I found this amazing opportunity in Eagle Rock yesterday. It is a charming Spanish style home located in the coveted Dahlia Heights Elementary. It has a huge, deep lot – one could add a sizable ADU and both homes would have privacy and large outdoor space.
As an experiment, I wanted to see what the financial math would look like if one were to buy this home, remodel it, and add an ADU. You know I am a nerd, so before I share all my noodgy details, let me give you the bottom line.
Buy 5132 Dahlia St. Call me- I’ll help!
You will make money by increasing the equity and lowering your net monthly mortgage.
- The Future Value is $2,200,000 – $460,000 over your investment costs!
- The potential rent will pay for the renovations and ADU addition
- You end up with a superior investment and rental property
Such an adorable home. Click the photo to see the entire listing detail, but here are the highlights.
5132 Dahlia Drive, Eagle Rock, 90041
List Price: $1,200,000
Super Power: 10,000 SF Flat lot AND best Eagle Rock Location
Home: 3 Bedroom, 2 Bath and 1600 SF
Listed By: Keely Myers, Compass Realtors
I chatted up Keely at the broker’s open. The only person who knows more about the Eagle Rock market is her mom Tracy King – still the King of the Hill. We agreed that the home probably needs $150,000 – $180,000 to completely renovate to “High Hipster” standard. She also felt the home would be easily worth well over two million once my proposed renovations and ADU were complete.
Whoa. So, how does that pencil out?
Financial Analysis of Remodeling and Adding An ADU
Let’s assume the acquisition price is $1,200,000 and your down payment is 20%.
Acquisition Price: $1,200,000
Down Payment: $240,000
Loan Amount $960,000
Mortgage PITI: $7490 @6.893%
Now, let’s talk about the cost of doing the work. Now, the fly in the ointment is the money needed to complete all of this work. Construction loans are an ideal product to help you accomplish this and you can get more information about ADU construction financing here.
Remodeling Estimate: $180,000
Garage Demolition: $10,000
1000 SF ADU: $350,000 – See our Models. The DIGGS 1000 Casita Style is the perfect fit for this home!
Total: $540,000
Once work is completed, you will have two separate homes -a remodeled 1600 sf 3/2 home and a new 1000 sf 2/2 bath home. Each would enjoy a front yard, backyard, and privacy from the other.
ROI of Remodeling and Adding ADU
Once the work is complete, you will refinance the entire project and pay off any loans you took to do the work. Here is what it looks like:
New Property Value: $2,200,000
Equity: $660,000
New Loan Amount: $1,540,000
Mortgage PITI: $12,234
Projected rent for new ADU: $4800
Remaining Mortgage Payment: $7,434
So- let’s underscore what is happening here. You’ve increased the property value by a million dollars, completely remodeled your house, gained a high-quality rental property. Did you notice that the monthly payment is slightly LOWER than when you started?
Buy A Home With An Existing ADU
Remodeling and building an ADU are not for the faint of heart – you might wonder if buying a home with an ADU already in place is a better idea?
It just so happens that another home popped up in Eagle Rock- it is already remodeled in “High Yuppie” style and has a lovely one bedroom detached ADU. It is listed for $1,720,000 by John Kim at Keller Williams.
In exchange for getting a done/done home and ADU you give up quite a bit. The location is below Colorado and just off Yosemite Ave. Not a place where you expect to find a nearly two-million-dollar home. The lot is 5742 SF- less than half of the lot for Dahlia Dr. This means the privacy for each home is compromised by quite a lot.
Here is how the money pencils:
List Price: $1,720,000
Down Payment: $340,000
Loan Amount: $1,380,000
Mortgage PITI: $10,584
Projected Rent for 1 Bedroom ADU: $3400
Remaining Mortgage Payment: $7,184
From a pure business perspective, 5132 Dahlia is a big win. It is a higher-quality property with a higher potential for growth, but the cash investment and monthly obligation is nearly the same.
Compare “ADU Potential” To “ADU In Place”
| 5132 Dahlia St | 4954 Glen Iris Ave. | |
| Main House | 1600 SF, 3/2 | 1600 SF (est) 4/2 |
| ADU | 1000 SF, 2/2 | 650 (est) 1/1 |
| Lot | 10,182 | 5742 |
| Location | Above Colorado, Dahlia Elem. | Below Colorado, off Yosemite |
| Value | $2,200,000 | $1,720,000 |
| Cash Invested | $240,000 | $340,000 |
| Loan Amount | $1,540,000 | $1,380,000 |
| Monthly PITI | $12,234 | $10,584 |
| Projected ADU Rents | $4800 | $3400 |
| Balance | $7434 | $7184 |
That doesn’t mean Glen Iris is a bad deal. I mean… it already DONE!! Check my socials- I actually shot a little tour of the ADU and I’ll put it up soon.
I Can Help You Buy Either Home
Text me at (818) 482-1885, and my team will spring into action on your behalf!!
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