- Blanca Barragan rents out rooms in her home to earn extra income and has earned $55,780 since 2019.
- In 2023, she began building an accessory dwelling unit in the garden and moved into it in April.
- She rents out her entire home, saves hundreds of dollars each month, and has plans to buy more.
This told essay is based on a conversation with Blanca Barragan, a 42-year-old electrician. Blanca Barragan completed construction on an accessory unit built in the front yard of her home and moved in in April. This essay has been edited for length and clarity.
I bought a house in Sacramento seven years ago for $150,000. It's small at 583 square feet. Even at that time, there were few stores in the city where you could buy it at such a low price.
At that time, most of the houses on my block were abandoned and there were lots of vacant lots. When I bought the house, it looked like it was falling apart. Everyone told me not to buy it and to wait until I could buy something in a better neighborhood.
Things have changed a lot since then. They renovated all the houses in my neighborhood and built houses on vacant lots.
I fixed up my home with the help of Habitat for Humanity and by 2019 I started house hacking.
My house was going to have two bedrooms and one bathroom. However, I sacrificed the master bedroom and converted it into another micro-studio, which I am now renting out.
We also got very creative and turned the pantry area into a room and turned another room in the house that was supposed to be an office into a bedroom. Additionally, we repurposed a 120 square foot shed into a micro studio.
Over the past four years, I've made $55,780 renting out my home micro studio. The money I earned helped me buy her eldest son a $360,000 home for which I am also the co-mortgage owner, and qualified for a loan to add her ADU to my property. I was able to.
In April I moved into an ADU with my youngest son. By renting the main house and living there, you can save about $2,200 per month. I plan to use the money to buy more properties.
The grant approval process was very easy
I've always wanted to buy another home but knew I couldn't afford it. Instead, we decided to extend the existing site as we had a large front garden and the house was quite small.
I told all my friends about my dream of building another house on my property. One of her girlfriends sent me an ad for her ADU subsidy program at CalHFA. The program gives eligible Californians $40,000 to cover blueprints, permits, and closing costs to build her ADU on their property.
In 2022, we began the process of getting approved for CalHFA's ADU grant, and it was very easy.
The ad they sent me explained all the steps I needed to take and also provided a list of lenders who would work with me. This is because to qualify for the subsidy, you must qualify for a conventional loan on her ADU at the same time.
The loan was too expensive for me because I couldn't find anyone to finance the ADU separately. I decided to refinance my existing mortgage with Envoy Mortgage.
My lender contacted Anchored Tiny Homes for a cost breakdown for the project. It cost about $30,000, including permits and blueprints. They then submitted those numbers and final cost estimates to CalHFA to win the grant. I was approved, my $40,000 grant was sent directly to my lender, and I was approved for a new mortgage.
Since we purchased our home in 2017, the property value had continued to rise year after year, so we refinanced our 30-year fixed mortgage several times before starting our ADU project. So I currently have 28 years left on his $460,000 loan at a 4.8% mortgage rate that includes the existing home and ADU.
We moved to an ADU – saving us hundreds of dollars each month.
Construction of my ADU started in April 2023, took 1 year and 8 months, and was completed only about 3 weeks ago. There are two bedrooms and one large bathroom.
All in all, construction cost $220,000, which was higher than expected. We expected closing costs to be around $5,000 to $6,000, but ended up costing us close to $30,000. I believe the amount was high because the lender had to oversee the contractor's work and manage the loan throughout the construction process.
I received a $40,000 grant, but had to borrow the rest of the money from a lender. As a result, my mortgage, which includes the main house and her ADU, increased by $1,500 a month, from $1,200 to $2,700.
There are two renters living in the main building and my son and I moved into the ADU. (When we built our ADU, we had to tear down the small cabin we had previously rented.)
The master bedroom in the main house (which I converted into a micro studio) is rented for $875. I will charge the other tenant $1,305 for the remainder of the house. She lives with her son in her ADU and he only pays $520 of the $2,700 mortgage. The rest will be paid by the tenant.
I love living in an ADU and so does my son. Everything is clean, white, and brand new, including the dishwasher, washing machine, and dryer.
ADUs inspired me to buy more real estate
Currently, California has an epidemic of homelessness because housing prices are so high. There are tents on many streets. so sad.
Everyone is looking for affordable housing, including my family. So I decided to sacrifice living in a larger space and move to a smaller space.
I want to know that I'm helping people. And if someone in my family has an emergency and needs to move somewhere, I have housing for them.
When I started this project, I had zero extra money and just sketched it out and put it on paper. Building this her ADU would be great for me. Because I feel that I can achieve everything I dream of.
All of this has affected the lives of my children, friends, and neighbors.
Thanks to that, I started to have many big dreams. I wrote a 20-page booklet to teach others how to build an ADU, and I'm already thinking about the next property I want to buy.
