Basement Accessory Dwelling Unit (ADU) Conversion & Structural Opening Fix & Flip

The Investor Scenario & Opportunity

An experienced regional developer secured an off-market wholesaler assignment for a historic brick single-family townhouse in the Petworth neighborhood of Northwest Washington, DC. Located near Georgia Avenue and the Petworth Metro station, the location offers strong transit accessibility and steady demand from young professionals and expanding households.

The deal was time-sensitive, requiring a strict five business day funding mandate to fulfill the terms of the wholesaler assignment agreement. The developer locked in an acquisition price of $410,000 in as-is condition. Fully renovated townhouses in Petworth featuring finished lower-level rental units or accessory dwelling units (ADUs) were selling consistently near $820,000.

The Strategy & Capital Requirement

The primary challenge centered on capital execution speed and liquidity management across concurrent projects. The assignment contract required a large non-refundable earnest money deposit and a five business day closing window, meaning any financing delay would forfeit the contract.

At the same time, the developer had active equity committed to two ongoing single-family full-gut renovations in Capitol Hill and Brookland. To maintain adequate liquidity for subcontractor payroll and long-lead material deposits on those active job sites, the borrower required a direct loan facility that funded 90% of the purchase price and 100% of the construction scope through an escrow draw account.

The Henry Solution (Loan Mechanics & Underwriting)

Hard Money Henry underwrote the loan using direct real estate equity and local sub-market sales comparables. Our internal team completed an in-house asset evaluation of recent Petworth sales within 24 hours, waiving the requirement for third-party appraisals.

We issued a firm commitment letter and structured a $524,300 total loan facility, financing 90% of the purchase price ($369,000) and 100% of the construction budget ($155,300). Construction funds were held in escrow and disbursed across four milestone draw inspections as work was completed. The transaction funded and closed in five business days.

The Financial Win & Outcome

The developer executed a 90-day comprehensive renovation. The primary value-add strategy focused on underpinning the basement to create a separate income-producing Accessory Dwelling Unit (ADU) and removing main-floor load-bearing walls. The investor allocated $68,000 of the $155,300 budget to excavate the basement floor, install an exterior egress walkout, and build out a self-contained one-bedroom apartment with separate electrical metering. Another $32,000 was dedicated to installing structural steel LVL beams to create an open-concept main floor.

The remaining funds covered new mechanical systems, modern kitchen cabinetry, quartz countertops, updated bathrooms, and fresh interior finishes. Delivering a legal ADU configuration provided house-hacking appeal for end buyers, generating multiple competing offers within five days of market launch.

• Purchase Price: $410,000
• Rehab Budget: $155,300 (Basement ADU buildout, structural steel opening, and full interior renovation)
• Financing & Holding Costs: $28,000
• Selling Costs (6%): $49,200
• Total Cost Basis & Expenses: $642,500
• Final Sale Price: $820,000
• Net Profit: $177,500

Key Takeaways for Local Investors

• Basement ADUs unlock premium valuations in Washington, DC. Lower-level conversions with private rear entrances expand functional square footage and appeal directly to buyers seeking rental income offsets.
• Wholesaler assignments require guaranteed closing timelines. Partnering with a lender who guarantees capital delivery in five business days secures high-margin assignment contracts without risk of default.
• 100% construction debt preserves corporate liquidity. Financing complete renovation budgets keeps working capital available for concurrent development projects.

Planning a single-family renovation or basement ADU conversion in Washington, DC? Submit your property address at hardmoneyhenry.com/apply for a 24-hour commitment letter.