8 years to pay off your ADU or Garage Conversion Hack!
I think it is time to think about your future. The only thing you need to do is improve your credit score. It may take some planning, but if you have great credit, let’s apply for that loan. If you already have this cash, then this article isn’t for you, but you may still read on to see how long it will take until you get your investment back. You will need about 125k for a garage conversion or 250k for a new ADU construction. Simple Right? If you are feeling flashy and want a nice upgraded ADU then tack on another 100k for full upgrades. The way to pay back your loan is to become a landlord and make your income back from renting out your unit. Yes, to make your money is to earn money from your unit. A small, converted garage with nice upgrades could be easily rented out for $1500 a month. In 7 years, you would earn 126,000, but wait I said 8 years. Right, because it will take 1 year to build this ADU and most likely you would be making payments on your loan the minute you take money from it, and you won’t be able to rent this out until the unit construction is completed. The same concept would apply to the new addition ADU, A loan for 250k may be paid back if you rented the ADU unit for 2,500-3000 a month. You can consider making a 3-bedroom ADU and getting a few roommates and charging more. This strategy is called house hacking. House hacking is renting out the unit to multiple people that like to have roommates. You can charge more and have amenities and create a social setting for them. If you can manage multiple tenants and keep them on good terms, then potentially you can make extra income from your investment. Keep in mind that your entire property value will increase with these new additions, but the downside is taking out that loan to finance this venture. Spending an extra 100k for an upgrade would also be nice because that also increases your property value. It is risky, but very low risk. The housing market isn’t going to crash, and people will always be renting. Making the unit nice will attract more renters. The only thing to look out for is that your area is a desirable area to live in. Once you have earned back your investment, the monthly renter’s income is now your income for life. This is a good investment strategy and I highly recommend this. I would recommend going to an all-in-one contractor who can pull permits, and interior design, build new constructions and set you up with proper loan agents. This way you don’t have to manage too many contacts as it can get frustrating, and things will never get done. Will you start today? Contact me if you need help.