Austin presents homeowners with a real estate investment opportunity unlike anywhere else in the country. Homeowners may build a granny flat, also known as an accessory dwelling unit (ADU), on their property and then subdivide the lot and sell each home separately.
This allows homeowners to create two homes out of one property and the financial rewards are significant. So much so, that investors are clamoring to take advantage.
Maxable staff caught up with lead architect and owner of Davey McEathron Architecture, Davey McEathron, to discuss a recent build he completed for an investor in South Austin.
McEathron was hired by an investor to design and build both an ADU and a new single-family home. Dubbed, the Chelsea ADU, this impressive 1,100 square foot granny flat was meticulously designed. It includes a rooftop space over the garage and its own private yard.
The Chelsea House has designed private spaces any neighbor would envy. Plenty of light fills the home, due to its open glass wall designs. A private pool and spacious layout give the house a fresh flow.
Maxable: What was your design vision for the split build?
McEathron: We just design to the lot itself and build from there. It’s sort of like a Tetris game, you’re just trying fit spaces here and there. It starts to take shape at one point. For the most part, we let the site dictate the start of the project.
Maxable: Take us through the process from start to finish.
McEathron: The large tree became the area where we separated the ADU from the House. We wanted the ADU to not feel like it was in someone’s backyard. Its front yard faces the side yard, giving its own space. Each bedroom has its own deck. We designed an open floor plan, eliminating as many walls as possible to open the space up and make it feel more spacious.
Maxable: What was on the lot previously?
McEathron: One smaller single family home on an 11,000 square foot lot.
Maxable: Where are the financial opportunities for regular homeowners in Austin?
McEathron: There is a lot of traction for people to build ADU and live in the house in areas they want to live, but are normally priced out. People are converting their garages or adding ADUs above it.
Within a few weeks, both the Chelsea home and ADU have already entered contracts selling at $1.5 million and $600k, respectfully. In South Austin (where the Chelsea homes are located), Finding housing is competitive and new dwellings generally, go upwards from 600k to 700k with minimal upgrades.
But this opportunity doesn’t just exist for wealthy investors. Regular homeowners in Austin can benefit from building an accessory dwelling unit as well.
If you’re interested in buying a property or building on your existing lot here are some things to look for:
• Choose an ideal lot. The Chelsea Home/ADU sits pretty on an 11,000-square foot lot. A corner lot is advantageous because it allows a separate entrance for both homeowners. This allows both homes their own privacy and plenty of separate spaces. Another feature to consider would be the number of trees on a lot. Texas protects natural tree species and limits the removal of trees.
• Find an architectural firm whose style echoes your dream ADU. The house you design will be a permanent fixture, and any imperfections may leave an unwanted impression long after you’ve paid the mortgage.
• Communication is key. Set realistic expectations with your contractor and architect. If you are not design-savvy, rely on their expertise and communicate specific images that encompass the aesthetic that will fit your needs.
• Be financially savvy. Consider the risk/profitability of the area you are purchasing. In Austin, the housing market is pricing families out of the urban areas. By acquiring land in a highly desirable area with a new home you up the prospects of making a hefty profit.
If you can build for $270 a square foot, but the average value of homes in your neighborhood is $400 per square foot you’re adding instant equity to your property. For a lot of homeowners, the math makes this a no-brainer.
Profitability:
Large lots, mature trees, central location: Allandale, TX
Newly renovated homes price: 900,000 and upwards
Land/Tear down price: 500,000
What makes this a good investment: While there is a small supply of homes in Austin. This central Austin neighborhood is known for large lots, mature trees, and a great community. It’s minutes from downtown nightlife and close to many trendy stores and restaurants.
The highly-desired neighborhood: Rollingwood, TX
Newly renovated homes price: Starting price 1.25 Mil
Land/Tear down Price: 900k
What makes this a good investment: The shown lot offers nearly a half acre of land with endless possibilities. For the price, there’s no reason a home/ADU split wouldn’t be possible. The area is an arm’s reach to Downtown Austin where the tech industry is sprawling and creating housing demand for those that want to be near the city, but not in the city.
Highly-sought after neighborhood: Old West Austin, TX
Newly renovated home price: 2.75 Mil
Land/tear down price: 900,000
What makes this a solid investment: Location, location, location. Named a Historic Place on the National Register in 2003. An older community started in 1886 showcases homes from varying timelines with no shortage of history. Homes are rarely larger sized lots so a lot with potential to build two homes will make a quick sale with a substantial profit upside.
With the housing market becoming unaffordable for many families, Austin’s unique option to subdivide lots opens the market for housing that would be otherwise inaccessible.
Interested in building a granny flat on your property? Download our free tool kit today to get started!
