Financing my ADU project
What type of loan should I take to build an ADU?
So, you have finally decided that you want to build an ADU in your garage. It does not matter if your plan is to rent out your ADU via Airbnb or you need some extra living space because converting your garage into a ‘granny-flat’ definitely pays off. However, if you haven’t been able to save up for this investment, you have to think about financing, and that’s where a lot of people decide to give up. All the stress associated with touring dozens of banks to find the best loan makes one’s head spin. On top of this, a lot of people are anxious about taking on new loans in today’s economy. Nonetheless, taking a loan from a bank is a familiar territory. There is a standardized procedure that one has to go through in order to get a loan, and this procedure does not vary a lot from bank to bank. The vast majority of banks require substantial down payments in order to issue loans. The typical down payment amounts to 20%. Some banks will accept less and some even require more, but securing 20% of the total value of your investment will be enough to get you a loan that you want. One advantage of building an ADU in your house is that you can renegotiate your mortgage to obtain extra funds for the project. Of course, all of this depends on your credit score, and a lot of people are not eligible for this type of loans for whatever reason.
Hard money construction loans represent an alternative to conventional bank loans. There are many reasons why some people prefer hard money loans over conventional loans apart from the fact that even those who are not eligible for bank loans can negotiate a hard money loan. The creditors who extend these types of loans are usually much more flexible. This means that the procedure that is required to get the money is much simpler and shorter. A hard money loan is typically negotiated within a couple of days in contrast to conventional loans that take more than a month to process. Also, with hard money loans, there is more room to negotiated the conditions, which are usually standardised and non-negotiable with conventional bank loans. One important downside of these loans is that they tend to be significantly more expensive than conventional loans often involving significantly higher interest rates and down payments.
For those who find faults with both of the above mentioned options, NEO Builders offers the third solution. NEO Builders believe that ADUs are an airtight investment given the growing rent and real estate prices in Los Angeles, and we put our money where our mouth is, as the saying goes. We extend loans to people who are interested in converting their garages into ADUs and select NEO to build for them. These loans do not require any down payment, and the interest rates are lower than hard money loans. This way you can pay off your ADU with zero down payment. Given the current rent prices, a newly built ADU can literally pay itself off within five years and you will be left with a source of steady income for years to come. Of course, NEO Builders will be careful in selecting its clients for these exclusive deals, but you will not be required to go through exhausting bureaucratic procedures. So, if you have decided that you want an ADU in your garage, there is no reason to wait – get in touch with NEO builders and start the process today.