Realty411 Magazine Featuring Lee Arnold from Cogo Capital | Page 8
California Niche Opportunity
Expand Revenue with ADUs
By Aaron Norris
I
n September of 2018, The
Norris Group created a
twohour session for our
TNG Academy Subscribers
that covered ADUs (accessory
dwelling units). It took months
of preparation to understand the
rules, regulations, politics, and
the future of this interesting
opportunity.
The Norris Group launched
all new hard money rates in
California and Florida in 2019.
We have been funding ADUs in
a variety of ways via our flip
program and our hold program.
Our new 9.9% flip program
goes up to 70% of after repair
value (up to 90% LTC and
100% repairs). Some investors
are financing rehabs of the
primary and including construction
of the new ADU as part of the
project.
Another way we can accomplish
this is the 6.9%, 3year hold
program. If you have a free and
clear rental property, we do a
loan on the primary property
only. You can take the proceeds
and construct the new ADU.
You’ll have to build, rent, and
get the property stabilized for
standard financing to enjoy
more cash flow.
The bonus here is it’s a three
year term and that is going to
come in handy for important
reasons. Flipping with ADUs
has caused some challenges so I
wanted to share some of our
research on ADUs and some of
the biggest market moves we’re
seeing in the ADU space.
The ADU Opportunity
In 2017, the State of California
pushed through regulation on
ADUs (granny flats, casitas,
8
motherinlaw suites, etc.). It went
into effect in 1/2018. There are even
rules that allow former illegal spaces
like converted garages (JADUs) or
backyard pool houses to become legal
for the sake of becoming rentals.
Cool, right?!
Well, it is, but there are some
things we think you should know so
you don’t make mistakes. Or, at
least, see it coming to plan ahead.
When investors apply for loans with
ADUs in mind, we’ll be asking you
these questions to make sure you
don’t get stuck and lose money.