FREQUENTLY ASKED QUESTIONS

 

Financing your ADU

 

How can I finance my ADU?

There are several ways to finance your Accessory Dwelling Unit including cash-out refinance, home equity line of credit, renovation loan, or even a personal loan.

 

What is needed to finance my ADU?

Most loans rely on your credit score, your cash assets, and income.  Depending on the type of loan you get, lenders will also consider the current and/or future value of your property.

 

Are lenders limited to how much they can loan?

Yes. Depending on the type of loan you get and the area you’re in dictates the lending caps that lenders are limited to.

 

Can ADU Geeks help finance ADUs?

Yes. We can help facilitate a personal loan of up to $100,000.  We also have our preferred lenders who can easily finance your ADU project at low rates and often stretch your payments over 30 years!

 

Budgeting for your ADU

 

How much will an ADU cost?

The cost depends on a range of factors including the type of ADU (attached vs detached vs garage conversion), size of ADU (cost per square foot typically is less the larger you build), type of construction (stick-built vs factory-built), existing site conditions, quality of finishes, etc.  The cost is very project-specific.  On average, the cost to build in San Diego is $250 per square foot for a single-story detached or attached ADU.  If you’re converting your garage into an ADU then the cost will most likely be between $190 to $215 per square foot.  It’s important to note that the cost per square foot to build a second story (eg, above-garage ADU or a two-story ADU) is more expensive, usually $300 to $350 per square foot.

 

What costs should I budget for?

When building an ADU you’ll need to budget for both soft costs and hard costs.  Soft costs are all the costs incurred prior to construction like architectural designs, permit fees, development impact fees, school fees, water and/or sewer fees.  These typically range between $10,000 to $20,000.

 

What are the soft costs?  What are the hard costs?

Soft costs are any costs other than the physical costs of construction. These include design fees, building permit fees, impact fees, school fees, water/sewer connection fees. These typically range from $10,000 to $20,000. 

Hard costs are the actual cost of construction including site preparation, demolition, trenching, grading, utilities, foundation, framing, plumbing, electrical, roofing, flooring, finishes, etc.  Depending on your ADU type, hard costs could be $250 per square foot.

 

How do I know how big of an ADU to build?

Start with the end in mind--what will be the ultimate use of your ADU? Someone who is looking to house their elderly parent may have different needs than someone who is building a space to rent out. Even though you may have a huge backyard, don’t go big just because you can.  If your ADU is to house your family then determine how many bedrooms and bathrooms are needed and build to that need.  If, however, your ADU is to create monthly cash flow then it’s important to consider the rental market in your area.  More important than square footage, renters pay for amenities.  Build just big enough to have the number of rooms and bathrooms the rental market will pay for.   

Anything less than 300 square feet will allow for a studio ADU. 400 to 600 square feet will allow for a one-bedroom ADU. 700 square feet or larger will allow for an ADU with 2 bedrooms or more.

 

How much rent can I get for an ADU?

There are several factors to consider when it comes to estimating the potential rental income for your ADU.  The quick and easy way is to compare rental units in your area that have the same number of rooms and bathrooms.  We are used to seeing rental amounts ranging from $1,200 to $2,500 per month depending on amenities, size and location. 

 

What is cash flow?  

Cash flow is your remaining income after expenses. For most people, this will be your rental income from the ADU less than the monthly financing payment. 

 

How can I calculate my Return on Investment?

The easiest way to calculate the Return On Investment (ROI) with your ADU is Net profit divided by the total cost of your ADU.  Your net profit is the amount of money you have after paying any/all expenses (mortgage payment, maintenance, etc).  The total cost of your ADU is the soft costs plus hard costs (and financing costs if applicable).

 

Are ADU permit fees waived?

Depending on the area you are in certain fees may be waived.  San Diego County, as an example, is currently waiving building permit fees for ADUs.

 

Can ADU Geeks help me budget for my ADU project?

Yes, ADU Geeks can help you budget for your ADU project.  Things to consider when planning financially for your ADU are: design fees, permit fees, cost of construction, type of financing, and the logistics/timing of the financing becoming available during your ADU project.

 

Designing your ADU

 

Do I need an architect?

No. ADUs do not require architects.  In California structures that are not taller than two stories are allowed to be designed by a draftsperson.  Technically, you yourself could design the blueprints necessary to obtain building permits--however, we don’t recommend doing this alone.  

 

It’s important to note that in rare cases HOAs may require a licensed architect to sign off on residential projects.

 

What's the difference between an architect and a draftsman? 

An architect and draftsperson vary in many ways.  Architects often have 5-7 years of formal education and years of experience.  They are visionaries who can provide a level of detail that the average draftsperson cannot.  However, this experience does come at a cost.  Architects usually charge a minimum of $7,500 to $10,000 for ADU drawings.  We’ll be the first to say that it’s true, you do get what you pay for.  However, we’ll also say there’s nothing so technical about an ADU that requires an architect.  

A draftsperson can utilize CADD to take your vision and draw necessary blueprints that meet the requirements to obtain a building permit.  For all ADU projects, a draftsperson is more than qualified to complete the drawings as needed for your ADU project.  On average, a draftsperson will charge $4,500 to $6,000. 

 

How long does it take to complete a set of plans?

It takes six weeks to draw a complete set of ADU plans detailed enough to obtain your building permit.  Your plans will include multiple pages.  At a minimum, there will be a site plan, floor plan, elevations, Title 24, electrical plan, foundation plan, framing plan, and roof plan.  It’s not always required but your plans may also need structural engineering calculations.

 

Can we use the preapproved plans on my county/city's website?

Absolutely.  However, those pre-approved plans are only the 70% solution to your ADU needs.  Like a fingerprint, every single property is unique in its own ways.  So there is still much work to be put into your ADU plans in order to utilize those pre-approved plans.  Read the fine print, the county/city even acknowledges that there is still much more detail to include and those pre-approved plans by themselves are not enough to obtain a building permit for your ADU.

 

What is a stick-built ADU?  What is a prefab ADU?

A stick-built ADU is simply one that is built completely on-site with materials that are brought in.  It does not necessarily mean the ADU is built with sticks.

With a pre-fabricated ADU, the structure itself is built offsite then shipped to your address. This means very little construction is actually done on your property--much less mess.  The only construction that is actually done onsite is trenching, utilities, foundation, and then install and finishings. 

 

What are the pros & cons of a stick-built ADU vs. a prefab ADU?

A stick-built ADU has the flexibility to build whatever size and shape you want. It usually has a higher resale value as well. The downside is it usually takes longer to build and is more costly than a prefab ADU.

 

The prefab units are more affordable and faster to build, but you are limited in size and shape in most cases.  The resale value is not as great as a stick-built ADU. 

 

Do I have to have solar?  If so, can I use the solar panels already on my main home?

Contrary to what most people are saying about solar and ADUs, there is no specific rule that says ADUs have to have solar.  However, there is a Title 24 requirement that mandates all new construction in CA requires solar.  That said junior ADUs, attached ADUs, and garage-converted ADUs do not require solar.  Detached ADUs and above-garage ADUs, however, do require solar power.  ADU geeks can help you determine the solar requirements for your ADU project.

What are my ADU options?

There are many factors that limit what you can and cannot do on your property when it comes to ADUs.  Unfortunately, local jurisdictions and their ordinances are not completely aligned with the ADU rules and regulations prescribed by California.  As a general rule, you can have a detached ADU up to 1,200 square feet, an attached ADU that is not bigger than 50% of the existing home, a garage-converted ADU, a second-story ADU, or a basement ADU.  We highly recommend you get a feasibility study done before jumping into an ADU project--ADU Geeks can help you with this, give us a call or make an appointment.

 

Can ADU Geeks design my ADU?

Yes. ADU Geeks can design your ADU any way you would like (as long as it meets the zoning requirements).  Our design team consists of draftsmen and architects.  Combined, they have over 30 years of experience which is more than enough to help you with your ADU project.  

We also have repurposed storage containers that are already permitted by the state of California.  Give us a call for more details (855) 999-GEEK.

 

Building your ADU

 

Can I build the ADU myself?

Yes, you can absolutely build your own ADU.  Building yourself is a great way to keep your project expenses down.  We can design the necessary plans and help you obtain the required building permits.  After that you can definitely build your ADU.  The county/city will see this project as an ‘owner builder’ project but you’ll need to carry the necessary insurance and workers' compensation throughout the construction phase.

 

Can I use my own subcontractors?

You may certainly use your own subcontractors where appropriate.  Just keep in mind that the General Contractor cannot warranty anything that he/she did not do.  Also when it comes to construction, oftentimes ‘cheaper’ is actually more expensive in the long run.

 

How long does it take to build an ADU?  

Every ADU project is different, but the average build time for an ADU is between 9-16 weeks.  There are many trades involved with constructing an ADU.  Additionally, the county/city has to perform inspections at various stages of the construction phase which contributes to the lengthy timeline.

 

What's the warranty on my ADU?

Your stick-built ADU will be guaranteed for 10 years on average.

 

Can ADU Geeks build my ADU?

Our preferred General Contractors are fully vetted.  They’re licensed, insured, and bonded with a long record of building residential homes.  We’d love the opportunity to build your ADU so give us a call!

 

Can I use a repurposed storage container as an ADU?

Yes. We even have several designs that are already permitted at the state level.  Ask us about our state-approved ADU container modules.

 

Leasing your ADU

How much rent can I get for my ADU?

The area your ADU is located plays a large part in how much rent you can charge your ADU.  There are many websites available to you to search for the rental market in your local area.  Knowing this information upfront is probably the most important factor as it will set the budget for your ADU project.  Give us a call and let us help you set the right budget for your ADU.

 

Taxes and your ADU

 

Will my ADU trigger a tax assessment on my property?

Your ADU will be assessed for tax purposes, yes.  You ADU will not trigger a reassessed value on your house.  In the end, your property will have a mixed tax assessment. 

 

How much will the new taxes be?

Generally, property taxes are approximately 1%.  So if your ADU is valued by the tax assessor at $120,000 then the property taxes is $1,200.   If you spread that over the year then your property tax is only $100 per month.  As you can see, property taxes should never be the reason you do or don’t build your ADU.

 

Can I expense or depreciate my ADU investment?

You can depreciate the cost of the ADU over 27.5 years if you rent it out.  Currently, 100% bonus depreciation is offered to all personal property and land improvement assets.  You can not depreciate the value of the land your ADU is built on.  In order to accelerate your depreciation you’ll want to get a certified cost segregation study done *Note: do not rely on any computer-generated cost segregation report produced without an in-person physical inspection.  ADU Geeks can help you with the required cost segregation study to accelerate your ADU depreciation.

 

What is a cost segregation study?

As it relates to your ADU, a  cost segregation study is a process in which every tangible part of your ADU is separated into categories by a certified cost segregation engineer.  Without the cost segregation study, you can depreciate the total cost of your ADU over 27.5 years beginning the day you put your ADU into service.  The IRS understands that most things within your ADU will not last 27.5 years so they allow us to categorize them into its proper useful-life categories (5, 7, 15, or 27.5 years).  The benefit of accelerating your depreciation is to create a larger expense which you can potentially use to offset your business (rental) income.  Luckily, the IRS is giving us all a bonus by allowing us to expense 100% of all assets categorized in those 5, 7, and 15-year buckets. ADU Geeks can help you with the required cost segregation study to accelerate your ADU depreciation.

 

Can ADU Geeks do the cost segregation study required to accelerate the depreciation on my ADU?

Yes, we absolutely can.  There are a lot of ADU companies out there but none of them can perform a certified cost segregation study.  Our founder has a Master's degree in Taxation from the University of San Diego and served many years with Ernst & Young as a Tax CPA.  Cost segregation studies are not the right tax strategy for everybody, give us a call and let us help you make that determination.  

 

Miscellaneous

 

I already have my plans.  Can you help me get permits?

Yes. We will navigate the permit process with your local municipality.

 

I already have my own General Contractor, will you help me design the ADU?

Yes. We will take your ideas and create a complete set of blueprints. 

 

Can you handle all phases of an ADU project (design, permits, build, leasing, financing)?

Yes. We do it all!

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