Fannie Mae Just Made It Easier to Invest in ADUs—Here’s What That Means For Investors
Summary
Fannie Mae has expanded financing options for accessory dwelling units (ADUs), allowing homeowners and investors to add rentable units. Hosts can now finance up to four units on a property, including ADUs, and potentially increase revenue. Before investing, hosts should verify zoning compliance and assess ADU costs.
Key Insights
- •The ADU update includes major improvements to HomeStyle Renovation loans; up to 50% of renovation costs can be disbursed at closing.
- •Fannie Mae will purchase loans for two-to-three unit homes that include an ADU, allowing for up to four units total on a property, including the ADU.
- •When using an ADU as a short-term rental, only one ADU’s rent can be used for a refi, and its revenue is capped at 30% of your total qualifying income.
Action Items
- ✓Consider the cost, which varies from $60,000 to $285,000, depending on size, scope, and location, to determine the project's feasibility.Effort: mediumImpact: medium
- ✓Before adding an ADU, double-check that your dream property complies with applicable zoning guidelines to ensure compliance.Effort: lowImpact: high
Tools & Resources
- →Angi: According to home renovation site Angi, the average ADU costs $180,000.
Common Mistakes
- ⚠The new Fannie Mae ADU rules are good, but they’re not good enough to overcome prohibitive zoning. Failure to comply with zoning guidelines can prevent the use of the ADU.
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