How to Manage Your ADU as a Rental Unit

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SOURCE: Freddie Mac
Building an accessory dwelling unit (ADU) can be a worthwhile investment for homeowners looking to increase their property value and generate rental income, while contributing to the supply of affordable housing. Here’s what you need to know about building, managing and maintaining an ADU as a rental property.

Characteristics and Benefits of ADUs

An ADU is an additional residential unit located on the property of a single-family home. These living spaces can be attached to the primary residence or completely detached and can be used for various purposes like housing family members and guests, or renting out to tenants.

ADUs have become more popular in recent years, particularly in areas with limited housing supply and high demand for affordable units. ADUs offer a promising return on investment for property owners looking to earn passive income and can help alleviate the housing shortage.

Before you Build

If you’re considering adding an ADU to your home, you’ll need to do some upfront research on the applicable building codes, regulations and zoning laws. Ordinances and policies vary by location and can change frequently as ADUs become more popular. You may consider consulting an attorney to make sure you understand any federal, state or local laws involved if you plan to rent out your ADU.

You should also think about how you plan to pay for any construction or renovation projects needed for your ADU. Create a construction budget and explore financing options. You may consider refinancing your current mortgage loan to help cover upfront costs for your ADU project.

Renting and Managing Your ADU

Once your ADU project is complete, it’s time to start thinking like a landlord. Before your ADU is move-in ready, you’ll need to:

  1. Set a competitive rental rate: Factors such as location, amenities and the length of the lease will all play a part in determining how much you should charge for rent. Do your research to understand local demand, rental trends and market rates for similar listings in the area.

  2. Draft a comprehensive lease agreement: Set clearly defined expectations for yourself and your future tenants, including details such as rent amount, payment due dates, late fees, security deposit amount and occupancy rules. If you’re a first-time landlord, you might begin by reviewing sample lease agreements online, but keep in mind you’ll want to customize the lease to your specific property. Ask yourself:

    • Which utilities will tenants be responsible for?

    • Where will tenants park?

    • Are pets allowed?

    • How will maintenance requests be handled?

    • Which spaces on the property, if any, will be shared?

  3. Screen prospective tenants: Before inviting a tenant to live on your property, you’ll want to conduct a thorough screening process while keeping in mind relevant laws and guidelines to avoid discriminatory practices and ensure a fair and equal housing opportunity. This process may include background checks, reviewing recent pay stubs, checking references and analyzing credit reports. You may consider exploring local programs or property management services that may be able to assist you with tenant placement.

Whether you’re looking for a way to increase your property value or provide affordable housing, adding an ADU can be a rewarding investment. While navigating zoning laws, renovation budgets and landlord responsibilities may seem a bit daunting at first, there are many resources available to guide you through the process if you decide to build and rent out an ADU.

SOURCE: Freddie Mac

CURATED • SEPTEMBER 2023 HOMES ACROSS THE STATES WITH CHRIS DOUCET

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CURATED • SEPTEMBER 2023 HOMES ACROSS THE STATES WITH CHRIS DOUCET marketingcenter--

September 13, 2023 Weekly Market Watch with Chris Doucet

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September 13, 2023 Weekly Market Watch with Chris Doucet marketingcenter--

September 6, 2023 Weekly Market Watch with Chris Doucet

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8 Things to Consider When Buying a House: How Many Have You Done?

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SOURCE: Realtor
There are a lot of things to consider when buying a house. Are you ready for this? Emotionally? Financially?

If you’re finally ready to get serious and buy a house, you feel primed to start poring over listings and spending your weekends open-house hopping. Exciting!

But all that excitement can cause you to rush into things just a little bit too fast. Hold on! Wait a second! Before you buy, you’re going to need to do some considering.

Things to consider when buying a house

While you might feel prepared for this next giant step, just remember—there’s a lot of planning and prep work that goes into this purchase, even before you start to look at homes. So make sure you’ve got all your mallards in a row first!

From checking on your credit score to see if you can score a mortgage to amassing the down payment, use this checklist of things to consider when buying a house to figure out if there are any things you may have missed.

1. Crunch your numbers

First, ask yourself not if you’re ready emotionally—because it sounds like you are—but ready financially, says Kristen Robinson, senior vice president at Fidelity Investments. A perfect place to start is at our Home Affordability Calculator, where you can punch in your income, desired location, and other factors to see if your expectations jibe with reality. Good luck!

2. Know your credit score

Your mortgage’s interest rate—and, as a result, the size of your monthly payments—will be directly related to your credit or FICO score, essentially a summary of how reliably you’ve been paying off your debts.

“If you’ve had too many problems or late payments leading up to the purchase of a home, your score could be lower, and you might get a higher mortgage rate,” says Ali Vafai, president of The Money Source, a national lender and servicer. Many major lenders require a score of at least 620 for a mortgage, but if you find out you’re below that or want to boost your score, now is the time to get started, since it can take months to take effect.

3. Amass a down payment

Most mortgage lenders require a cash down payment of 5% to 20% of the price of a home. If you don’t have this kind of cash lying around, it’s high time to start a saving goal for the next few months. You can start by putting off buying any big-ticket items, fancy vacations or other extravagances. This is a new home we’re talking about, remember? You can also explore other ways to come up with a down payment fast—like borrowing from your IRA or even getting a gift from your parents (lucky you).

4. Get educated

The most important thing to consider when buying a house? The nuts and bolts of how it works. Consider taking advantage of local home-buying seminars, often offered by banks or nonprofits. Such resources will explain aspects of a home loan, like the criteria lenders use to evaluate a borrower, the documentation buyers will need to provide and what each portion of a mortgage payment goes toward. Even better: these seminars are usually free.

5. Interview at least three real estate agents

Just about everyone knows a real estate agent or five, which explains why 52% of home buyers find their agent through a friend. But don’t just settle for the first agent to cross your path—remember, a house is a huge purchase, the stakes are high. In the same way you’d want to thoroughly vet a surgeon before upcoming surgery, you want to consider who you work with when buying a house. Here are some questions to ask a real estate agent before deciding which one is right for you.

A real estate agent can also help in the education department, according to Christine Lutz, director of residential brokerage for Chicago-based Kinzie Real Estate Group. “An agent will often have relationships with lenders that buyers can work with to determine a budget and down payment percentage and get pre-approved for a mortgage.”

6. Go mortgage shopping

In the same way you wouldn’t buy the first house you set foot in, you shouldn’t commit to the very first mortgage you meet, either.

“Mortgages are not one-size-fits-all,” says Scott Haymore, head of mortgage pricing and secondary markets at TD Bank. He advises buyers to find a lender they trust and to discuss their financial situation. A lender will then help buyers “understand what financing options are available.”

7. Ballpark your closing costs

Buyers sometimes forget, amid their scramble to make a down payment and monthly mortgage fees, that that’s not everything they need to pay for. Another sizable chunk are closing costs, and they’re no small chunk of change, ranging from 3% to 6% of the purchase price thanks to taxes, transfer fees, and other expenses. So, make sure to budget for this expense too, just so you aren’t blindsided come closing time.

8. Ponder the future

Home buyers sometimes think of the purchase “inside a vacuum,” says Jeremy Hallett, CEO of Quotacy.com. That’s why he advises “making sure you have a will in place. Buyers should also consider a term life policy that runs at least 20 years and would pay off the home if something tragic happened—$20 a month buys a $500,000 policy.”

Robinson adds that before buying a home, you should have “an emergency fund established with enough money to cover three to six months of living in case you’re faced with an unexpected financial hardship. Considering your retirement savings is also important; you should continue making contributions towards your future.”

SOURCE: Realtor