Things to consider when building an ADU

Costs and Considerations of Building an ADU

A variety of lifestyle and economic factors drive interest in accessory dwelling units (ADUs). Some homeowners want a place for relatives, while others seek rental income or creating more affordable housing units in their neighborhoods. Retiring baby boomers and adult children moving back home also add to the demand. For those who want to build a place to rent, the allure of passive income is undeniable. Some sign tenants to traditional leases, while others make their ADUs available for short-term rentals (STRs) when permitted.

New laws in states like California make ADUs more possible and practical than ever before. Experience with ADUs is important, as you’ll feel more confident with architects, engineers and contractors who possess relevant building experience.

HUD defines an ADU as “a habitable living unit added to, created within, or detached from a primary one-unit single family dwelling, which together constitute a single interest in real estate.” In some jurisdictions, ADUs are also permitted on multi-family properties.

How Much Does an ADU Cost?

Once determined that an ADU is possible on your property, you’ll be wondering how much it will cost. Many variables impact ADU costs, particularly the size of the unit and the quality of materials.

Homeowners face fixed costs associated with the development of any ADU. You’ll often find that simply expanding on an existing living space costs far less than a stand-alone unit, on a per-square-foot basis. If you’re planning to rent out your ADU, find the “sweet spot.” Balance key variables like affordability, size, quality, and potential rents.

Contractors often state the cost of an ADU in dollars per-square-foot. As you might imagine, this range is very broad, from less than $150/sq ft to well over $500/sq ft. The cost of many ADUs falls between $200 and $300 per-square-foot, but it is important to remember that this amount can vary greatly.

Consider an average-sized, 800 sq ft ADU built for $200/sq ft. In this example, the cost would be approximately $160,000 and that cost can increase based on the site conditions and interior finishes.

However, some homeowners spend less than $100k, while others build ADUs costing $400,000 or more. A UC-Berkeley survey calculated that the average cost of an ADU was $156,000. However, ADU costs run higher in certain markets. For example, in California’s Bay Area, the average cost is about $350,000 to $390,000. These numbers indicate that, historically, ADUs have not necessarily been a low-cost type of construction. They also indicate that there are plenty of opportunities for developers and ADU designers to solve for more efficient delivery of these units as an affordable housing solution in high-cost areas like the San Francisco Bay Area.

With an ADU, you’re doing much more than framing a room on a concrete slab. Code-compliant ADUs must typically include both a kitchen and a bathroom. In such facilities, mechanical systems, gas lines and appliances all drive costs higher; making them more expensive than simply framing in a new bedroom.

The cost of an accessory dwelling unit is also related to the type of construction. Here’s a general ranking from the lowest to the highest ADU costs:

  • Basement ADUs
  • Garage conversions
  • New construction above a garage
  • Attached new construction
  • Detached new construction

State laws and local ordinances may affect your available options. For example, the ADU Ordinance Summary for Los Angeles County establishes key criteria such as whether an ADU is permitted, size and height requirements, and more.

Finally, the costs of labor and materials vary from place to place. In California, for example, ADUs in Los Angeles County or the Bay Area may run more than those in the Central Valley.

Common ADU Budget Items

Before you build an ADU, you must get approval from the city, county, or both. You may also need to secure a variance if your ADU plans are non-conforming. In addition, you must develop your architectural plans and complete the permitting process.

Beyond the architectural plans, there are also potential ADU costs for surveying and engineering. For new construction, it is necessary to ensure that the soil is stable, for example. An engineer must make load bearing calculations if the ADU will rest atop a garage. You must also ensure that your ADU complies with environmental rules and regulations, including tree removals and other requirements.

Key Steps

Permitting and planning often takes longer than the construction itself. Your construction budget will include the materials and labor. It includes the cost to prepare the site, frame in the structure, and finish the unit (both indoors and outdoors).

Preparing the site

  • Clearing, grading, and demolition (if applicable)
  • Excavation
  • Concrete foundation

Framing the structure

  • Walls and joists
  • Roofing
  • Windows and doors
  • Exterior trim (flashing, gutters, and so on)

Installing and connecting systems

  • HVAC
  • Plumbing
  • Electrical

Interior finishing

  • Insulation
  • Drywall
  • Stairs, handrails, and millwork
  • Floor, wall, and ceiling finishes
  • Kitchen appliances

Final touches around your ADU

  • Driveway, sidewalk, patio
  • Landscaping

Other Expenses

There are additional accessory dwelling unit costs that are easy to overlook. For example, you might need to invest in site security, porta-potty rental, and specialty tools. You or the contractor must also plan for waste disposal. Don’t forget about sales tax as well, when applicable.

You might also furnish the interior of your ADU. If not, staging might maximize your ADU’s rent potential. Enlisting the services of a professional stager may seem like a luxury at first. However, it could pay for itself given the premium rent you might receive year-in and year-out.

Fees

Fees are also a part of these additional dwelling unit costs. Most homeowners realize that permit fees are inevitable. However, there are often environmental and other fees as well. For instance, architectural fees often range from about 8 to 15 percent of the project’s cost. Also, the construction manager or general contractor will charge a fee for overseeing the project. You may find these costs embedded in the contractor’s quote.

Money-saving Tips

There are a variety of ways to reduce the cost of an ADU. Here are some tips.

Choose Pre-Designed Over Custom-Designed Units

Sometimes a homeowner can forego the expense associated with customized architectural plans. When appropriate, you may reduce costs by starting with a pre-designed ADU. You are still free to modify exterior and interior finishes to suit your preferences.

Select Materials With Care

Look for materials that are affordable, yet upscale. For example, a luxurious granite countertop is more affordable if you go with a remnant. Or, save by selecting a standard, prefabricated size instead of something custom.

To save further, avoid labor-intensive materials like tile. There are stylish, yet durable alternatives. You want to invest in durable materials so you’re not looking at a premature need for renovation down the road.

Make Smart Utility Choices

Consider going all-electric. In many regions, low-cost natural gas is attractive, but extending a gas line to an ADU may get expensive. Solar panels can offset the cost of an all-electric ADU, now or in the future.

Consider Potential Sweat Equity Savings

Some homeowners try to reduce ADU costs by doing some of the work themselves, like painting or landscaping. However, it is easy to overestimate the value of sweat equity. Also, acquiring specialty tools adds to the cost. Experienced ADU contractors save time and increase efficiency in many ways.

 

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