How do you treat legal ADUs in the rental grid, sales grid and 216?

[cdanj]

I've done plenty with illegal ADUs, but this is first with a legal one. A few of the comps have legal ones too.
How do you treat legal ADUs in the rental grid, sales grid and 216?
Also, where on the sales grid would you adjust for them? Extra line item?
Calculating the adjustment? Cap rate the added rental income?

 

[J Grant]

I've done plenty with illegal ADUs, but this is first with a legal one. A few of the comps have legal ones too.
How do you treat legal ADUs in the rental grid, sales grid and 216?
Also, where on the sales grid would you adjust for them? Extra line item?
Calculating the adjustment? Cap rate the added rental income?

Is it part of the assignment to analyze rent for the ADU?

I typically do not address rental income for an ADU unless client asks for it - . I put the ADU as a line item on the sales grid and find 2 or more comps that have an ADU or guest house or inlaw suite.

 

[Zoe]

I don't understand. So, is it rented out like an owner living in one side of duplex and renting the other side? It is not a massage parlor is it?

 

[cdanj]

I don't understand. So, is it rented out like an owner living in one side of duplex and renting the other side? It is not a massage parlor is it?

It's a multifamily with an ADU in a town that allows ADUs and renting them to non family members. .

 

[Tom D]

That adu GLA is broken away from the house GLA, if it part of it. It can make the house GLA smaller. You describe it, then put it on a separate line marked adu. You then make a separate adjustment for. You need at least 1 comp with an adu. I was lucky to find one, had to read the listing sheets. Not big in my areas.

Cap rate if you have nothing else, or a grm from rentals. It is like a rented small house, or an apartment on a 2-4.

 

[AppraisingLA123]

Extra line item, i would adjust for the size of ADU as well. Not all ADUs are the same. Then in the rental grid just look for similar rentals and adjust for the differences. You would need a seperate rental page for the ADU. You can also look for duplexes as comps.

 

[Zoe]

It's a multifamily with an ADU in a town that allows ADUs and renting them to non family members. .

You said you have done illegal ADUs. This is no different. You have done a rent schedule before haven't you? The sales grid wants the contributory value of the ADU and the rent schedule helps with market rent estimate or contract rent depending. Contract rent could be your market rent estimate for MV appraisal. You may see contract rent as your market rent estimate based on comparable rents.

You don't have to use a legal ADU as a rent comparable. You can use a similar rental unit of any kind (same utility) as the subject ADU unit.

Is the subject ADU rented month to month? Is it 6 month lease? 12 month lease? Do you have income/expense statement on the ADU? Is it occupied? How long has it been occupied?

Do you have a copy of the lease on the ADU?

I can see many possible scenarios falling into place on the ADU. Is it near a resort area and short term rental?

Do people rent it for a weekend or a week? I don't know the subject.

 

[J Grant]

It's a multifamily with an ADU in a town that allows ADUs and renting them to non family members. .

Why didn't you disclose this honestly in your first post? You would have gotten different answers.

What does "It's a multifamily" mean? A duplex with an ADU? Be specific. WRT zoning - a "legal" ADU might apply to sf houses but not multi-family properties with a so-called ADU - because in my experience that simply means what they are passing off as an ADU is simply an additional rental unit. And some lenders do not accept a multi-family with an ADU - check with your client and check local zoning.

 

[Zoe]

Okay, next question. They are wanting rent comparables then and you won't be doing it on a 1004. You will use like small income producing form? I am not sure what form(s) you are using.

 

[Zoe]

You may be better off using a form that has the rent comparables built in the form. Similar to like a duplex form.