Buying a house with an already legal ADU instead of building one
Building a backyard cottage fails a common affordability test: it usually runs near $180k and demands patience for a permit queue that many buyers do not have. An alternative worth studying is buying a house that already has a second unit built in. Take a 1950s three bedroom with a converted attached garage studio, separate entrance off the side yard, its own bathroom and kitchenette, 410 square feet. Say it trades at $412k with 5% down, payment including taxes and insurance around $2,690, and the studio rents at $1,450 on a twelve month lease. That leaves roughly $1,240 out of pocket for a three bedroom house to live in, which is a strong entry point compared to funding new construction. The part that trips buyers up: a listing calling a unit a permitted ADU does not mean the permit closed out. A permit pulled years earlier can have the work done and the final inspection never signed off, sitting open. That surfaces when an agent pulls permit history, and it can take months and a few thousand dollars in corrections, commonly GFCI outlets, a smoke and CO detector interlock, and a handrail, to get the final signed. A seller credit at closing and a written scope from a licensed electrician are the standard way to close with an open permit rather than walking. The lesson worth keeping: pull permit history before the inspection contingency ends, not after. Closing with an open permit can work out fine. It can also mean inheriting a unit the city later orders removed, so treat that documentation step as non negotiable.
