Have you decided to build an accessory dwelling unit (ADU) at your home? That's great! Building an ADU has become an increasingly popular option for California homeowners over the last few years. ADUs can provide additional living space for family members, generate extra rental income, and increase the value of your property.
However, building an ADU is no small undertaking. To have a successful, low-stress project, you should take the time to carefully plan your project before rushing to hire an architect or a contractor. We at Revival Homes recommend five steps in your planning process to ensure that your ADU project gets off to a smooth start.
1. Decide why you want an ADU
First, determine what your ADU’s primary use will be. Do you plan on living in it yourself, renting it out, housing an aging parent, or using it as a home office or guest house? Once you've decided how you want to use the ADU, you’ll be better equipped to decide on the ADU's size, layout, and design.
For example, if you plan to rent the ADU to a tenant, you’d probably design the layout for privacy — think doors that face away from the main house, and possibly trees or hedges separating the two units. If you’re designing the ADU for family living or guests, you might choose a layout that connects the two units or faces a common patio or garden.
It’s important to identify your end goal and communicate it to your designer early in the process. This helps you ensure that you manage design choices, costs, and outcomes to get the project you want — and avoid costly late-stage design changes.
2. Create your budget
Once you decide why you want an ADU, the next step is to create a project budget. ADU projects don’t come cheap — they can cost anywhere from $100,000 for a simple garage conversion, to over $300,000 for a newly-built 2-bedroom unit. Determining early on what you can afford to spend will help you decide how large of an ADU to build, whether to convert existing space or build from scratch, and what features and amenities you can include.
Also, when you budget, make sure to factor in the “soft” costs of construction, including creating the plan set and designs, permit fees, and (depending on your project) a solar panel system. You can use Revival Homes’ ADU Budget Calculator to create a line-item forecast of project costs.
3. Make a plan to get financing
After you determine your project budget, you should decide how you plan to fund construction. Most homeowners don’t have enough cash savings to pay for the entire project, which is why most projects are partially or fully funded through a bank loan.
While you have many different financing options available, each lending product comes with its own pros and cons. Check out this blog post for a quick comparison of typical home lending options, like home equity loans, HELOCs, cash-out refis, and construction loans. Your bank or credit union may be able to pre-approve you for a set amount of money you can borrow, which can help you determine how much money you can spend on your ADU project.
It’s also worth noting that existing lending products aren’t specifically tailored to ADU projects, and often don’t work well for newer homeowners (who haven’t yet built up home equity) and retired households (whose incomes tend to be lower). We’re about to launch the Revival Homes ADU Loan, a new type of lending product that makes your project simpler and more affordable to finance. Join our waitlist today to be the first to know once the Revival Homes ADU Loan is live.
4. Identify project constraints
Recent state laws in California have created more consistent rules and regulations for ADUs that all cities must follow. However, cities still have some ability to set local rules about what you can and can’t build. For example, some cities allow two-story ADUs, while others limit you to one story, and many cities have different rules around setbacks (the distance between your ADU and other structures on the property).
Additionally, the location of trees on your lot may limit where you can build an ADU. Some cities require a special permit for tree removal as part of an ADU project, or don’t allow tree removal at all.
Power lines can also pose an obstacle: ADUs that are less than 5-6 feet from power lines require approval for an encroachment permit from your electric utility. In the City of Los Angeles, the L.A. Department of Water and Power has to approve ADU projects built less than 10 feet from its equipment or an easement. These reviews add more time to the permitting process.
Finally, your city planning department may require you to remove unpermitted structures from your property (or get them permitted) before your ADU permit is approved.
We encourage homeowners to work with an architect or a design-build general contractor who’s experienced in navigating your city’s regulations, and who’s well-equipped to design a project that avoids potential constraints and pitfalls. Revival Homes has a pre-vetted network of design-build general contractors who specialize in ADU projects and can partner with you throughout your process.
5. Create your ADU vision
Once you have a project goal in mind, a budget, a financing plan, and a firm grasp on potential planning constraints, you get to embark on the fun part of the ADU process — designing your ideal project!
At this stage, we recommend sitting down with your “decision making team” (anyone who has a stake in the project — whether that’s your family, friends, or an investor) and brainstorming a list of features you’d like to have in your completed ADU. These could include accessibility features for aging relatives, energy-efficient add-ons like solar panels or a heat pump, or design elements like countertops, tiles, windows, and natural lighting.
From here, we recommend categorizing your feature list into “must-have”, “nice-to-have”, and “could pass on”. This will help your designer understand your priorities and design a project that meets as many of your feature goals as possible, while staying on budget.
Ready to get started?
Once you’ve taken these 5 steps, you’re ready to get financing and meet design-build general contractors. The Revival Homes team is here to provide you with expert project advice, financing options, and top ADU builders. Contact us today to schedule your FREE, no-obligation project consultation.
