Finance an ADU in Miramar Ranch

An Accessory Dwelling Unit can be built in 30 days with financing starting at 2.9%!!!

Accessory Dwelling Units are quickly becoming a must have in the backyard of Miramar Ranch homeowners looking for an affordable rental property or a residence for a family member. With rents in some Miramar Ranch neighborhoods topping $2000/ month…an Accessory Dwelling Unit is a great way to earn money while helping ease a housing shortage in California.

Many family members are bringing aging parent’s home to a separate new accessory dwelling unit aka “tiny home” or granny flat…as a means to reduce the cost of an assisted living center which can top $6000/ month in some areas. Having an aging parent living next to family has shown to have other benefits besides reduced cost…like healthier and happier parents. PREFABRICATED ADUs are built faster and for less!!! USModular, Inc., the leading builder of prefab buildings in California…can build an ADU in as little as 30 days once permits are issued. Less time means less disruption to your family and neighborhood and faster income. We have many designs ranging from 480 to 1200 sq ft. that meet California ADU requirements .

USModular, Inc. prefab accessory dwelling units can be built to Local or Federal building code.

Recent State and local laws have made it easier and cheaper to build an Accessory Dwelling Unit in Miramar Ranch, as permits, fees and parking requirements have been reduced…making it easier and cheaper to build. Can you use extra income? Do you have a family member or friend that needs a nice place to live? If so let USModular, Inc. help you build an Accessory Dwelling Unit in your backyard. Visit our website, email or call today to learn if a prefab ADU is right for you.

What are the rules and regulations of building an ADU where I live?

Most people underestimate the cost of building an accessory dwelling unit in Miramar Ranch and are disappointed when they discover they can’t convert their garage for $20,000.

ADU’s come with all the same expenses as building a brand new home, but without the ‘cheap’ square footage like a bedroom or hallway to offset the expensive square footage, like the kitchen and bathrooms.

Plus, there are a lot of fixed costs to building a home regardless of how big that house is.

Here are 7 ways to finance an ADU in Miramar Ranch:

Your Bank Account

If you can afford to pay for things out of investments or a bank account, congratulations. This is the easiest and quickest way to finance your ADU. However, because of the substantial six-figure expense of an accessory dwelling unit, this isn’t an option for a lot of homeowners. Most homeowners who build an ADU have to borrow money to finance their project. Even if you do finance, you’ll have to pay something out of pocket so expect to tap into savings for your project regardless.

Ok, so what are the loan options for ADU’s in Miramar Ranch?

How to Finance an ADU with a Home Equity Line of Credit (HELOC)

A home equity line of credit allows a homeowner to borrow money from a lender where the collateral is the borrower’s equity in his or her house before any improvements are added. Typically, homeowners must have at least 10% equity in their home or 20% if an investment property or second home.

A Home Equity Line generally has $500 or less in Lender Fee’s. Depending on the equity in your home a Lender may only require a drive by appraisal (never start any construction work until AFTER you have your loan)

Essentially, a lender agrees to lend to a maximum amount and a timeframe; then you can use your home equity line of credit like a credit card and only pay interest on your average daily balance owed. A typical Home Equity Line (HELOC) is for 25 or 30 years and the first 10 years is a draw period with interest only payments. After 10 years your monthly payment requires principal and interest payments to pay off your loan in full at maturity.

If you default on your loans, your home will be foreclosed on. HELOC’s are usually used for significant life expenses like medical bills, education or, you guessed it, home improvements. It’s not uncommon for a bank to want an appraisal done on the house before granting a loan.

Let’s say your home is appraised by the lender at $550,000 and your mortgage balance on your 1st mortgage is $300,000. At 90% of the appraised value you have $495,000 mortgage lien capacity. This would give you a $195,000 Home Equity Line for whatever use you want to use the money for. ($550,000 value x 90% = $495,000 – $300,000 1st mortgage)

If you have equity in your home, this is the next most straightforward way to finance an ADU. This method is a common way to finance a granny flat. It allows a homeowner to leverage the value in their home, making improvements, which will lead to an increased value in the property.

How is a HELOC different from a Home Equity Loan?

A Home Equity Loan provides a homeowner with a fixed amount of cash and a set repayment schedule. Like a HELOC, the collateral is your home. A HELOC is structured as a revolving line of credit. A revolving line of credit gives funds to someone when needed. Here, the amount needed can fluctuate from month to month. This will have shorter repayment terms and only charge you interest on the amount a homeowner has withdrawn.

So, if your HELOC allows you access to 170K, but you’ve only pulled out 20K, you’ll just be charged interest on the 20K.

How to Finance an ADU with a Construction Loan in Miramar Ranch

A construction loan evaluates what the future value of the property will be after the project is completed and allows a homeowner to borrow against that amount. A bank will send the plans to an appraiser to have the project and property appraised.

The bank will get back an “As Complete Value” or ACV.

How much a homeowner can borrow varies widely depending on the circumstances.

Let’s explore a scenario:

Your home is worth 400K. You want to build an accessory dwelling unit.

You contact an architect and have plans drawn up.

You submit those plans to your bank which sends them to an appraiser. The As Complete Value comes back at 520K, an increase of 120K in value.

You can now borrow up to 95% of the As Complete Value.

The bank then releases funds as certain milestones are achieved and inspected by a third party.

Construction loans are typically short-term with a maximum of one year and have variable rates that move up and down with the prime rate. Two-time close construction loans (as opposed to our one-time close) typically fits this bill. You can also get a one-time close with fixed and adjustable rates.

Sometimes loans provide temporary financing for the project and then it converts to permanent. If this is all done with one application, it’s referred to as a one-close. Others provide a loan for the project and then you must reapply for the permanent financing this would be classified as two-closings.

To Gain Approval, a Lender Will Need:

Construction plans with a detailed timetable
Realistic budget
Proof that you are qualified to borrow and have the means to repay the loan. Like the loans above future rental income cannot be factored in to qualify you for this loan.

Susan mentioned that Umpqua and others have financing available specific to granny flats (also referred to as ADUs or Accessory Dwelling Units) brought on by a growing interest to meet the immediate need for housing.

Construction loans are most often associated with professional developers and for that reason tend to carry a higher risk. Umpqua, however, doesn’t make loans to developers, only to individual homeowners working with a general contractor, but that’s not always the case. So it’s important to do your own research.

How to Finance with a HomeStyle Renovation Loan in Miramar Ranch

This mortgage loan program will help if you have limited equity in your current property, or are purchasing another property that needs improvements that you can finance it into the financing before the work is started.

The HomeStyle Renovation mortgage provides a convenient and flexible way for borrowers considering home improvements to make repairs and renovations with a first mortgage, rather than a second mortgage, home equity line of credit, or other more costly methods of financing.

A single loan for financing the mortgage, repairs & upgrades, based on the As-Completed value of the home.

Renovation costs are limited to 75% of the “As-Completed” appraised value of the home and may include:

Labor and materials
Property inspection fees
Architectural or engineering fees
Independent consulting fees
Permit and licenses
Other documented fees including fees for energy reports, appraisals, review of renovation plans, feasability studies, etc.

How to Finance an ADU in Miramar Ranch with a Cash-Out Refinance

This option allows you to refinance your current mortgage for more than you owe and take the difference out in cash. The most common reason for a cash-out refinance is to pay for home improvements.

You have been dutifully making your mortgage payments, accruing equity in the home and paying off your loan. Now, you have equity in the home and still owe 200K on your mortgage.

You decide with low mortgage interest rates to refinance your mortgage for more than you currently owe.

Since you need 100K to finance your project, you refinance your mortgage and take out a new loan of 300K. This allows you cash out 100K.

Should You Do a Cash-Out Refi? This could be a good option if:

Interest rates have dropped substantially since the last time you financed your home.
You intend to stay in your home for several more years.
You have available equity to provide the cash-out option.
You can shorten your loan term.

It’s important to weigh the benefit of how you’re going to use the money against the amount of time it will take to pay off the loan. For instance, you may be able to get a better interest rate, but it will also extend the number of years needed to pay back your loan. Renting out your granny flat will generate revenue that will allow you to pay your loan off more quickly, but keep in mind that future rental income will not qualify you for a mortgage loan.

Before you do a Cash-out Refi, answer these questions:

How many years until the end of the term of your current loan?
How long is the term of the new loan?
Are interest rates lower than your current financing?
How much cash do you need?
What’s the monthly payment amount?
What’s the effect on your taxes?
What’s the total cost of borrowing?
What’s your break-even point

For more information on building an ADU in Miramar Ranch contact USModular, Inc.


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9 Great Things About Granny Flats

They might not seem like the most glamorous of property extensions, but granny flats are becoming increasingly popular among renters, homeowners and investors.

Here are five reasons why you might want to consider investing in one!
Whether you’re adding to your own home or to an investment property, I have two exciting words for you:
Granny flat.

Ok, maybe not that exciting. But these unassuming little abodes are growing in popularity among savvy property owners and investors.

If you’re like most people and haven’t given much thought to building or converting an area into a granny flat, here are five great things about them that might get you thinking.

Extra rental income

First and foremost, the biggest plus-point for granny flats is the additional rental income they generate. A large backyard can be a great investment opportunity. With the rental market at capacity, there are many people looking for affordable rental properties. Depending on the layout of your block, building a backyard bungalow to rent out may be a smart decision. For a relatively low cost, you can be receiving a regular income from previously unused space. It’s the easiest way to get into the investment market and take a short-cut to financial freedom. Best still, you have the added convenience of earning income from your backyard.

Granny flats in inner Brisbane can fetch anywhere from $300 to over $600 per week – they commonly achieve over 15% rental yield.

These extra rental dollars will go a long way to helping you achieve some positive returns, and for a much lower initial investment than a standalone property… which leads me to the next point:

Inexpensive to build

“Expensive” and “inexpensive” are relative terms, but if you consider that the average granny flat only requires about $100,000 borrowed, it’s nowhere near the amount you’d need to buy a full property.

Because granny flats legally need to be built next to or attached to an existing property, they usually share all service connections (i.e. mains water, electricity and drainage). Plus, if they’re built in a garage or under the house, there’s virtually zero structural work to be done.

Added value at sale time

This is especially true when you’re simply renovating an under-house area or garage extension.

Even if you’re building a granny flat at the end of the garden, as long as you’re abiding by the council’s zoning and planning laws, you’re more or less good to go.

Remember to check before starting though – you don’t want to get halfway through and then realise you’re going against regulations.

An ideal Home Office

Working from home has many benefits: flexible environment, more time with the kids, financial benefits, no commute… It also comes with some problems: no distinction between home time and work time, constant interruptions, not enough dedicated space. A Granny Flat with one or two bedrooms easily become one or two offices, a staff kitchen area, and a welcoming space for clients to visit are some of the features a Granny Flat provides.

Kids have left school but not quite ready to leave home?

The high cost of living has made it very difficult for young adults and University students to take that first step towards independence. A Granny Flat provides the answer. A separate space for them to live in will give your students the freedom and independence they would like while cutting down the costs of living away from home.

Regular visitors and a guest room isn’t enough?

With families spread out all over the globe, regular (and sometimes long term) visitors are a familiar experience for many of us. While a guest room may do the trick, imagine being able to provide your visitors with a spacious, private guest retreat. With room to spread out, their own bathroom, kitchen and living space, it gives everyone that extra space to enjoy the stay while not getting in each other’s hair

Retirement Income

Worried about your income in retirement, a Granny Flat may be the solution as an affordable way to add value to your home and safely invest in a rental property. Put simply, it’s the accessible and practical way to maximise the value on your home, by making use of the asset you already have – your backyard. Saved from any risks or hassles of buying new property, a granny flat creates an easy way for everyday families to enter the property investment market. Not only will you be benefiting from an affordable accommodation solution and opportunity for rental income; but you will increase the value of your home.

As further proof of a safe investment, the government has projected single-person households as the fastest growing area over the next 20 years. With the addition of a granny flat, you can reap the benefits of starting with a positively geared investment, removing any fear from taking the leap into property investments. A granny flat can provide home owners with their own rental property, without putting them in substantial debt, all within the ease and comfort of their own backyard.

A few hundred dollars a week may make a huge difference in your retirement plans
Can also be used for grannies!

Oh, I almost forgot! The granny flat can also be used for grannies! Or kids, or in-laws, or other relatives… you get the idea.
If you decide to keep it in the family instead of renting it out to an outside tenant, your granny flat could save you quite a lot of money in the long term
Having relatives staying in the granny flat means they don’t have to pay rent elsewhere or maintain a larger property they own.

It also means you can have your loved ones just a flight of stairs or garden stroll away: a perfect mix of privacy and proximity, especially if they need caring for.

Could tiny homes help solve San Diego’s affordable housing crisis?

SAN DIEGO (KGTV) – Could the placement of tiny homes on San Diegans’ properties help solve the area’s affordable housing crisis?

Citing reports, city officials say “over one million new residents will move to the region by 2050. To account for this, roughly 350,000 new living units, or about 11,000 units per year between now and 2050 will need to be built.”

Councilman Scott Sherman, who represents the city’s District 7, said building new homes on new land is no longer the answer. He suggested that the building of tiny homes on existing lots could be a way to ease the housing crunch.

Sherman said zoning changes and the permitting process are already in the works — with fees reduced — to allow tiny homes to be placed in the backyards of homes with lots of at least 5,000 square feet.

“We have a whole bunch of housing on the luxury side of things. We have subsided housing, but we’re missing that middle. This could deal with both of those problems,” Sherman said Thursday.

Sherman believes tiny homes would help provide much-needed affordable housing and, at the same time, give property owners extra income through rentals.

Sherman told 10News he thinks the tiny home program for San Diego could be in place before the end of the year.

In Oregon, one tiny home program allows homeowners to agree to have a tiny home that houses a person in a mental health program placed on their property. After five years, the homeowner would own the tiny home and be allowed to rent it to whoever they want.