou and we just get into
some of the newer regulations and just how that is impacting,
you know, investment in development. Let's jump into it and
enjoy this podcast with Steph Guterra's are you doing, Stephanie.
Speaker 2 (00:44):
I'm great. Thank you for having me, And I.
Speaker 1 (00:47):
Said Stephanie, even though I just asked you and you
prefer stuff, so Steph, from.
Speaker 2 (00:50):
Now on that sounds good too.
Speaker 1 (00:53):
Whatever you So, I really appreciate you taking the time
and as I was mentioning before we started record or
that this is a topic that I'm actually not that
knowledgeable about as far as like regulations and you know,
various aspects of ADU development. But I have a ton
of clients that are doing ADUs, especially in southern California.
So Anyway, I'm excited to kind of unpack some of
(01:15):
this and maybe share some info that people could use.
Why don't we start with just like a quick kind
of background and how you got into this.
Speaker 3 (01:25):
Yeah, so I've My name is Stephanie. Thank you for
the introduction. I am a realtor, I'm an ADU consulting.
Speaker 2 (01:32):
I'm a mother. I also enjoy surfing, I enjoy running.
Speaker 3 (01:37):
Recently got into running, so I've taken that on along
with all these other hats. I've been in the real
estate space for over ten years, and I started off
as a buyer's agent, right, which is a very common
way that a lot of agents start their real estate career,
and working with so many buyers and investors, a lot
(01:57):
of them. This was back in twenty seventeen when I
got licensed, because prior to that, I was an assistant
to other agents and building out teams and doing property management.
So a lot of these buyers were asking me questions
about how they can convert existing space.
Speaker 1 (02:14):
Right.
Speaker 3 (02:14):
This was around twenty seventeen twenty eighteen, and I found
myself not knowing anything about the ADU development process, and
ADUs were starting to become a thing in twenty seventeen
when legislation made it a lot more feasible for people
to build. So started focusing on that, and I decided
that that was the niche that I wanted to, you know,
(02:36):
just kind of follow because of the demand. You know,
as you guys know Southern California, we are in a
housing shortage really nationwide, but even more so in high
dense areas like sokel So we're in a housing shortage.
We definitely have an affordability issue. So a lot of
these buyers that I was showing properties to, whether they
(02:57):
were an investor or a first time home buyer, they
couldn't afford the average monthly payment back then, so especially
not now. And so the way that you have to
look at the market is look at how you can
maximize highest and best use of that property before you
even buy it, right so that you can figure out
(03:17):
how you're going to help how that rental income of
that additional dwelling unit or accessory dwelling unit is going
to help you offset your your expenses, like your mortgage
payment or other expenses.
Speaker 2 (03:31):
And that's just one strategy, right then I'll leave it
at that.
Speaker 3 (03:35):
That's kind of how I started my ADU journey and
then you're from there started doing full on consulting for people.
Speaker 1 (03:41):
By the way, you could find Stephanie at steff sells adu.
It has one hundred thousand cards in there, so I
want to make sure I had the right url. But
sellsadu dot com and she does coaching as well as
provides a ton of info.
Speaker 4 (03:58):
So check that out.
Speaker 1 (04:00):
Okay, So let's kind of dive in and by the way,
for you know, people are listening, you know, throughout the country.
I think this is you know, primarily focused in southern California,
but you know, as far as like regulations and some
of the stuff that's going on related to ADUs, but
the overall strategies and I think method applies and it's
(04:21):
not you know, I mentioned that I have a lot
of clients doing ADUs. I mean that is across the
country and kind of taking advantage of you know, whether
it's rent or just you know, kind of appealing to
you know, the broader market with another unit in in
whatever they're you know, developing. So I guess let's go
(04:42):
with you want to start with maybe some of the.
Speaker 4 (04:47):
I guess recent or new legislation.
Speaker 1 (04:49):
This is kind of what piqued my interest when I
got your email is what new legislation that you know,
investors and developers should be aware of.
Speaker 3 (04:58):
Yeah, and I think I'll kind of just share with
people a little bit of the basics before I give
you guys, like the new updated legislation, so you guys
created understand, right, so they can understand kind of like
the workflow of these legislations and how every single year
or every two years, they're making it a lot more
feasible and easier right for you to build. So if
(05:19):
you take a look at like the history of legislation
I talked about earlier, how I tapped into the ADU
space because in twenty seventeen, legislation allowed for homeowners to
build an ADU, and this was a statewide ordinance right
which overrides local ordinances. So that was a big deal.
(05:39):
But then there was a couple of things that we
had to work through. So in twenty twenty there was
a lot more legislation. We went from being able to
build one to being able to build two, to you know,
removing a couple other red tapes, like you know, owner
occupancy except for junior ADUs and a couple other things,
and then this last year twenty three, there was a
(06:01):
couple legislations that are really going to change you know,
the ADU game, I believe, and make it a lot,
a lot better because one of them is AB ten
thirty three. And so what AB ten thirty three allows
you to do is it allows you to sell off
that ADU as a condo. You can condoize it if
(06:21):
your local city opts into that.
Speaker 2 (06:25):
So they have to opt in and want to participate.
Speaker 3 (06:28):
Right now, I think San Jose is the only city
that officially has a checklist and a process. If you
go to their website, they have a you know, a
full on checklist of what that process would look like
for you to you know, build and then be able
to sell off your ADU. So that's going to be huge,
you know, especially for underwriting for appraisals or evaluations. It
(06:51):
just plays a different part in the real estate space
a lot split or anything like that. It's just it's
single parcel. I mean, it's not like SB nine where
you're doing a lot to split and then possibly an ADU.
This would be converting let's say the garage and then
condoizing the ADUST.
Speaker 4 (07:13):
That yeah, it can be attached as well as detached.
Speaker 2 (07:16):
It would have to be detached.
Speaker 3 (07:17):
I don't know that you can do a junior because
usually attached is junior ADU, so I don't junior ADUs
don't fall under that that category just yet. But that's
one that we're keeping an eye on because once other
cities start opting in, then it's going to just change
up the financing space for ADU, so it'll allow for
people to build. Another one was SB twelve eleven, So
(07:42):
that's more for multi family investors. So if you have
a let's say one hundred unit building, before, what we
used to have was a twenty five percent density rule,
and what that means is you could convert twenty five
percent of the existing structure. So you know, let's say
you have one hundred unit building, if you have enough
garage spaces or car ports or unused space, you could
(08:05):
convert twenty five percent of that. But what SB twelve
eleven does is it applies the twenty five percent density
rule plus eight eight US. So you can have an
eight unit building right for example, and add an additional
eight units. You can have a four plex and you
can add four eight US to it where before it
(08:26):
used to be only two or one, you know for
a four unit. So it allows you to scale that
strategy a lot quicker and it makes a lot more
sense for you know, these multifamily investors.
Speaker 1 (08:38):
Is it just a unit count now and it's it's
independent of the twenty five percent rule, or it is.
Speaker 3 (08:44):
The twenty five percent density rule plus the eight unit,
but the existing plus the eight. But the existing structure
has to have a minimum of eight if you're going
to add another eight, So you can't add eight eight.
Speaker 2 (08:58):
US to a four plex. It has to be four units.
Speaker 3 (09:01):
You could add four, you know, possibly convert twenty five
percent of that.
Speaker 2 (09:06):
So yeah, I mean.
Speaker 4 (09:07):
Twenty unit you can add eight. Eight's kind of the
max eight.
Speaker 3 (09:11):
And you know, if we could play around with the
twenty five percent density rule, maybe a little bit more.
I know one of my friends up in Sacramento, they're
actually adding I think it's forty eighty US to uh
three hundred and fifties, you know, three hundred and fifty building,
but it's five different parcels or four. So that's how
(09:32):
they were able to really maximize. You know, you really
have to understand zoning too, so that you can scale
it and really try to push for that max density.
So yeah, I mean that's that's on a larger scale.
But what I was going to say was I like
ad us because it just helps. It creates a lot
of flexibility for homeowners and investors. So you could have
(09:54):
a conversation with someone who is a first time home
buyer and wants to tap into this market. They're probably
going to look at buying a property with the option
of converting space because they're anticipating and they're already relying
on that income, or you know, they want their in
laws or or family to live in that back unit
(10:15):
and have more of a co living situation. If you're
talking to investors the same thing, right, investors, at least
long term investors. This isn't a play for short term,
flip and fix type of investors, right because the process
of building an ADU is also a lengthy process. And
that's what I'm always very transparent with people. You know,
(10:37):
the timeframe can take somewhere between eight to twelve months
depending on your local city. But yeah, I mean it
caters to different people. I mean people are building it
for rental purposes, for elderly family homeschool, recreational offices, yoga studios,
home office.
Speaker 2 (10:55):
Right.
Speaker 3 (10:55):
It just it could be a rental right now, and
it could be a retirement later. Asisted living is another
big one because assisted living, I was just talking about
this yesterday, is such an expensive type of service right
for elderly people. And so rather than paying six to
eight thousand and assisted living, you'd be better off leveraging
(11:16):
your equity to help you build in your backyard. You
live in that backyard, and maybe have your kids live
in the main home you downside to the ADU, and
now you have a co living situation, and it will
be a lot less than six thousand right a month
even on.
Speaker 1 (11:32):
That, and that's incredibly low. I mean, it's you know,
assisted living is from what I've seen, you know, eight
or nine to twenty five grand a month. You know,
it's yeah, crazy, yeah, exactly before you go on, I'm curious.
I don't know if you want to talk about the
timing now, but you had mentioned the process, because I
do have clients that'll do let's just say, a fix
and flip on the main house. They won't even they'll
(11:55):
they'll work on the permit for the ADU. But they won't.
They won't mention that in the budget. They won't, you know,
they won't. We won't do the loan based on that.
And then they'll finish the ADU and then once that done,
then they get the ADU permit and then they'll go
build that. So right, what would you say your average
for most people, at least in socow, what is that timing?
Speaker 2 (12:18):
Yeah?
Speaker 3 (12:18):
I would say for the permits, the planning and permit phase,
you're looking at three to six months, ok ideally, but
you know, it really depends on who you're working with.
You know, places like who you're working with and what
city you're working with. So for example, Long Beach is
where I'm from, born and raised in Long Beach, and
(12:39):
Long Beach is one of the cities that's really pioneering ADUs.
Speaker 2 (12:43):
They've built over six hundred ADUs. You have, if you
know what you're.
Speaker 3 (12:47):
Doing, you can get over the counter OTC over the
counter approval for a junior ADU, possibly even an ADU
specifically under you know, seven hundred and fifty square feet.
So yeah, I mean to your point, on average, it's
three to six months for the permit phase, maybe sooner.
It all depends on these you know, pro housing local
(13:09):
cities that you're working with. So as an investor, I
would also look at that. Right before you even buy
an investment property and you're having thoughts of building an
ADU or maximizing space, I would consider a city that's
very ad you friendly. Now, most of them have to
be a to you friendly because at this point it's
a statewide law that they have to follow. But you know,
(13:30):
they're still pushback. Of course in some cities, as you know,
what was it. Huntington Beach was one of them that
tried to give some pushback about a year ago and
they ended up losing. SB nine has had some pushback too,
So of course, you know, ADUs aren't going to fit
every single neighborhood. I think in some suburban areas you'll
(13:51):
see some type of pushback, which I totally get. But yeah,
I would say permit and planning phase three to six months.
Once you get plans approved, then it would be another
six to eight months for construction, whether it's a conversion
or you know, a new construction built.
Speaker 1 (14:10):
Yeah, it's good to know, yeah, because that's actually I mean,
it's roughly what I mean depends on the city obviously
and what you're building. But yeah, that's that's comparable to
just getting a new house permit in a lot of cities,
right I was, you know, I keep thinking or I
was expecting that the process would be much quicker and
maybe post LA fires, you know there, you know in
(14:31):
certain cities there might be some uh, some more flexibility
and speed the process.
Speaker 2 (14:36):
Well hopefully.
Speaker 3 (14:37):
You know, they are trying to remove a lot of
the red tape right now for cities like Pacific Palisades
and Altadena everywhere where you know, these people are going
through these horrible situations of being displaced. They do want
to streamline the process. But even though just like with
adu's legislation, has really done their best in trying to
(14:59):
streamline the process us, some of the issues that we
still come across is working with the cities because a
lot of these plan checkers don't really stay up updated
or up to date with these legislations. So sometimes you
really have to come at it from a place of
understanding and sort of teach them the code and teach
them kind of how this new ADU legislation works in
(15:22):
the nicest way, right to really try and get your
point across and get your plans approved ultimately.
Speaker 1 (15:28):
Yeah, and do you do that, do you get in
involved in that you know, building planning process, and because
I mean I would expect it it is education sometimes
because you of.
Speaker 3 (15:38):
Course yes, I mean up in Sokel, I'm also a
member of the Casito Coalition. So if you want to
tap into ADUs and you really want to get involved
in advocacy and really understanding legislation, you should join as
a member. So we have these monthly calls and every
month we that's one of the main topics is how
can we get to through the these either third party
(16:02):
vendors that the city's hiring to try and streamline these submittals,
how can we get through to city planning. Up in SoCal,
they're going to test out these roundtables where they're going
to have people like myself right that are ADU consultings
consultants teach the plan checkers and people that work for
(16:22):
the city more about the strategy and more about the
process and really just referencing the code back to them,
which is something that they're not focused on right. Their
data day job is to just really they actually are
trained for liability purposes to almost always say no, So
(16:42):
that's the friction that we experience. So although the governor
is removing red tape and they want to streamline the
process with the cities being able to build after these fires,
just think of the influx of submittals because there's over
nineteen thousand homes that have been burnt, right, So if
even a fraction of that starts submitting to the city,
(17:04):
just think of the backlog. I don't even think that
we're prepared for that. So there's going to be a delay.
I also was talking to someone yesterday about the claims,
the insurance claims that are going to be paid out
in portions, right, So there's a ripple effect, and there's
also indirect and direct effects that I think will play
(17:25):
in the housing market because of what's happening. And you know,
like I was telling you offline, I think ADUs really
helped solve a short term solution for those people and
a long term because the short term would be we
have I'm going to be the instructor for the ADU
Academy in March in San Diego, and we're also going
(17:46):
to be part of the Tiny Fest And the biggest
topic around that is that a lot of these people
who have been displaced are either going to have to
find temporary housing, possibly sell their land, or possibly you know,
have some sort of short term housing solution which could
be a tiny home on wheels or an RV type
(18:08):
of situation that they could easily park on their property
or you know, on site really for now until things
are cleared up and cleaned up, and that these some
of these RVs and some of these tiny homes on
wheels can be converted into an ADU later on the line.
Speaker 2 (18:26):
So that cool.
Speaker 3 (18:27):
You know, these are some of the solutions that I
think would really help that side of the equation. Yeah,
Like I said, I'm all for ADUs because it again,
it allows for so much flexibility.
Speaker 1 (18:40):
Right, No, it solves a lot of problem. Especially it
does a no brainer for the lack of housing. But
then now we we you know, lump on the fires
and you know how we're you know, the city's going
to deal with that exactly. So are there any more
regulations that you want to cover, because I have a
couple of other.
Speaker 3 (19:00):
Yeah, there's another, there's two other ones, aybe thirteen thirty two,
I believe is the one where any pre approved plans
that we've submitted with the city. Let's say I have
a set of plans that I've submitted previously with the
City of Long Beach and they've been approved. I can
use those same set of plans with another project and
(19:23):
that would really help streamline the process. So what it
allows for you to do is to repurpose and reuse
some of these preapproved plans that you've had in the
past with that specific city. You could also give it
a shot, like we had on that call last month.
There was someone who had an ADU plan approved in
(19:43):
Burbank and they were wanting to use that same set
of plans in San Diego, and I think they had
to go through a couple additional steps to get to
that point. So you may not be successful using it
from one county or one city to another, but you
could definitely use it within that city if they opt in.
So that's a big one because it helps save costs
and time, right it minimizes Yeah, and then there's another one.
(20:09):
I think I can't remember the number.
Speaker 1 (20:11):
Stuff before we leave. That one is in the same city, county,
depending on the jurisdiction. Is it over the counter Basically,
if you if you have you walk in with I
guess through plans on A, now I need them on
B and boom.
Speaker 3 (20:25):
It's almost like over the counter. Yeah, I mean you
still have to go through the different departments, which is annoying.
And that's the thing, you know, Like in California, we're
talking about permits being approved taking three to six months.
The average in other states is about a month, three
weeks to a month and a half, right, right, So,
(20:45):
and that's because of the way it's set up. We
have different departments here. You got to go through building
buyer and safety. You know, it just creates a couple
more hurdles to have to go through. So yeah, I
mean it's not quite over the counter, but you're hoping
that because you've successfully had this one approved in the past,
you minimize corrections and revisions and all you have to
(21:07):
do is just go through the motion and hopefully get
it just stamped right.
Speaker 4 (21:11):
Yeah.
Speaker 1 (21:11):
Along the way, Funny Trump was in town, you know,
with the mayor and everybody, right and maybe a week
week and a half ago, and he was harping on
that because people were bringing it up. It's like, right, hey,
it's it's a department to department, you know, It's like
there's no real too many process or whatever, So you
were I think you want to mention one other? Yeah,
(21:32):
the other one.
Speaker 3 (21:33):
I don't remember the numbers because it's hard to remember everything,
but it's.
Speaker 4 (21:37):
All we'll do show notes. By the way, everybody you
remember all these numbers. Yeah. So this other.
Speaker 3 (21:42):
Legislation is AB something something two twenty six I think,
talking about unpermitted ADUs, and that's a big one because
that's sort of how adu's really started, is a lot
of them were unpermitted and inhabitable, and because of that,
you know, people are the state really pushed for eight
(22:02):
us to be feasible and allowed because people were already
building them illegally anyway, it's not under the pright proper
conditions or up to build building standards. So this basically
allows for you to convert convert it properly using the
right you know process. And each city has like their
(22:23):
own checklist of what that would look like.
Speaker 2 (22:25):
But that's huge.
Speaker 3 (22:26):
I think it has to be built before twenty eighteen,
so anything before that you'd qualify to be able to
convert it to a proper ADU and have it permitted
with its own address.
Speaker 1 (22:38):
I'm curious if if it was post twenty eighteen, how
would you deal with that?
Speaker 4 (22:46):
I mean, is it? Is it?
Speaker 1 (22:47):
Like? I mean, I've run into issues where I've done
stuff without permit and then I get caught, and then
I've done all this work and then they come in
and they're like, well, that you know wasn't original, so
you got to or they would say that someone, you know,
the prior buyer, did something without permits, and then they're like,
well you got to make sure, you know, you got
to go get all that permitted now.
Speaker 4 (23:08):
So I'm just curious on how that works.
Speaker 3 (23:11):
Yeah, I I don't, to be quite honest, I don't
deal with a whole lot of them because the process
is not as streamlined or as easy as it should
be just yet. This was a legislation that just passed
this year, and I think there's still a lot of
things that need to happen in order to make that
an easy process. Because to your point, I mean, I've
seen some ADUs that are non permitted that were done
(23:33):
pretty good, right almost up to code, you could say,
But then there's others that it's like, well who did
you hire? Like you're gonna have to tear this thing
down and rebuild that because when you are trying to
permit an unpermitted ADU, you still have to go through
the motion, right, They still have to verify that utilities
were done correctly, they still have to check footings. So
(23:55):
if they still have to go through the motion as
if it was a new one, it does create every
Every single ADU is different because some of them were
built somewhat up to code, some of them were not.
Speaker 2 (24:06):
And that's the whole issue.
Speaker 3 (24:08):
So I really don't get involved with permitting unpermitted structures.
I would just anticipate that if you open up a
can of worms with the city, that's what could happen.
Speaker 2 (24:18):
Right.
Speaker 3 (24:18):
They could say, okay, we'll just go through these set
of inspections and you're good to go. Or they could
come back and say you're going to have to tear
it down, the entire thing and resubmit, and then you
just have to be ready for that to happen.
Speaker 2 (24:31):
Yeah, either way, which is common in.
Speaker 3 (24:35):
I mean, I honestly think that it's not the end
of the world if that was to happen. I think
ultimately you want to get it permitted, you want it
to have its own official, independent address, you want it
to be built up to code. It's going to add
more value to your property in the long run, and
it's just the best way to do it. You don't
have to be stressed out about your neighbors calling on
you or the city having to go inspect, you know,
(24:58):
just do things the right way. It'll be a good
investment in the long run.
Speaker 1 (25:03):
No, that's a good point and that my my audience
would be there on board with that because it's you know,
you you it takes more time and more work, but
you know, you also get that on the back end
because you know, the buyer beware, ends up affecting affecting.
Speaker 4 (25:16):
Price, you know exactly.
Speaker 1 (25:19):
So are there any you know, I'll call them hacks
maybe strategies? How do we how would you suggest? So
my audience, for the most part investors and developers, and
so when they're doing ADUs, I mean, everything is just
you know, on a timeline, right, trying to do it
as quickly as possible, versus like a owner, which it's like, oh,
you know, we had a few month delay, No big deal.
(25:41):
It affects the bottom line. As a developer, how do
we get a quicker permit? Do you have any ideas
or strategies there.
Speaker 3 (25:49):
Yeah, So I would say talking to developers and investors
who are looking for hacks, right and time is of
the essence. I would say, if you're a developer, I
would look at cities that again have a very streamline process.
So cities like in La you're talking Downy Long Beach
(26:09):
in Orange County, it could be Coasta, Messa, Buena Park, Anaheim,
It's Santa Ana in San Diego. I mean, you can
really maximize it because San Diego has what's called the
bonus ADU program. So if you buy a piece of
land or a single family home that's in a specific
(26:30):
type of zoning type, you can build up to thirty units.
You can build unlimited amount of ADUs as long as
a percentage of them are also for affordable housing. So
I would say look at cities number one that are
very ADU friendly, and for that you may want to
consult with somebody who's hyper local to your area. You
(26:50):
guys can reach out to me and I can analyze
what cities those would be. I think at a very
basic level, corner lots are always a great option avoiding
septic tanks or having to need an additional septic because
you're gonna need one if you build an ADU, avoiding
you know, if you're gonna do a corner lot with
(27:11):
the detached garage, don't do new construction because you're gonna
need solar.
Speaker 2 (27:17):
And that's just an added step and added costs.
Speaker 3 (27:20):
What else I would say, Yeah, those are like some hacks,
right Obviously hoas hoas can't allow, they're not allowed to
like not let you build. But it's just an added
you know, step of having to get someone else involved.
So I would say avoid hoa's pro housing cities, corner lots,
(27:42):
what else, working with the perfect contractor, which are hard
to find right now as you know, and most of
your developers who are listening to the call. So i'd say,
if you're looking in SoCal, the average price for an
ADU is gonna be for a garage conversion, probably one
twenty to one hundred and fifty thousand. And I don't
(28:02):
like to use a price for square foot, but I
would say somewhere between two hundred and fifty to three
hundred and fifty price per square foot. And there's a
lot of things that play a role in your ADU,
but I would say those are roughly the prices too.
Speaker 1 (28:18):
About how about pre prefab models and pre fab Yeah, yeah,
I mean prefab models are good because they do help
you cut time.
Speaker 3 (28:30):
I mean, you still have to go through the permit process,
which could probably still take three to six months. But
from the time you get the plans approved, you know,
you can build some of these prefab models and some
of these structural insulated panels in two hours, three hours,
you know, same day, but you still have to go
through the set of inspections. So you know, it does
(28:52):
save you time. I wouldn't say that it saves you.
It does save you money because if you're saving time
or saving money. But as far as the cost, a
lot of people say that prefabs and SIP panels and
manufactured homes are less expensive than your traditional stick build
and they're actually not. They're about the same so but
they're both good strategies, right. It just depends on what
(29:14):
the client really wants.
Speaker 1 (29:16):
So right now I have a guy that I was anyway,
they do pre fab I'm sorry, they do like modules
and same thing. It's like it'll same bunch of time.
But but yeah, it's it's not necessarily cheaper. I mean,
especially for some clients that have their all their own
you know, labor and staff. I mean they're able to
(29:36):
build exactly, you know under two fifty a foot.
Speaker 3 (29:39):
And a lot of them are being imported too, so
you know you have to add that costs into it too,
and you have to make sure you find proper installers.
So yeah, I mean a lot of things to consider,
but overall, a great strategy as long as you vet
the right people. I would say that's probably the most
important part as a developer, as an investor, if you're
(30:02):
wanting to build a long term relationship with your.
Speaker 2 (30:05):
ADU strategist, you just like you would with.
Speaker 3 (30:08):
Your title rep, with your loan officer, with your agent broker. Right,
you have this set of people that are part of
your team. You want to look at the long term relationship,
so highly vet the people that you're working with.
Speaker 4 (30:23):
Absolutely. Okay, let's.
Speaker 1 (30:27):
Let's jump over to that you you had mentioned before
we start recording the LA fires and just some of
the how ADUs are basically being used to obviously create housing,
but just you know, for people that need to rebuild,
and I don't know, you want to cover some stuff
related to that.
Speaker 3 (30:46):
Yeah, I was mentioning earlier that people are going to
have to, unfortunately make one of three choice choices, which
is number one, finding some sort of mid term housing solution.
Number two talked about possibly selling off their land if
they don't have the proper coverage or financing or enough
(31:06):
equity to rebuild right because most likely you're going to
have to rebuild that same exact home, and I don't
know that everyone's going to have the proper payouts from
these insurance companies or the funds to do it. And
then the last one is like, you know, yeah, building
an ADU long term. The problem is you can't really
(31:27):
build an ADU right now until you build a main
home or at least submit both at the same time.
So what I was talking about was a lot of
these manufactured homes or tiny homes on wheels. Clever Tiny
Homes is one of the vendors that I work with personally.
You guys can check them out. And so what Clever
Tiny Homes has is they have some models that you
(31:48):
could have as a tiny home on wheels as of today,
but there's a permitting process to convert that tiny home
on wheels into an ADU. So you know, if you
go through that process. Later down the line, then you
can convert it into an ADU, But at least for now,
you know you're able to basically have like an RV
(32:10):
or a tiny home on wheels on your driveway or
on your land for now and then eventually convert it.
So yeah, I mean, I think long term ADUs will
be the way to solve this housing crisis.
Speaker 1 (32:25):
For now, now that in that case is it is
it like having a motor home on your property.
Speaker 4 (32:31):
There's like, no, you don't need even need to talk.
Speaker 2 (32:33):
To you don't need right exactly?
Speaker 1 (32:35):
Okay, interesting, Okay, So I'll also include that in the
show notes. So I guess that was that was kind
of it stuff anything else that you wanted to share.
Speaker 3 (32:49):
No, I think we gave people a good overview of
the importance of ADUs, why we should keep advocating. I
think more people should understand the strategy. And of course
there's more high level hacks that we could possibly have
on a part two session or you know, if people.
Speaker 2 (33:05):
Want to listen to my episode.
Speaker 3 (33:08):
I've had developers who specialize in ADUs, I've had architects,
I've had every single person that's in the space that
you could hear from and get different strategies on what
they're doing that's working, because there's multiple strategies within the
ad U space.
Speaker 1 (33:25):
Well, I've got clients that have been doing you know,
multifamily primarily four plexus you know, some one to four
SFR lots, and so you know, they've just been doing
those at a pretty high level, you know, super savvy
experienced investors and developers. And with the rates and the
compression on rents at least prior to this shortage of
(33:47):
housing in LA, they've had to add ad us to
make their numbers work. So every one of their you know,
either double duplex or four plex, they're they're adding at
least one, if not two ad us to those just
to make just to you know, hit their numbers because
they're you know, start looking at your returns and it's like,
you know, you see the rates go up, and your
your cost of financing and stuff go up, and and
(34:10):
in some cases rent's going down.
Speaker 4 (34:12):
I mean, you've got to do something.
Speaker 1 (34:13):
So it's a creative way to you know, to increase
the profitability of a of a project, not to mention
for you know, just even either a new or rehab
s FR.
Speaker 4 (34:26):
I mean added an Adu.
Speaker 1 (34:28):
I mean, especially with some of these new you know regulations,
I mean it's it's kind of a no brainer. I
appreciate the time, and so it's check out Steff Sales
eighty US guys, and I will have detailed show notes
both on YouTube channel and the website where all of
these are located, as well as just you know whatever
(34:49):
your podcast provider effect and.
Speaker 3 (34:52):
I'm excited to have you on mine as well, So
stay tuned for that, guys.
Speaker 2 (34:56):
Let's do it.
Speaker 4 (34:57):
Absolutely, do you want to share?
Speaker 3 (34:58):
What?
Speaker 4 (34:58):
Where can they find your podcast?
Speaker 1 (34:59):
Is it?
Speaker 3 (35:00):
If you go to stuff cells adu dot com, you'll
see the Spotify and the YouTube and you know I'm
pretty active on LinkedIn, Instagram, YouTube, and Spotify.
Speaker 2 (35:12):
Those would be excellent.
Speaker 3 (35:13):
W Well, thanks again for the time, staff, Thank you,
thank you for having me.
Hey, everybody, welcome to another edition of the Optimized real
Estate Podcast. I'm your host Rod Wilson, and today we're
covering everything ADU. My guest, Steph Guterres, is actually an
expert at at eighty u's. She's focused primarily in southern California,
(00:21):
but you know, obviously this applies a lot of these
strategies do apply across the country. She has a podcast
called All Things a tou and we just get into
some of the newer regulations and just how that is impacting,
you know, investment in development. Let's jump into it and
enjoy this podcast with Steph Guterra's are you doing, Stephanie.
Speaker 2 (00:44):
I'm great. Thank you for having me, And I.
Speaker 1 (00:47):
Said Stephanie, even though I just asked you and you
prefer stuff, so Steph, from.
Speaker 2 (00:50):
Now on that sounds good too.
Speaker 1 (00:53):
Whatever you So, I really appreciate you taking the time
and as I was mentioning before we started record or
that this is a topic that I'm actually not that
knowledgeable about as far as like regulations and you know,
various aspects of ADU development. But I have a ton
of clients that are doing ADUs, especially in southern California.
So Anyway, I'm excited to kind of unpack some of
(01:15):
this and maybe share some info that people could use.
Why don't we start with just like a quick kind
of background and how you got into this.
Speaker 3 (01:25):
Yeah, so I've My name is Stephanie. Thank you for
the introduction. I am a realtor, I'm an ADU consulting.
Speaker 2 (01:32):
I'm a mother. I also enjoy surfing, I enjoy running.
Speaker 3 (01:37):
Recently got into running, so I've taken that on along
with all these other hats. I've been in the real
estate space for over ten years, and I started off
as a buyer's agent, right, which is a very common
way that a lot of agents start their real estate career,
and working with so many buyers and investors, a lot
(01:57):
of them. This was back in twenty seventeen when I
got licensed, because prior to that, I was an assistant
to other agents and building out teams and doing property management.
So a lot of these buyers were asking me questions
about how they can convert existing space.
Speaker 1 (02:14):
Right.
Speaker 3 (02:14):
This was around twenty seventeen twenty eighteen, and I found
myself not knowing anything about the ADU development process, and
ADUs were starting to become a thing in twenty seventeen
when legislation made it a lot more feasible for people
to build. So started focusing on that, and I decided
that that was the niche that I wanted to, you know,
(02:36):
just kind of follow because of the demand. You know,
as you guys know Southern California, we are in a
housing shortage really nationwide, but even more so in high
dense areas like sokel So we're in a housing shortage.
We definitely have an affordability issue. So a lot of
these buyers that I was showing properties to, whether they
(02:57):
were an investor or a first time home buyer, they
couldn't afford the average monthly payment back then, so especially
not now. And so the way that you have to
look at the market is look at how you can
maximize highest and best use of that property before you
even buy it, right so that you can figure out
(03:17):
how you're going to help how that rental income of
that additional dwelling unit or accessory dwelling unit is going
to help you offset your your expenses, like your mortgage
payment or other expenses.
Speaker 2 (03:31):
And that's just one strategy, right then I'll leave it
at that.
Speaker 3 (03:35):
That's kind of how I started my ADU journey and
then you're from there started doing full on consulting for people.
Speaker 1 (03:41):
By the way, you could find Stephanie at steff sells adu.
It has one hundred thousand cards in there, so I
want to make sure I had the right url. But
sellsadu dot com and she does coaching as well as
provides a ton of info.
Speaker 4 (03:58):
So check that out.
Speaker 1 (04:00):
Okay, So let's kind of dive in and by the way,
for you know, people are listening, you know, throughout the country.
I think this is you know, primarily focused in southern California,
but you know, as far as like regulations and some
of the stuff that's going on related to ADUs, but
the overall strategies and I think method applies and it's
(04:21):
not you know, I mentioned that I have a lot
of clients doing ADUs. I mean that is across the
country and kind of taking advantage of you know, whether
it's rent or just you know, kind of appealing to
you know, the broader market with another unit in in
whatever they're you know, developing. So I guess let's go
(04:42):
with you want to start with maybe some of the.
Speaker 4 (04:47):
I guess recent or new legislation.
Speaker 1 (04:49):
This is kind of what piqued my interest when I
got your email is what new legislation that you know,
investors and developers should be aware of.
Speaker 3 (04:58):
Yeah, and I think I'll kind of just share with
people a little bit of the basics before I give
you guys, like the new updated legislation, so you guys
created understand, right, so they can understand kind of like
the workflow of these legislations and how every single year
or every two years, they're making it a lot more
feasible and easier right for you to build. So if
(05:19):
you take a look at like the history of legislation
I talked about earlier, how I tapped into the ADU
space because in twenty seventeen, legislation allowed for homeowners to
build an ADU, and this was a statewide ordinance right
which overrides local ordinances. So that was a big deal.
(05:39):
But then there was a couple of things that we
had to work through. So in twenty twenty there was
a lot more legislation. We went from being able to
build one to being able to build two, to you know,
removing a couple other red tapes, like you know, owner
occupancy except for junior ADUs and a couple other things,
and then this last year twenty three, there was a
(06:01):
couple legislations that are really going to change you know,
the ADU game, I believe, and make it a lot,
a lot better because one of them is AB ten
thirty three. And so what AB ten thirty three allows
you to do is it allows you to sell off
that ADU as a condo. You can condoize it if
(06:21):
your local city opts into that.
Speaker 2 (06:25):
So they have to opt in and want to participate.
Speaker 3 (06:28):
Right now, I think San Jose is the only city
that officially has a checklist and a process. If you
go to their website, they have a you know, a
full on checklist of what that process would look like
for you to you know, build and then be able
to sell off your ADU. So that's going to be huge,
you know, especially for underwriting for appraisals or evaluations. It
(06:51):
just plays a different part in the real estate space
a lot split or anything like that. It's just it's
single parcel. I mean, it's not like SB nine where
you're doing a lot to split and then possibly an ADU.
This would be converting let's say the garage and then
condoizing the ADUST.
Speaker 4 (07:13):
That yeah, it can be attached as well as detached.
Speaker 2 (07:16):
It would have to be detached.
Speaker 3 (07:17):
I don't know that you can do a junior because
usually attached is junior ADU, so I don't junior ADUs
don't fall under that that category just yet. But that's
one that we're keeping an eye on because once other
cities start opting in, then it's going to just change
up the financing space for ADU, so it'll allow for
people to build. Another one was SB twelve eleven, So
(07:42):
that's more for multi family investors. So if you have
a let's say one hundred unit building, before, what we
used to have was a twenty five percent density rule,
and what that means is you could convert twenty five
percent of the existing structure. So you know, let's say
you have one hundred unit building, if you have enough
garage spaces or car ports or unused space, you could
(08:05):
convert twenty five percent of that. But what SB twelve
eleven does is it applies the twenty five percent density
rule plus eight eight US. So you can have an
eight unit building right for example, and add an additional
eight units. You can have a four plex and you
can add four eight US to it where before it
(08:26):
used to be only two or one, you know for
a four unit. So it allows you to scale that
strategy a lot quicker and it makes a lot more
sense for you know, these multifamily investors.
Speaker 1 (08:38):
Is it just a unit count now and it's it's
independent of the twenty five percent rule, or it is.
Speaker 3 (08:44):
The twenty five percent density rule plus the eight unit,
but the existing plus the eight. But the existing structure
has to have a minimum of eight if you're going
to add another eight, So you can't add eight eight.
Speaker 2 (08:58):
US to a four plex. It has to be four units.
Speaker 3 (09:01):
You could add four, you know, possibly convert twenty five
percent of that.
Speaker 2 (09:06):
So yeah, I mean.
Speaker 4 (09:07):
Twenty unit you can add eight. Eight's kind of the
max eight.
Speaker 3 (09:11):
And you know, if we could play around with the
twenty five percent density rule, maybe a little bit more.
I know one of my friends up in Sacramento, they're
actually adding I think it's forty eighty US to uh
three hundred and fifties, you know, three hundred and fifty building,
but it's five different parcels or four. So that's how
(09:32):
they were able to really maximize. You know, you really
have to understand zoning too, so that you can scale
it and really try to push for that max density.
So yeah, I mean that's that's on a larger scale.
But what I was going to say was I like
ad us because it just helps. It creates a lot
of flexibility for homeowners and investors. So you could have
(09:54):
a conversation with someone who is a first time home
buyer and wants to tap into this market. They're probably
going to look at buying a property with the option
of converting space because they're anticipating and they're already relying
on that income, or you know, they want their in
laws or or family to live in that back unit
(10:15):
and have more of a co living situation. If you're
talking to investors the same thing, right, investors, at least
long term investors. This isn't a play for short term,
flip and fix type of investors, right because the process
of building an ADU is also a lengthy process. And
that's what I'm always very transparent with people. You know,
(10:37):
the timeframe can take somewhere between eight to twelve months
depending on your local city. But yeah, I mean it
caters to different people. I mean people are building it
for rental purposes, for elderly family homeschool, recreational offices, yoga studios,
home office.
Speaker 2 (10:55):
Right.
Speaker 3 (10:55):
It just it could be a rental right now, and
it could be a retirement later. Asisted living is another
big one because assisted living, I was just talking about
this yesterday, is such an expensive type of service right
for elderly people. And so rather than paying six to
eight thousand and assisted living, you'd be better off leveraging
(11:16):
your equity to help you build in your backyard. You
live in that backyard, and maybe have your kids live
in the main home you downside to the ADU, and
now you have a co living situation, and it will
be a lot less than six thousand right a month
even on.
Speaker 1 (11:32):
That, and that's incredibly low. I mean, it's you know,
assisted living is from what I've seen, you know, eight
or nine to twenty five grand a month. You know,
it's yeah, crazy, yeah, exactly before you go on, I'm curious.
I don't know if you want to talk about the
timing now, but you had mentioned the process, because I
do have clients that'll do let's just say, a fix
and flip on the main house. They won't even they'll
(11:55):
they'll work on the permit for the ADU. But they won't.
They won't mention that in the budget. They won't, you know,
they won't. We won't do the loan based on that.
And then they'll finish the ADU and then once that done,
then they get the ADU permit and then they'll go
build that. So right, what would you say your average
for most people, at least in socow, what is that timing?
Speaker 2 (12:18):
Yeah?
Speaker 3 (12:18):
I would say for the permits, the planning and permit phase,
you're looking at three to six months, ok ideally, but
you know, it really depends on who you're working with.
You know, places like who you're working with and what
city you're working with. So for example, Long Beach is
where I'm from, born and raised in Long Beach, and
(12:39):
Long Beach is one of the cities that's really pioneering ADUs.
Speaker 2 (12:43):
They've built over six hundred ADUs. You have, if you
know what you're.
Speaker 3 (12:47):
Doing, you can get over the counter OTC over the
counter approval for a junior ADU, possibly even an ADU
specifically under you know, seven hundred and fifty square feet.
So yeah, I mean to your point, on average, it's
three to six months for the permit phase, maybe sooner.
It all depends on these you know, pro housing local
(13:09):
cities that you're working with. So as an investor, I
would also look at that. Right before you even buy
an investment property and you're having thoughts of building an
ADU or maximizing space, I would consider a city that's
very ad you friendly. Now, most of them have to
be a to you friendly because at this point it's
a statewide law that they have to follow. But you know,
(13:30):
they're still pushback. Of course in some cities, as you know,
what was it. Huntington Beach was one of them that
tried to give some pushback about a year ago and
they ended up losing. SB nine has had some pushback too,
So of course, you know, ADUs aren't going to fit
every single neighborhood. I think in some suburban areas you'll
(13:51):
see some type of pushback, which I totally get. But yeah,
I would say permit and planning phase three to six months.
Once you get plans approved, then it would be another
six to eight months for construction, whether it's a conversion
or you know, a new construction built.
Speaker 1 (14:10):
Yeah, it's good to know, yeah, because that's actually I mean,
it's roughly what I mean depends on the city obviously
and what you're building. But yeah, that's that's comparable to
just getting a new house permit in a lot of cities,
right I was, you know, I keep thinking or I
was expecting that the process would be much quicker and
maybe post LA fires, you know there, you know in
(14:31):
certain cities there might be some uh, some more flexibility
and speed the process.
Speaker 2 (14:36):
Well hopefully.
Speaker 3 (14:37):
You know, they are trying to remove a lot of
the red tape right now for cities like Pacific Palisades
and Altadena everywhere where you know, these people are going
through these horrible situations of being displaced. They do want
to streamline the process. But even though just like with
adu's legislation, has really done their best in trying to
(14:59):
streamline the process us, some of the issues that we
still come across is working with the cities because a
lot of these plan checkers don't really stay up updated
or up to date with these legislations. So sometimes you
really have to come at it from a place of
understanding and sort of teach them the code and teach
them kind of how this new ADU legislation works in
(15:22):
the nicest way, right to really try and get your
point across and get your plans approved ultimately.
Speaker 1 (15:28):
Yeah, and do you do that, do you get in
involved in that you know, building planning process, and because
I mean I would expect it it is education sometimes
because you of.
Speaker 3 (15:38):
Course yes, I mean up in Sokel, I'm also a
member of the Casito Coalition. So if you want to
tap into ADUs and you really want to get involved
in advocacy and really understanding legislation, you should join as
a member. So we have these monthly calls and every
month we that's one of the main topics is how
can we get to through the these either third party
(16:02):
vendors that the city's hiring to try and streamline these submittals,
how can we get through to city planning. Up in SoCal,
they're going to test out these roundtables where they're going
to have people like myself right that are ADU consultings
consultants teach the plan checkers and people that work for
(16:22):
the city more about the strategy and more about the
process and really just referencing the code back to them,
which is something that they're not focused on right. Their
data day job is to just really they actually are
trained for liability purposes to almost always say no, So
(16:42):
that's the friction that we experience. So although the governor
is removing red tape and they want to streamline the
process with the cities being able to build after these fires,
just think of the influx of submittals because there's over
nineteen thousand homes that have been burnt, right, So if
even a fraction of that starts submitting to the city,
(17:04):
just think of the backlog. I don't even think that
we're prepared for that. So there's going to be a delay.
I also was talking to someone yesterday about the claims,
the insurance claims that are going to be paid out
in portions, right, So there's a ripple effect, and there's
also indirect and direct effects that I think will play
(17:25):
in the housing market because of what's happening. And you know,
like I was telling you offline, I think ADUs really
helped solve a short term solution for those people and
a long term because the short term would be we
have I'm going to be the instructor for the ADU
Academy in March in San Diego, and we're also going
(17:46):
to be part of the Tiny Fest And the biggest
topic around that is that a lot of these people
who have been displaced are either going to have to
find temporary housing, possibly sell their land, or possibly you know,
have some sort of short term housing solution which could
be a tiny home on wheels or an RV type
(18:08):
of situation that they could easily park on their property
or you know, on site really for now until things
are cleared up and cleaned up, and that these some
of these RVs and some of these tiny homes on
wheels can be converted into an ADU later on the line.
Speaker 2 (18:26):
So that cool.
Speaker 3 (18:27):
You know, these are some of the solutions that I
think would really help that side of the equation. Yeah,
Like I said, I'm all for ADUs because it again,
it allows for so much flexibility.
Speaker 1 (18:40):
Right, No, it solves a lot of problem. Especially it
does a no brainer for the lack of housing. But
then now we we you know, lump on the fires
and you know how we're you know, the city's going
to deal with that exactly. So are there any more
regulations that you want to cover, because I have a
couple of other.
Speaker 3 (19:00):
Yeah, there's another, there's two other ones, aybe thirteen thirty two,
I believe is the one where any pre approved plans
that we've submitted with the city. Let's say I have
a set of plans that I've submitted previously with the
City of Long Beach and they've been approved. I can
use those same set of plans with another project and
(19:23):
that would really help streamline the process. So what it
allows for you to do is to repurpose and reuse
some of these preapproved plans that you've had in the
past with that specific city. You could also give it
a shot, like we had on that call last month.
There was someone who had an ADU plan approved in
(19:43):
Burbank and they were wanting to use that same set
of plans in San Diego, and I think they had
to go through a couple additional steps to get to
that point. So you may not be successful using it
from one county or one city to another, but you
could definitely use it within that city if they opt in.
So that's a big one because it helps save costs
and time, right it minimizes Yeah, and then there's another one.
(20:09):
I think I can't remember the number.
Speaker 1 (20:11):
Stuff before we leave. That one is in the same city, county,
depending on the jurisdiction. Is it over the counter Basically,
if you if you have you walk in with I
guess through plans on A, now I need them on
B and boom.
Speaker 3 (20:25):
It's almost like over the counter. Yeah, I mean you
still have to go through the different departments, which is annoying.
And that's the thing, you know, Like in California, we're
talking about permits being approved taking three to six months.
The average in other states is about a month, three
weeks to a month and a half, right, right, So,
(20:45):
and that's because of the way it's set up. We
have different departments here. You got to go through building
buyer and safety. You know, it just creates a couple
more hurdles to have to go through. So yeah, I
mean it's not quite over the counter, but you're hoping
that because you've successfully had this one approved in the past,
you minimize corrections and revisions and all you have to
(21:07):
do is just go through the motion and hopefully get
it just stamped right.
Speaker 4 (21:11):
Yeah.
Speaker 1 (21:11):
Along the way, Funny Trump was in town, you know,
with the mayor and everybody, right and maybe a week
week and a half ago, and he was harping on
that because people were bringing it up. It's like, right, hey,
it's it's a department to department, you know, It's like
there's no real too many process or whatever, So you
were I think you want to mention one other? Yeah,
(21:32):
the other one.
Speaker 3 (21:33):
I don't remember the numbers because it's hard to remember everything,
but it's.
Speaker 4 (21:37):
All we'll do show notes. By the way, everybody you
remember all these numbers. Yeah. So this other.
Speaker 3 (21:42):
Legislation is AB something something two twenty six I think,
talking about unpermitted ADUs, and that's a big one because
that's sort of how adu's really started, is a lot
of them were unpermitted and inhabitable, and because of that,
you know, people are the state really pushed for eight
(22:02):
us to be feasible and allowed because people were already
building them illegally anyway, it's not under the pright proper
conditions or up to build building standards. So this basically
allows for you to convert convert it properly using the
right you know process. And each city has like their
(22:23):
own checklist of what that would look like.
Speaker 2 (22:25):
But that's huge.
Speaker 3 (22:26):
I think it has to be built before twenty eighteen,
so anything before that you'd qualify to be able to
convert it to a proper ADU and have it permitted
with its own address.
Speaker 1 (22:38):
I'm curious if if it was post twenty eighteen, how
would you deal with that?
Speaker 4 (22:46):
I mean, is it? Is it?
Speaker 1 (22:47):
Like? I mean, I've run into issues where I've done
stuff without permit and then I get caught, and then
I've done all this work and then they come in
and they're like, well, that you know wasn't original, so
you got to or they would say that someone, you know,
the prior buyer, did something without permits, and then they're like,
well you got to make sure, you know, you got
to go get all that permitted now.
Speaker 4 (23:08):
So I'm just curious on how that works.
Speaker 3 (23:11):
Yeah, I I don't, to be quite honest, I don't
deal with a whole lot of them because the process
is not as streamlined or as easy as it should
be just yet. This was a legislation that just passed
this year, and I think there's still a lot of
things that need to happen in order to make that
an easy process. Because to your point, I mean, I've
seen some ADUs that are non permitted that were done
(23:33):
pretty good, right almost up to code, you could say,
But then there's others that it's like, well who did
you hire? Like you're gonna have to tear this thing
down and rebuild that because when you are trying to
permit an unpermitted ADU, you still have to go through
the motion, right, They still have to verify that utilities
were done correctly, they still have to check footings. So
(23:55):
if they still have to go through the motion as
if it was a new one, it does create every
Every single ADU is different because some of them were
built somewhat up to code, some of them were not.
Speaker 2 (24:06):
And that's the whole issue.
Speaker 3 (24:08):
So I really don't get involved with permitting unpermitted structures.
I would just anticipate that if you open up a
can of worms with the city, that's what could happen.
Speaker 2 (24:18):
Right.
Speaker 3 (24:18):
They could say, okay, we'll just go through these set
of inspections and you're good to go. Or they could
come back and say you're going to have to tear
it down, the entire thing and resubmit, and then you
just have to be ready for that to happen.
Speaker 2 (24:31):
Yeah, either way, which is common in.
Speaker 3 (24:35):
I mean, I honestly think that it's not the end
of the world if that was to happen. I think
ultimately you want to get it permitted, you want it
to have its own official, independent address, you want it
to be built up to code. It's going to add
more value to your property in the long run, and
it's just the best way to do it. You don't
have to be stressed out about your neighbors calling on
you or the city having to go inspect, you know,
(24:58):
just do things the right way. It'll be a good
investment in the long run.
Speaker 1 (25:03):
No, that's a good point and that my my audience
would be there on board with that because it's you know,
you you it takes more time and more work, but
you know, you also get that on the back end
because you know, the buyer beware, ends up affecting affecting.
Speaker 4 (25:16):
Price, you know exactly.
Speaker 1 (25:19):
So are there any you know, I'll call them hacks
maybe strategies? How do we how would you suggest? So
my audience, for the most part investors and developers, and
so when they're doing ADUs, I mean, everything is just
you know, on a timeline, right, trying to do it
as quickly as possible, versus like a owner, which it's like, oh,
you know, we had a few month delay, No big deal.
(25:41):
It affects the bottom line. As a developer, how do
we get a quicker permit? Do you have any ideas
or strategies there.
Speaker 3 (25:49):
Yeah, So I would say talking to developers and investors
who are looking for hacks, right and time is of
the essence. I would say, if you're a developer, I
would look at cities that again have a very streamline process.
So cities like in La you're talking Downy Long Beach
(26:09):
in Orange County, it could be Coasta, Messa, Buena Park, Anaheim,
It's Santa Ana in San Diego. I mean, you can
really maximize it because San Diego has what's called the
bonus ADU program. So if you buy a piece of
land or a single family home that's in a specific
(26:30):
type of zoning type, you can build up to thirty units.
You can build unlimited amount of ADUs as long as
a percentage of them are also for affordable housing. So
I would say look at cities number one that are
very ADU friendly, and for that you may want to
consult with somebody who's hyper local to your area. You
(26:50):
guys can reach out to me and I can analyze
what cities those would be. I think at a very
basic level, corner lots are always a great option avoiding
septic tanks or having to need an additional septic because
you're gonna need one if you build an ADU, avoiding
you know, if you're gonna do a corner lot with
(27:11):
the detached garage, don't do new construction because you're gonna
need solar.
Speaker 2 (27:17):
And that's just an added step and added costs.
Speaker 3 (27:20):
What else I would say, Yeah, those are like some hacks,
right Obviously hoas hoas can't allow, they're not allowed to
like not let you build. But it's just an added
you know, step of having to get someone else involved.
So I would say avoid hoa's pro housing cities, corner lots,
(27:42):
what else, working with the perfect contractor, which are hard
to find right now as you know, and most of
your developers who are listening to the call. So i'd say,
if you're looking in SoCal, the average price for an
ADU is gonna be for a garage conversion, probably one
twenty to one hundred and fifty thousand. And I don't
(28:02):
like to use a price for square foot, but I
would say somewhere between two hundred and fifty to three
hundred and fifty price per square foot. And there's a
lot of things that play a role in your ADU,
but I would say those are roughly the prices too.
Speaker 1 (28:18):
About how about pre prefab models and pre fab Yeah, yeah,
I mean prefab models are good because they do help
you cut time.
Speaker 3 (28:30):
I mean, you still have to go through the permit process,
which could probably still take three to six months. But
from the time you get the plans approved, you know,
you can build some of these prefab models and some
of these structural insulated panels in two hours, three hours,
you know, same day, but you still have to go
through the set of inspections. So you know, it does
(28:52):
save you time. I wouldn't say that it saves you.
It does save you money because if you're saving time
or saving money. But as far as the cost, a
lot of people say that prefabs and SIP panels and
manufactured homes are less expensive than your traditional stick build
and they're actually not. They're about the same so but
they're both good strategies, right. It just depends on what
(29:14):
the client really wants.
Speaker 1 (29:16):
So right now I have a guy that I was anyway,
they do pre fab I'm sorry, they do like modules
and same thing. It's like it'll same bunch of time.
But but yeah, it's it's not necessarily cheaper. I mean,
especially for some clients that have their all their own
you know, labor and staff. I mean they're able to
(29:36):
build exactly, you know under two fifty a foot.
Speaker 3 (29:39):
And a lot of them are being imported too, so
you know you have to add that costs into it too,
and you have to make sure you find proper installers.
So yeah, I mean a lot of things to consider,
but overall, a great strategy as long as you vet
the right people. I would say that's probably the most
important part as a developer, as an investor, if you're
(30:02):
wanting to build a long term relationship with your.
Speaker 2 (30:05):
ADU strategist, you just like you would with.
Speaker 3 (30:08):
Your title rep, with your loan officer, with your agent broker. Right,
you have this set of people that are part of
your team. You want to look at the long term relationship,
so highly vet the people that you're working with.
Speaker 4 (30:23):
Absolutely. Okay, let's.
Speaker 1 (30:27):
Let's jump over to that you you had mentioned before
we start recording the LA fires and just some of
the how ADUs are basically being used to obviously create housing,
but just you know, for people that need to rebuild,
and I don't know, you want to cover some stuff
related to that.
Speaker 3 (30:46):
Yeah, I was mentioning earlier that people are going to
have to, unfortunately make one of three choice choices, which
is number one, finding some sort of mid term housing solution.
Number two talked about possibly selling off their land if
they don't have the proper coverage or financing or enough
(31:06):
equity to rebuild right because most likely you're going to
have to rebuild that same exact home, and I don't
know that everyone's going to have the proper payouts from
these insurance companies or the funds to do it. And
then the last one is like, you know, yeah, building
an ADU long term. The problem is you can't really
(31:27):
build an ADU right now until you build a main
home or at least submit both at the same time.
So what I was talking about was a lot of
these manufactured homes or tiny homes on wheels. Clever Tiny
Homes is one of the vendors that I work with personally.
You guys can check them out. And so what Clever
Tiny Homes has is they have some models that you
(31:48):
could have as a tiny home on wheels as of today,
but there's a permitting process to convert that tiny home
on wheels into an ADU. So you know, if you
go through that process. Later down the line, then you
can convert it into an ADU, But at least for now,
you know you're able to basically have like an RV
(32:10):
or a tiny home on wheels on your driveway or
on your land for now and then eventually convert it.
So yeah, I mean, I think long term ADUs will
be the way to solve this housing crisis.
Speaker 1 (32:25):
For now, now that in that case is it is
it like having a motor home on your property.
Speaker 4 (32:31):
There's like, no, you don't need even need to talk.
Speaker 2 (32:33):
To you don't need right exactly?
Speaker 1 (32:35):
Okay, interesting, Okay, So I'll also include that in the
show notes. So I guess that was that was kind
of it stuff anything else that you wanted to share.
Speaker 3 (32:49):
No, I think we gave people a good overview of
the importance of ADUs, why we should keep advocating. I
think more people should understand the strategy. And of course
there's more high level hacks that we could possibly have
on a part two session or you know, if people.
Speaker 2 (33:05):
Want to listen to my episode.
Speaker 3 (33:08):
I've had developers who specialize in ADUs, I've had architects,
I've had every single person that's in the space that
you could hear from and get different strategies on what
they're doing that's working, because there's multiple strategies within the
ad U space.
Speaker 1 (33:25):
Well, I've got clients that have been doing you know,
multifamily primarily four plexus you know, some one to four
SFR lots, and so you know, they've just been doing
those at a pretty high level, you know, super savvy
experienced investors and developers. And with the rates and the
compression on rents at least prior to this shortage of
(33:47):
housing in LA, they've had to add ad us to
make their numbers work. So every one of their you know,
either double duplex or four plex, they're they're adding at
least one, if not two ad us to those just
to make just to you know, hit their numbers because
they're you know, start looking at your returns and it's like,
you know, you see the rates go up, and your
your cost of financing and stuff go up, and and
(34:10):
in some cases rent's going down.
Speaker 4 (34:12):
I mean, you've got to do something.
Speaker 1 (34:13):
So it's a creative way to you know, to increase
the profitability of a of a project, not to mention
for you know, just even either a new or rehab
s FR.
Speaker 4 (34:26):
I mean added an Adu.
Speaker 1 (34:28):
I mean, especially with some of these new you know regulations,
I mean it's it's kind of a no brainer. I
appreciate the time, and so it's check out Steff Sales
eighty US guys, and I will have detailed show notes
both on YouTube channel and the website where all of
these are located, as well as just you know whatever
(34:49):
your podcast provider effect and.
Speaker 3 (34:52):
I'm excited to have you on mine as well, So
stay tuned for that, guys.
Speaker 2 (34:56):
Let's do it.
Speaker 4 (34:57):
Absolutely, do you want to share?
Speaker 3 (34:58):
What?
Speaker 4 (34:58):
Where can they find your podcast?
Speaker 1 (34:59):
Is it?
Speaker 3 (35:00):
If you go to stuff cells adu dot com, you'll
see the Spotify and the YouTube and you know I'm
pretty active on LinkedIn, Instagram, YouTube, and Spotify.
Speaker 2 (35:12):
Those would be excellent.
Speaker 3 (35:13):
W Well, thanks again for the time, staff, Thank you,
thank you for having me.
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