What is an ADU?
An ADU (Additional Dwelling Unit) is a secondary/independent living unit on the same land as a primary residence unit. ADU’s can be attached to a primary residence or detached. It would most likely consist of a kitchen, living area, bathroom and separate room or space for bed.
It’s typically smaller in size and suitable for either a single person or a couple.
Many cities are encouraging developing ADU’s due to a shortage of housing and also rentable units compared to demand for affordable housing.
Government data from the Federal Housing Finance Agency and California Department of Housing and Community Development shows ADU’s are becoming popular.
The number of ADU are growing. Here is data for California:
You can also see the value of properties with ADU is also growing, here is data for California:
What Steps Are Required to Create an ADU?
If you want to create an ADU, you should take into consideration the following:
Cost – What kind of funding/loan will you need?
Type of ADU – What type of ADU are you building?
Local Regulation – What type of regulations does your local municipality require?
Design the ADU – Find an architect or designer to create plans.
Permits – Get necessary permits from your local planning authority.
Contractor – you’ll need to hire a licensed contractor, unless you’ll build yourself.
Construct – Get it built and inspected by municipality inspectors.
Cost of ADU
Building an ADU is a significant expense. You should have a good idea of cost before you start. Here are some estimates based on size. The range is determined based on your location and design choices.
Type of ADU
There are a variety of types of ADU; you should determine if you can use space in the primary residence to convert it to an ADU or if you have enough space in your lot to construct one.
Here are some of the common types to consider:
- Detached ADU
- Attached – addition to main house
- Garage converted to ADU
- Basement converted to ADU
Local Regulations Governing ADU’s
You’ll need to contact your local planning authority to understand ADU rules. Some things to consider are:
- Zoning Laws – Can you build an ADU in your neighborhood?
- Size limits – What’s the maximum size for an ADU?
- Setbacks – How much space do you need from your neighbors to where you can place an ADU?
- Height Restrictions – How high can roofline and ceilings be?
- Parking – What kind of parking if any do you have to provide?
- Occupancy – Are there limits to the number of people allowed in ADU? Can it be used for long and short term rental?
Designing the ADU
You will need to find an Architect or Designer you’re comfortable with to come up with plans that meet your cost requirements and also satisfy local regulations.
Permits for an ADU
You and your Architect should set up a meeting with your local planning department to determine what kind of permits you need to start the project.
Typically, you’ll need:
- Building permit
- Zoning Approval
- Site plan approval
- Utility permits
- Fire safety compliance
Getting a Contractor to Start Building your ADU
Once you’ve gotten the appropriate permits, you need to start construction. There are two key decisions you need to make. First, will you build yourself or use a contractor? Second, if you use a contractor finding the right one for you.
Make sure your contractor has an up-to-date license.
Constructing an ADU
Once you have started construction, at the end of each stage of the build, get it inspected for approval by the planning department. Typically, different stages where you’ll need an inspection are:
- Foundation
- Framing
- Plumbing
- Electrical
- Final Inspection
Inspectors are your friend; getting it approved by them can ensure you’re getting quality work.
Should I Create an ADU from Scratch or Prefab?
One other consideration that can affect costs is should build ADU from scratch or prefab?
Typically, custom construction takes longer and is more expensive. However, you can customize the design to your liking so it better matches the main residence. It also tends to have higher resale value.
Whereas prefab is limited in design, which can make it look more cookie-cutter. It can also have a lower resale value. However, construction can be done faster, and it can also lower costs. Sometimes it’s easier to get a permit as well.
What Are the Costs and Benefits of an ADU?
An ADU can be a great investment. The costs are significant based on the size, location and design choices, as we showed earlier.
There are many benefits, such as:
- Rental income
- Property value increase
- Flexible space for family needs: aging parents, adult children, guest space
- Affordable housing – Help your community by providing affordable housing.
Should You Consider Section 8 Housing for your ADU?
Section 8 housing means you’re willing to accept low-income tenants where a portion of the rent is paid by the government. There are many advantages and disadvantages to consider.
Advantage:
- Guaranteed rent payments
- Larger pool of potential tenants
- Lessens the risk of rental loss
Disadvantage:
- Property inspection to meet Section 8 standards
- Rent must comply with government regulations
- More government administrative work
Do You Want To Accept Pets in ADU – Is It Pet-Friendly?
Accepting pets in your ADU has many advantages and disadvantages.
Advantage:
- Larger pool of potential tenants
- Higher Rent (Pet Fee, Pet Rent)
- Tenants tend to stay longer
Disadvantage:
- More property damage
- Noise issues
- More cleaning when tenants move out
Should You Make Your ADU a Short-Term Rental?
It can be profitable to have your ADU as a short-term rental (AirBNB) rather than long-term rental. There are many advantages and disadvantages.
Advantages
- More rental income
- Flexibility for your own usage of ADU
- Tenant turnover is easier
Disadvantages
- Zoning restrictions – Many cities do not allow it.
- More management – since there is frequent tenant turnover
- Operating cost – frequent cleaning, furniture, Utilities
How can SimplifyEm help with your ADU?
If you are renting out your ADU. You need software that does an excellent job of:
- Keeping track of your tenants account and balance
- Great communication capabilities to stay in touch with your tenant and have everything recorded.
- Having your records ready for tax time.
SimplifyEm Property Management Software does all of this and is the easiest to use.
Frequently Asked Questions (FAQs) about ADU
- What is an ADU?
ADU (Additional Dwelling Unit) is a secondary living space in the lot of a primary residence.
It can be a detached space or attached (such as a converted garage or basement) as an independent unit consisting of a kitchen, living area with a bedroom space, and bathroom.
- What are the costs and benefits of an ADU?
The cost of an ADU consists of permit to build as well construction cost. The factors that affect its cost are size of space, design decisions you make, as well location. It can be very expensive to construct running into several hundred of thousands dollars.
It provides many benefits and gives you a flexible space to deal with elderly parents, adult children, as well as guests.
You can also rent it out for income. Having an ADU on a property typically increases property value.
- Should I consider a Prefab ADU?
A Prefab ADU is absolutely worth considering. It provides many benefits, such as lower construction costs as well as a faster time to build.
Some limitations of Prefab are you have less control over design; you can’t have all the design elements you want. It’s limited to whatever is offered by the prefab company.
- Do ADU’s make an affordable rental?
ADU tends to be smaller than Single Family homes. So they can make for ideal space for single people or young couples on a limited budget.
- Can an ADU be used for Section 8 housing?
You should check with government authorities as to what qualifies for Section 8 housing. Typically, a fully functional ADU can be used for section 8 housing.
Turning your ADU into Section 8 housing gives you the benefit of a regular rent check from the government. However, you do become subject to government rules on how much rent you can charge as well as filling out government forms and paperwork.
Sources:
https://www.hcd.ca.gov/policy-and-research/accessory-dwelling-units
