Accessory Dwelling Units (ADU)

Need a solution for your in-laws, long-term guests, or a growing family? ADUs have become a popular solution! An ADU is also known as an in-law house, backyard house, guest house, or casita; basically a small home that can be built on the same lot alongside another, larger single-family home.

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BENEFITS OF AN ACCESSORY DWELLING UNIT (ADU)

Are you considering adding an Accessory Dwelling Unit to your home? That’s wonderful news! ADUs offer an amazing way to keep extended family close (while maintaining privacy), increase your property values and even add a possible rental property to your portfolio.  Read on for more answers about ADUs and why there’s never been a better time to build one for your home.

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WHAT IS AN ACCESSORY DWELLING UNIT (ADU)?

An accessory dwelling unit (also known as a casita ordetached inlaw unit) is a second small residence right on the same land as the original residence.  Examples include:

  • A garage apartment
  • A small house (on a backyard foundation)
  • A Basement flat.

Regardless of the shape of the house (cottage in the backyard, cellar, etc), an ADU is legally included in the property of its principal residence. The ADU owner is the primary residence owner.

Builders call them ADUs, but they are also known as granny flats, in-law units, laneways, secondary housing units and hundreds of other names. ADUs may be small houses, but the ADUs are not always small houses.

There are several reasons why people create them, but according to one study the most frequent motives are to gain privacy, simplify your living situation and even earn spare income as rent. For environmental, lifestyle, and financial purposes, the housing versatility ADUs offer makes sense. While many people purchase and remain in their homes for decades, over time, their real needs change. Unfortunately, the way houses are currently constructed does not reflect these changes, especially how the households with only 1 or 2 members can spend decades. For 1- or 2-person households, many American houses are too large to maintain, so an ADU makes sense for them and their wallets.

WILL AN ADU ADD VALUE TO MY HOME?

If you are considering options to increase the value of your land, an ADU can look like a logical choice. However, one question always comes to mind among the various choices and information involved: Will An ADU Add Value To A Home?

Like so many things in life, the answer is a little complicated. It depends on the comparables that have sold in the area within the past 6 months within a one-mile radius. You can also take 1/3 to 1/2 of the “main” home’s $/sqft. and apply that to the ADU. When conducting a Price Per Square Foot comparison, adhere to the 10 percent rule to be accurate. The 10 percent rule says that both the improvements and the square footage of the land must be within 10 percent of those of the subject property being evaluated. 

ADUs offer many financial advantages beyond social benefits. ADUs can increase your property value by 20-30 percent depending on your project and area! Furthermore, one survey showed that the value of properties with ADUs was increased by over 50%. You can obtain legal rent from an authorized ADU in several areas. Many homeowners have the option to have their properties rented (and thus produce monthly income) as well as the option to provide accommodation and even additional space for family members.

You should also understand how the unit will produce rental income before you start planning your ADU. Take a look at related properties and properties awaiting sale or recently sold to help you decide if the ADU’s expense is recovered after a few years of leasing. The best way to assess if an ADU project suits your situation best is to equate projected costs with future revenues.

Lastly, the main property must be kept in mind when preparing your project. The ADU should not seem cramped or out of place and should be as elegant as the main house.

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HOW MUCH DOES IT COST TO BUILD ADU?

The price of an ADU is all over the map. It is therefore not an easy task to clarify the cost of building an ADU. The building costs of the same structure will vary greatly depending on the contractors involved and on the actual labor and material costs in a given area. It will also depend largely on which kind of ADU we are building. A conversion to a basement ADU is very different from an ADU above a parking garage or one in your backyard. All of these factors make it difficult to determine the ‘average ADU cost.’

ADU costs $300-$600 per sq/ft depending on how complex the construction is, how custom or standard the build-out is, and lastly what price level of finish you want.

There are 3 types of ADUs:

  1. Highest cost: Custom built aka Stick built. Completely custom
  2. Middle cost: Precut framing ADU. The framing is shipped built out. The walls are pre-assembled. Semi custom
  3. Lowest cost: Pre-assembled from prebuilt styles. Least custom. A prefinished (detached) mini home is delivered to your backyard.

Each direction has is benefits and drawbacks. Let’s chat to discuss which direction is best for you.

FREQUENTLY ASKED QUESTIONS ABOUT ACCESSORY DWELLING UNITS (ADUS)

Can an ADU have its own address?

Yes! ADU’s are a legal unit, and may have their own address.

Can I rent out my ADU?

Yes. A homeowner has the freedom to rent his ADU to anyone they wish, but make sure you are complying with all local rental rules and regulations.  Contact your local city hall for more information.

Does an ADU increase property taxes?

Yes, but only on the ADU’s marginal value.

 

Is building an ADU worth it?

Yes, most definitely. It could be worth building an ADU on your property if you attempt to sell it home and do not receive great offers. Adding a new separate living structure to your lot will bring to the table a very different buyer.

 

How much does it cost to build an ADU in Contra Costa County?

Building costs for ADUs can differ widely according to the contractor as well as the current labor and equipment costs in a given area. Give us a call for more information.

 

Does an ADU require a kitchen?

Yes. ADUs are independent rental units. The unit should have its own kitchen, bathroom, dedicated entrance, and at least one parking space.


 

Can I build an ADU in my front yard?

Generally yes. An ADU can be built on any side of the house but must follow normal setback rules. Check with your county for more details about your specific situation. If you have a historic building generally you will only be able to add an ADU to the rear of the structure.

Can an ADU have a garage?

Yes, for the ADU, you should plan on a parking space or a garage.



 

Can I sell only my ADU?

It can be rented out, but can not be sold from the main house separately.



 

How big can my ADU be?

In most cases, ADUs may be built up to 1200 square feet. With the exception of allowing a minimum size of 800 square feet, attached ADUs should never be more than 50 per cent of the primary dwelling size.



 

How do you finance an ADU?

Cashout refinancing, a home equity loan or credit line and renovation financing are options for financing the ADU.



 

How does an ADU affect property taxes?

When you add an ADU, the tax basis on your property will not be reassessed. The property tax will only increase by the value of the ADU on your property.  You should also confirm with your accountant for yor specific situation.



 

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