Why ADU Financing Might Make Sense for Investors

For many, having supplementary space on the property that can be converted into additional living quarters—like a garage or a shed—can offer greater opportunities beyond basic hoarding and storage. ADUs, or accessory dwelling units, are second homes on a single property, often spaces converted to accommodate additional living beyond the primary house. Think full basements or in-law apartments, or apartments over garages. This can pose an excellent opportunity for individuals to gain additional passive income if they go the route of converting the space into livable housing.

 

For cities or towns where housing shortages are a very real, tangible concern, ADUs are a great alternative to offer affordable, safe housing. For investors, that means an opportunity to add greater value to fix-and-flip (or fix-and-hold)properties that might offer that opportunity; rental income can be increased with an ADU onsite, and rehab properties can sell at a higher cost if buyers see an opportunity to rent out a space and make additional income. Since ADUs are almost singularly used for the purpose of creating passive income, they often experience shorter payback periods, which in theory make it easier for investors to obtain financing.

 

The approach to establishing ADUs is still relatively new and many traditional banks are not financing such projects, however, private lenders like Temple View Capital Funding, LP (“Temple View”) are peeking into the future and beginning to incorporate the option into larger loans.

 

If you are a homeowner interested in discussing financing options for your own ADU, contact Temple View today.