What’s the actual cost of ADUs?
What’s the actual cost of ADUs, and what goes into it? How much do accessory dwelling units really cost? Keep reading to find out.
ADUs Are Amazing Investments — How Much Does an ADU Cost in California?
Constructing your very own tiny house in your backyard sounds like a dream come true. First of all, it’s a real estate investment, and those aren’t that easy to make in California (especially in large cities like Los Angeles or San Francisco).
Second, it’s got a lot of potential. It adds value to your home, and it can give you extra rental income or be the place where you house your friends, family, or relatives.
But when we talk about extra income and adding value, we talk about how much square footage it will add to the overall property or how much income you’ll be able to get. However, today we’ll talk about how much money you’d actually need to get to that gorgeous, dreamy place of having a backyard cottage that you’ll rent out or earn money on when you sell your residence.
In other words, we’re talking about the real cost of an ADU project.
Cost of ADUs | How Much Does Building an ADU Cost?
The California real estate market is more complicated than ever before. For decades, the state saw a steady influx of people, which significantly strained the housing market. In the blink of an eye, housing became a luxury. The cost of rental properties skyrocketed, and affordable housing became something that Californians only read about in the news, never experience.
What’s more, for decades, people flooded the state’s most dense areas. That’s not that surprising, given that those areas are job-rich, have easy access to public transport, as well as all the benefits of living in prominent neighborhoods.
However, in 2019, things changed. For the first time in years, the population of California decreased. And then, when the global events led to a lot of people having to upturn their lives, California saw an even bigger population loss.
However, California is still a populous state. And there’s still plenty of people who are searching for affordable housing options or extra income opportunities. That’s why ADUs are a great opportunity. Any real estate investor will tell you that they’ll pay off in a matter of a few years.
But how much do you actually have to invest to see that pay off? We already talked about the ROI of an ADU and discussed just how profitable renting out your ADU could be. But let’s see how big of an investment you have to make before you see those zeros multiplying in your bank account.
Cost of ADUs | Major Costs of Building an ADU
When it comes to accessory dwelling units (ADUs), it’s no secret that they are becoming more popular. A study done by Freddie Mac states that there’s a dramatic growth in not only the construction of ADUs but also a 3.1% uprise in sold homes with additional units on the property.
If you’re building your ADU on your own, there are many things to think about. The checklist is practically neverending (or so it seems at the beginning). Like any construction project, building an ADU means considering building codes, constructions costs, how many square feet you can afford (versus how many you want), what kind of floor plan you want, etc.
Luckily, the Californian law is now more lenient than ever before when it comes to building on your property. The housing crisis kicked everyone into high gear to find the optimal solution for the lack of affordable housing, and the government saw the potential of ADUs. Hence, the new laws make it easier for you to get permits to start your project.
The baseline average cost of an ADU is $156,000. However, even if you have that money right now, sitting in your bank account, waiting for a good investment opportunity, it might not be enough. The average cost and the actual cost of ADUs somewhat differ.
The real cost depends on the type of ADU you’re looking to build, the location you’re building in (and living in), and, of course, the cost of labor and construction materials. You also need to calculate permit fees, potential variance fees, as well as architectural plans. And that’s just to get you started!
Here are all the costs you need to calculate into the budget for your ADU project.
The Architectural Design
If you’re building the ADU yourself, you’ll need a plan. You can make an ADU even without it, if you have experience in construction, but it’s always a good idea to have a professional make you a plan.
But that cost is a bit trickier to calculate, as it depends on the:
- Size of your ADU
- Experience of the architect
- Complexity of the project you had in mind
- Local economy
Overall, you can calculate that the architectural costs will come to around 8-15% of your total project cost.
Now, you don’t need an architect, but if you’re going into this yourself, it’s a good idea to hire one, so your project ends up looking just as gorgeous as you imagined it.
If you calculated that your average per square foot cost would be around $200 or $250, then an average 600-food ADU will cost you between $120,000 and $150,000. And, let’s say that your architect will charge you 8% of your total cost. That means you’re looking at an architectural fee of $9,000-$12,000.
The Permitting Process
After you have the plan, you can go to the planning office in your area and see about the permits you need. The first thing you need to get is a zoning permit.
Sometimes, that’s unnecessary (when the zoning permit is included in the building permit), but if it is, you’re looking at an expense somewhere between $25 and $4,000. Yes, there’s a vast difference between different zoning permits, so before you even start thinking about your project, you need to check with your planning office what the potential cost for your location would be.
Building permit fees are also something that’s a necessary expense. If the zoning permit isn’t included in the (flat) building fee, then you’ll have to pay between $450 and $15,000.
Finally, if you’re building an average or large ADU (more than 600 square feet), you’ll also need to pay an impact fee.
Site Preparation and Engineering
After you get your license and permits, you’ll have to prep the site. You’ll need to:
- Clear the area, do grading and, if necessary, do demolition
- Do excavation and pour the concrete foundation
You might be able to do that by yourself, but it’s more likely that you’ll have to call in a professional. What’s more, you’ll need someone to inspect the site and check if the soil is stable enough for construction or, if you’re doing an over the garage ADU, to make loadbearing calculations.
Building the Structure
The cost of construction is your biggest money eater here. Building an accessory dwelling unit (ADU) can cost you anywhere between $100 and $500 per square foot, and that price depends on:
- Your location
- The plans
- The overall design
- ADU size
- The quality of building materials
On average, you’re looking at around $100-200 per square foot just for construction costs alone. That means you’ll have to set aside between $60,000 and $120,000 for an average 600-square foot ADU.
System Connection and (Potential) Utilities Upgrade
One of the defining features of ADUs is that they are entirely independent of the primary residence. That means that constructing them includes installing:
- Electrical systems
But it’s not just that you have to install new connections. You might also have to upgrade your existing system. For example, your electrical panels will now have to withhold two different households.
That means two washing machines, two refrigerators, and basically two of everything. If your existing system can’t handle that (which is likely, since it was probably built a couple of decades ago), you’ll need to upgrade it.
Finally, once you have everything settled and your ADU is built, you can sit back and gaze at it proudly, right?
Well, not really. To actually make some use of it, you have to furnish it. And there’s more here to worry about aside from which bed to buy and whether the dining room chairs go with the carpet you had in mind.
You’ll have to fully furnish not only a bathroom but also a kitchen. You’ll have to buy appliances, counters, tables, and everything else that makes a house livable.
A good rule of thumb is that you need between 10% and 50% of your initial investment to furnish a home. Now, an ADU is much smaller and won’t need as many pieces of furniture, but the rule can still apply.
Cost of ADUs | Stylish ADUs With Cedar — No Hassle, No Problem
Building an ADU can be exciting and exhausting at the same time. Not to mention, it will cost you not only money but also effort and time. Overall, there are three types of costs to building an ADU:
- Hard costs (construction, materials, utilities, and interior)
- Soft costs (architectural plans, on-site engineering checks, etc.)
When you combine them all, the cost of building your own ADU can come up to a pretty costly sum.
That’s why getting a turn-key ADU might be a better option. It saves time, money, and nerves.
Here at Cedar, we offer ready-made gorgeous ADUs, and we handle everything. And when we say everything, we do mean EVERYTHING:
- getting the permits
- making the design
- hiring contractors
- overseeing the construction
- final installation
Check out what our process looks like and see how we can make your dream come true!