Thinking about building an ADU - where to start and what to consider

[SimpleCycle]

ADUs will become legal in my area starting May 1st of this year.  It's a pilot program for three years.

We live in a SFH in a good neighborhood.  Our lot is 39 feet wide, and currently has a 1.5 car garage that runs a little more than half the lot width.  We'd be looking to replace the garage with an ADU that includes parking for a single car (ours) and a 1 br living space, with the plan to rent out the ADU apartment.  Under the current ordinance, ADUs cannot be rented short term like on AirBnB.

I'm really just not sure how to evaluate whether this is a good idea or not, and how to evaluate the resulting rental unit.  Mostly I am stuck on "how much would it cost to build the ADU" part of the equation.  I have looked up estimates online but a lot of the information is based on California and prefab ADUs.  I also am not sure what to expect for the rental price, since the unit will be different from the standard 1 br rental in the area, with both pros and cons compared to a regular unit.

Looking for any and all advice on how to get answers to my questions and anything else I should be considering.

[affordablehousing]

I would assume your construction costs for a project like that to be about $600psf for a nice ADU that you'd be comfortable living in, $400psf for a basic one with all home depot stuff in it.

[waltworks]

Um, $600 per square? Where do you live? I'm in a crazy HCOL area and construction doesn't cost anything like that much unless you're doing crazy custom/high end finishes.

-W

[PMJL34]

affordable housing is accurate for my neck of the woods (Bay Area). I'd add 10% more due to COVID pricing. But I agree Walt, it's probably much cheaper elsewhere.

[waltworks]

Where I live is much more expensive than the Bay Area, actually. And I'd estimate typical builder-grade finishes construction costs at around $300/sq. That was pre-covid, though, so it might be more right now.

Is it that expensive to build an ADU (which already has a foundation, I assume) in CA?

-W

[mozar]

Exactly how many square feet do you have to work with while using the existing foundation? And can you use the existing foundation? Probably, but it's good to make sure.
For pricing I would figure out what % profit you need for it to feel worth it, then work backwards from there.

For parking are you going to park next to the ADU? That might be awkward for the renter.

[affordablehousing]

@waltworks, yes indeed I'm in the bay area. $600 psf is pretty standard for an addition, small adu where you are doing a shell and foundation and all the guts. Yes, it's f'ing insane but it sadly still makes sense value-wise.

Not sure what the economics in your market are Walt but here a basic laborer you pick up from the paint store is about $25 an hour, an off-hours tradesperson $45 an hour like stucco, drywall, paint, off-hours plumber $100 an hour, and on-duty, like when you hire an actual contractor or company up from there. Most laborers are billed at $55-65 an hour to cover overhead, foremen at $85-95 an hour, GC's at $125 an hour. You also have lumber costs doubled, all specialties jacked up for storage and transport, and $600 psf is reasonable. And for much of the bay area, there is no point to "builder-grade" finishes unless you are working on crap rentals. For anyone's primary home with labor so high, there's no reason not to use nicer finishes, it's still a drop in the bucket compared to toal project cost.

There are companies touting the mythical $220K complete ADU but I have yet to see any of those companies actually deliver something or get beyond the fundraising with a youtube video stage.

[PMJL34]

Yeah, affordable housing is spot on. I have multiple friends/neighbors who have done the ADU additions. The all in cost for 250sq to 350sq ft is about 150k to 250k+. The reason is because the primary houses are 1 million plus, so proportionally it makes sense cost wise.  Raising the house is 200k-1million (with 200k being just foundation work by the cheapest company). So although everyone wants to double their sq ft by raising the house, some can't afford it. So the middle ground is adding an ADU in the back. And let's be honest, they customize everything and hire over priced builders that hand hold them. But it makes no sense to add a crappy addition to the back if it's not on par with the 1+ mil primary house either so here we are.

I can and will build one for 20K with my bare hands.

[waltworks]

Dang, I'm impressed! Around here labor is a lot cheaper (probably because the nearby metro area isn't very expensive, unlike the surrounding area in SF). We're in the process of trying to do an ADU right now, and honestly the issue isn't cost - it's permitting, which has become basically impossible.

-W

[PMJL34]

Walt,

Interesting. Getting the permit is the easy part here. The hard part is paying for it.

Is it difficult getting the permits because your neighbors are opposed to it? or is the city just very strict about new ADU builds?

Either way, I love ADUs (or any and all additions) so best of luck!

[waltworks]

Walt,

Interesting. Getting the permit is the easy part here. The hard part is paying for it.

Is it difficult getting the permits because your neighbors are opposed to it? or is the city just very strict about new ADU builds?

Either way, I love ADUs (or any and all additions) so best of luck!

It's a small town/county and I think the permit office people are just incompetent, really. The Covid building boom moved them all remote and also flooded them with work. We've been through 9 months of permitting hell now and resubmitted at least half a dozen times. We get the same comments that were addressed months ago from a new staff member, on and on.

The HOA/neighbors was easy. But honestly if it doesn't happen this summer I just give up (after spending $20k on fees and permits and surveys, ouch).

-W

[PMJL34]

That sucks. I'd be pissed. Fingers crossed you get that one helpful person who takes care of you and it gets done.

[LaineyAZ]

Walt,

Interesting. Getting the permit is the easy part here. The hard part is paying for it.

Is it difficult getting the permits because your neighbors are opposed to it? or is the city just very strict about new ADU builds?

Either way, I love ADUs (or any and all additions) so best of luck!

waltworks,
I'm wondering if it would be worthwhile to contact your local town or county representative.  I've found in the past that if you explain to your rep what's happening, they or their staff will then contact the person or agency directly.  It seems to get their attention when a legislative person calls them and they either have to defend their incompetence or approve your request.
Certainly worth a try?
It's a small town/county and I think the permit office people are just incompetent, really. The Covid building boom moved them all remote and also flooded them with work. We've been through 9 months of permitting hell now and resubmitted at least half a dozen times. We get the same comments that were addressed months ago from a new staff member, on and on.

The HOA/neighbors was easy. But honestly if it doesn't happen this summer I just give up (after spending $20k on fees and permits and surveys, ouch).

-W

[SndcxxJ]

I'm in the Bay area and I don't see $400-$600/sq ft costs.  I'm in the east Bay, are you guys across the bay or in the berkeley/oakland hills or comparable?
I experience $250/sq ft for generic construction and $325/sq ft for a little better finishes.  I am only in rental property, nothing high end, nothing more custom than it has to be.

[PMJL34]

SyndcxxJ,

Are you in Tracy or somewhere with more space and lower cost of living?

Also, we're talking about ADU builds. I've never seen or heard an ADU being built for $250/sqft let alone 325 even in Hayward or equivalent. I haven't even heard of additions or new constructions being anywhere close to that either. Are you including permitting fees and surveys and all the requirements or just a non-permitted build ADU build?

[Evie]

I looked into it, and it's definitely a money loser from my perspective unless you convert a garage or existing non-permitted structure.  I have a property with no garage and considered a prefab unit dropped onto a cinderblock garage but couldn't find anything like that pre spec and all the numbers I ran were ballpark $150k+

I'm in CA where the rules are really friendly to ADU, but for that price I have a downpayment on another property and could look at buying another duplex or an SFR with existing unit.

[SndcxxJ]

PMJL34,
I'm in Hayward/San Leandro/San Lorenzo/Castro Valley.
The only thing I am not including is land value and general contractors profit as I contract myself. 
For example, I have a 1000 sq ft adu underway and I am in at about $5000 permits/fees and I'm anticipating $200/sq ft for quality construction while doing a lot of work myself.  My insurance broker prices construction in this area at $240-$260/sq ft, but in reality I can't contract everything out for much less than $325/sq ft. 
With lumber prices where they are currently I would say these numbers are a bit behind as I am slowing anything substantial until lumber prices soften, hopefully in the third quarter of this year. 
I can't imagine spending $600/sq ft unless I'm burying money in the walls.

[PMJL34]

SndcxxJ,

Hello neighbor. Nice! 1000sqft ADU!!! That's bigger than my primary. I love it and hopefully those lumber prices come down soon. 

Yeah, your prices include you doing work and contracting. My stated numbers are for an average home owner who has someone else build it for them while they work. Anyway you slice it, it's very expensive.

[SndcxxJ]

To save on not insignificant county level fees keeping the ADU under 750 sq ft is critical.  I have an attached garage that brings the total square footage to 1000 because garages are considered non-habitable space and fees don't apply to that.
This is actually a good point for OP.  Call the city (or county if you are in an unincorporated area) and find out any all all fees associated with the project.  The planning department will know all fees,but may not know exact amounts.  Some fees will come from the school district, roads, sewer company, potentially water company, etc.  They each levee their fees and many, if not all, will have certain criteria that will make fees exempt.  The school district in my area does not charge a fee if under 750 sq ft, but charge $3/sq ft for any projects over 750.  The sewer company charges something around $12k for a single family house, but their minimum of about $1k for an ADU.  Park department doesn't charge for ADU but is normally in the low thousands. Etc.
A new construction single family house around 2,000 sq ft might pay somewhere around $80k, but a carefully planned adu can avoid a LOT of those.

[J Boogie]

Just an FYI in many areas an ADU does not allow you to rent out both units (like a duplex) if you move. You can either sell or rent out the whole thing to one renter.

Makes me think of, especially in warmer climates, building a detached "office" alongside a deck that you can park a tiny house next to. Then you can move into the tiny house and rent out the house, and you have a nice little compound in your backyard. Given that your office can have a bedroom/living room, you can build the tiny house in a far less cramped way than they are typically built.

A home office doesn't need to be plumbed and doesn't require the crazy level of permitting required in many cities.

And it would probably have a better ROI if you choose to sell.

Just a random thought.

[theoverlook]

A new construction single family house around 2,000 sq ft might pay somewhere around $80k, but a carefully planned adu can avoid a LOT of those.

Are you saying that a new build 2,000sf house pays around $80k total in fees for zoning/permits/utility fees? That's insane! No wonder there's a housing crunch in CA!

[affordablehousing]

That's impact fees. If you want to rebuild or expand a house, you save one stud of the original construction to have your project be counted as a remodel rather than new construction. Same thing in New York, there are different tiers of permits and you always save some door frame so the city can justify it as an alteration rather than new build.

[clarkfan1979]

I have a buddy doing an addition in Seattle. Most contractors are quoting $400 sq. ft. for a 1500 sq. ft. addition and that doesn't include all the finish work. My buddy wants to do the last 10% himself (flooring and painting). The cost per sq. ft. goes up when you start talking about smaller places like 750 sq. ft.

Seattle is more expensive than Chicago, IMO. Seattle is probably $500 sq. ft. for an ADU and Chicago is probably $400 sq. ft.

[windytrail]

If anyone has forgotten, MMM himself built a 16 x 22 detached studio for about $30k ($80/sq ft.) (https://www.mrmoneymustache.com/2017/01/24/diy-studio-building/). This was not a "move-in ready" ADU (lacked a kitchen or bathroom), but it serves as a good counterweight to the narrative that any detached building will cost $600/sq ft.

[pennyhandlebar]

We looked into building an ADU on our lot in Portland Oregon, and were coming in around $200/square foot. The problem is that it's expensive to do stuff like tie into the sewer - in our case it would have meant jackhammering up about 30 feet of our driveway. The contractors we talked to said just to get power, sewer, and water hooked up would run us around $20k -- that figure may have included permits too, it's been awhile.

If you're building a 2000 square foot house, that doesn't impact the cost per square foot that much, but it's different if you're looking at an ADU. Ours would have been about 650 square feet, so we were already at $30/square foot before buying a single 2x4. Then you have to have all the expensive rooms - bathroom & kitchen - and the expensive systems - heating, hot water, etc., - and can't amortize it over 2k square feet with a bunch of cheaper rooms like bedrooms and living rooms, so it adds up. MMM would definitely have spent more to make his studio something that would serve as a residence.

[MayDay]

You aren't going to get around the hookup expenses (and I agree those are the big ones) but the market seems ripe for a drip in modular solution.

If we stay in our house long term and my son ends up needing a supportive living situation, we may build one in the back of our yard. We already have an attached garage but I am envisioning a 1st floor garage that can flex to be a living room, with a second floor apartment. It would be lovely to do all the site work and then just plop a modular building in place.