PORTLAND, Ore. (9/25/14)--It can be tricky for lenders to finance construction of accessory dwelling units (ADU)--a type of micro-home built on a property already occupied by an existing home. But one credit union near Portland, Ore., appears to have a handle on it.
While some homeowners build these ADUs to rent them out as a source of income, Advantis CU, Milwaukie, Ore., with $1.1 billion in assets, has created its ADU loan program largely to serve homeowners looking to add space to accommodate aging parents or their recent college-graduate kids.
Therefore, Advantis doesn't assign a value to potential additional cash flow that could come down the road, Jones told The Portland Business Journal (Sept. 12).
Instead, Jones told News Now Wednesday, the credit union treats the loans more along the lines of a remodel.
"We treat it as basically a property rehab," Jones said. "We look at it as if they're adding living space. We won't allow them to use any rental income from it to qualify for the loan, they have to stand on their own based on their own income."
The reason, Jones told News Now, is because the overwhelming majority of those who approach Advantis looking for financing on an ADU, wants to build the unit to add space for relatives, not necessarily to rent out as a source of income.
"The purpose of the ADU, usually from our experience with our members, is typically not to increase value or to try to rent (the units)," Jones said.
Occasionally, members will come in looking for financing for an ADU because they would like to build it for additional income, or to increase the value of the property, Jones added, but building an ADU doesn't guarantee that the value of the property will increase.
"You may see in an increase in value, just from the standpoint of you have a traditional market appreciation," Jones said. "But I wouldn't necessarily say because there's an ADU it necessarily" increases the property value.