If you are thinking about building an ADU, you may have many questions about how to get started. We are here to help with some things to take into consideration below.
- Site Evaluation
First look at your property for possible ADU locations. Possible locations could be an unused bedroom and bathroom to turn into a junior ADU. Your existing garage can be converted to an ADU without a huge cost or imposing on your living space. If you have more money to invest and good yard space, a detached ADU could be a better option. This type will also have the advantages of being more private and perhaps rent for more per month than a smaller unit. Get a professional to evaluate your property, or consult with us online for free for more information and options you may not have considered.
- Calculate Costs
The is one of the main factors that will drive the size and location of your ADU. You will need to calculate the possible hard and soft costs of the ADU you want to build. Soft costs will include design fees, city fees, engineering fees. Hard costs will include the constructions costs that can vary from $225 - $350 per square foot. A good idea is to calculate your square foot price to be $280 to get a ball-park figure, then add the soft costs to that. Check out our other article on costs for more information. - Seek Financing
Take a look at where you can get financing from and how much cash you want to invest in your ADU. If your ADU is for a family member, they may be able to add to the budget. Typically homeowners use their homes equity for financing using a HELOC (Home Equity Line of Credit) to finance the project, along with some cash from savings. Talk to your bank or other financial advisor about refinancing your mortgage or equity loans so you have a good idea of your final budget available for the project. - Return on Investment
You need to make an informed and wise investment, so this step is very important. Hopefully your financial advisor will give you the estimated costs involved in pulling equity from your home and has calculated your new payment. Even if you are paying all cash for the project, knowing your return on investment is wise.
Firstly, there will be added value to your home. This is calculated by taking the cost per square foot to build your ADU, taken away from the square foot value of your current home. This information can be found on websites like Zillow.
For example – if you spend $250 per square foot to build a 500 sqft ADU (=$125,000) and if your home value is $400 per square foot, you are adding 500 x $400 = $200,000 extra value to your home.
Secondly, if you are renting out the ADU, you can calculate your extra monthly income after your expenses are covered per month. Essentially your renter will be paying off the loan for this investment over the next few years. For more information check out our ‘Return on Investment Article.’ - Design
Now you have an idea of where you can build, how much it will cost and the size of your budget for you to start the design plans for your ADU. Discuss with your designer the square foot you can afford, type of ADU and how you want to use the space. All this information will help your designer develop your set of ADU plans.
- Bids
Once you have a set of plans, a contractor can give you a bid for your project. We always recommend doing this before submitting to the city so any design changes can be made now if costs need to be cut. Always get at least 3 bids from reputable contractors. - Submit Plans
Once you have the design you want; the plans can be submitted to your city for the building permit. This process will take up to 60 days (down from the 120 days). Once any corrections are made, permits are issued for your contractor to get started building your ADU.
We will look at all these elements in more detail in further articles. Stay tuned!
Let us help you to get started by signing up below for a free online consultation today!