In this article, we will explore the pros and cons of building a new Accessory Dwelling Unit (ADU) in your Property. An ADU can be a great way to generate additional income, create more living space, increase your property’s value, and contribute to addressing the housing crisis. However, there are important factors to consider before deciding to build an ADU.
Key Considerations When Building an ADU
1. What is the purpose of your ADU?
Are you planning to rent it out, use it as a home office, or provide additional living space for a young adult child or guests? Your answers will help guide the design process. Prioritize your needs and design a space that can serve multiple purposes over time without requiring significant remodeling.
2. How big can my ADU be?
The maximum size for an ADU is 1,200 square feet, which can comfortably fit a 2-bedroom, 2-bathroom unit. The smallest ADUs are around 300 square feet, suitable for a studio with a small bathroom and kitchenette.
3. How much does an ADU cost?
The cost of an ADU varies depending on size, quality, complexity of design and construction, and whether you’re converting existing space or building from scratch. The most cost-effective option is often to convert existing space, such as a 2-car garage or a portion of a larger home. A 400-square-foot ADU conversion can start around $130,000, while a new 1,200-square-foot ADU can exceed $500,000, depending on design, finishes, and complexity.
4. Will my ADU be a good return on investment?
In many Los Angeles neighborhoods, real estate prices per square foot exceed construction costs. Adding square footage through an ADU can significantly increase your property’s value. Consult with an experienced general contractor and architect to ensure the design and construction quality align with neighborhood standards and meet your budget. A well-designed and built ADU can potentially double its construction cost in value upon completion and provide a 20%-25% annual return on investment as a rental property.
5. Will the ADU affect my home’s privacy?
Privacy is an important consideration. A well-designed ADU should not compromise your home’s privacy. Incorporate fencing and a separate entrance, especially if you have side yard or alley access, to ensure easy access to the ADU while maintaining a clear separation from the main dwelling.
6. What are the cons of building an ADU in my house?
Building an ADU will reduce your yard space, which might deter future buyers looking for larger and more flexible properties. Additionally, adding living square footage may increase your property taxes.
Conclusion
As a general contractor and real estate investor, I highly recommend adding an ADU if your property can comfortably accommodate it. An ADU is a perfect way to start real estate investing and pave the road to financial freedom. It maximizes the cash flow potential of a property, potentially doubling your income. This can provide additional income for your family, increase your property’s value, and enable you to afford a more expensive home while keeping your previous property as a rental.
If you are interested in learning more about the possibilities for an ADU construction on your property, or if you have any other construction related questions or need for advice, please tap on the bottom below. We are excited to hearing from you!
