California
Senate Bill 1069
How It May Impact Real Estate?
NOTE: If you are a stakeholder on this topic please be sure to log onto all the links as they are a blow by blow breakdown of this new law.
I have recently been posting about the somewhat controversial and often confusing Senate Bill 1069; The California State Mandate that went into effect on January 1, 2017.
SB 1069 is a new LAW, or in most instances the re-definition of ACCESSORY DWELLING UNITS (ADU's) aka GRANNY FLATS, GARAGE APARTMENTS and/or GARAGE CONVERSIONS, CASITAS, 2ND UNITS, etc.
An "ADU" was originally defined as a secondary dwelling unit with complete independent living facilities for one or more persons and generally takes three forms:
Detached: The unit is separated from the primary structure
Attached: The unit is attached to the primary structure
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Repurposed Existing Space: Space (e.g., master bedroom) within the primary residence is
converted into an independent living unit
Junior Accessory Dwelling Units: Similar to repurposed space with various streamlining measures
Under this bill/law the California Department of Housing and Community Development (HCD) regulates and maintains compliance Statewide for all Cities and Counties within the State of California for the governance and enforcement of SB 1069.
For those of you who've had the opportunity to dramatically impact the property value or, in some instances, even serve to help facilitate a sales transaction on a property that would not comp this could definitely be good news for you.
As a contractor and a real estate broker (temporarily down for redesign) I can personally atest to the fact that by adding an ADU or an JADU to your property you can often increase not only the value but the net equity.
Case in point: We had a client who's home could only appraise, based on local comps, at $900,000 which wasn't high enough to qualify for an 80% reverse mortgage.
By adding a 1bdrm. 600sf ADU for $300,000 the home then appraised for 1.4m. Adding the $300,000 ADU yielded an additional $200,000 in net equity and easily qualified the buyers for an 80% loan plus a revenue producing asset which enhanced their cash flow and ROI.
That stated it is also important to consider the cost per sf in the area. The formula that works best for this scenario was the fact that this particular property was in an area where most homes appraised from $600 to $3000/sf. easily elevating the property to a much higher value.
I don't expect this to resonate with all RE Professionals or Industry Stakeholders on this platform. But for those that it does hit a nerve with please feel free to reach out to me anytime.
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