So You Want to Build an ADU

There are certain requirements you need to keep in mind before you start building an ADU. 

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Accessory dwelling units (ADUs) have been a hot topic in the real estate world lately. Since the passing of Senate Bill 1069 in September 2018, there are more opportunities for people to add ADUs (granny flats, in-law quarters, etc.) to their properties and to do so legally. This is a huge benefit considering our current housing crisis. What is an ADU, though? Specifically, it’s a converted space on an existing property—such as a basement, attic, garage, or an attached room with separate entrances—or a separate detached unit built onto that property. Each property has different requirements, and each area within that property has different requirements too. Furthermore, each city or county may put specific restrictions on ADUs. Right now, though, these restrictions are very much in flux, and we expect that to be the case for the next three to five years. If you’re thinking of building an ADU on an existing property, there are a few requirements you still need to be aware of. The first is that the homeowner must live in one of the two units on the property—either the accessory unit or the primary home. Next, keep in mind that some areas do not allow short-term rentals. Additionally, the state mandates that the build size can only be between 1,200 and 1,500 square feet.

There’s no set value in terms of how much an ADU can increase your property’s worth.

Other factors to consider include:

• What kind of fees are being charged—some cities look at ADUs as a way to make more money
• If you live near the beach and whether or not there are any coastal restrictions Parking requirements
• The fact that, generally, your ADU can't be more than 50% of the size of the primary home

Before you start building, you should also ask yourself what your goals are. Are you looking for extra income, or to have a family member live with you but not under the same roof? Are you planning on building the unit for yourself as something to eventually downsize into? If you’re looking to buy a property to convert instead of converting an existing one, there are a different set of variables to keep in mind. First of all, you need to make sure the property is zoned for single-family homes. Next, look at what type of garage it has. A garage is one of the easiest and least-expensive conversions you can do to create an ADU. Some areas that have parking restrictions don’t allow garage conversions, but otherwise, this type of conversion typically costs between $90,000 and $100,000. Also, check whether or not you have enough lot space to build your ADU. And how about the neighborhood in general? Is it walkable? Is it close to easy transportation and commerce centers? Obviously, the nicer the neighborhood, the more you’ll be able to charge if you plan on renting your unit. Depending on your specific requirements, a standalone unit will cost you upwards of $150,000, but there’s no set value in terms of how much an ADU can increase your property’s worth because there aren’t a lot of properties out there to compare it to. That should change as the years go by, though, and in any case, the real return on investment comes from the rental income you can derive from it. If you have any questions about this topic or you’re interested in finding a property that has great ADU potential, don’t hesitate to reach out to me. I’d love to help you.