IT DEPENDS! The cost of building an ADU can vary greatly due to all of the variables at play. With that in mind, we all know that money has a huge impact on the decisions we make, and it is important to plan ahead as much as possible when considering a large investment like constructing an ADU. It may be helpful to start with a simple spreadsheet to organize your budget.

If plotted on a curve, the actual cost of ADUs across California would probably have a classic bell shape.  On the low end would be a rare low cost like $50 per sq ft. On the high end might be another rare case of $1000 per sq ft.

Projects in California, the typical cost today lands between $200 and $350 per sq ft. The cost per square foot can be more than 25% higher than that of a single-family home due to a lack of economy of scale. ADUs have similar costs for amenities to a typical house, but they are packed into a much smaller footprint.

Here are some ways cost can be affected for an ADU:

ADU projects can trigger a number of impact fees including school fees, park fees, sewer fees, etc.  California law states that ADUs less than 750 square feet are exempt from impact fees. For larger ADUs, impact fees must be proportionate. Other soft costs can also be affected by the project geometry, location and options.

As you can see, there are many factors that impact costs for ADUs, which is why it’s hard to apply a general cost multiplier to predict your building budget. On the other hand, it is very important to get a good feel for “ballpark budget” costs before making the decision to pursue an ADU. It is important to have a general idea about budget up-front in order to be sure the project will make sense financially before investing money in design.

You can get “ballpark” numbers in several ways:

• Talk to architects and contractors who work on ADU’s as what they are seeing in the marketplace.
• Talk to a few contractors who build ADUs in your area
• Check online resources
• Look at new home costs in your area ‘per sq ft’ on real estate listings, and adjust upward for lack of scale.
• If you are interested in luxury amenities, are on a tight schedule, or the project site poses substantial challenges for construction, you should add to your budget.
• For real-life examples and costs, check out our CASE STUDIES

A local AIA architect can help you understand the choices and key decisions to keep your budget on track as the project develops during design, permitting, bidding and construction. They have your best interests at heart and will work hard to help keep your project on-budget.

HIRING A KNOWLEDGEABLE TEAM OF PROFESSIONALS IS A WORTHWHILE INVESTMENT THAT CAN INCREASE THE LIKELIHOOD OF A SUCCESSFUL ON-BUDGET PROJECT.

Costs associated with a building project generally fall into two categories:

SOFT COSTS

Soft costs are services, expenses and fees. Some examples include design, structural engineering, energy code consultants, contractor profit and overhead, planning department review fees, building permit fees, utility and infrastructure impact fees. They can also include insurance costs, temporary protection for your house and yard, weather protection, and more.

HARD COSTS

Hard costs cover materials and labor. Some examples include: lumber, concrete, roofing, windows, subcontractor labor, furnishings, fixtures, appliances, window coverings, and landscaping.  Everything that goes into the final product has an associated dollar sign. As you assemble your project team, your sensitivity to cost fluctuations will be a big influence, and it may also direct you to a particular type of project delivery.  For example, your architect can explain how design-build or a design-selected contractor approach can reduce risk of cost shifts.

A final note about costs: No matter how well you plan, there are always UNEXPECTED COSTS associated with a construction project. It is always recommended that your budget incorporates contingencies to account for these! (10% is common)

Funds for ADUs can come from a variety of sources – sometimes up to three or four for a single project.  Here are some funding options to consider:

• Savings
• Family resources
• Home equity line of credit (HELOC) from a lender, or insurance company
• Special financing (sometimes available from utilities etc to incentivize energy savings, etc)
• Construction loan from a bank
• Rental income
• Cloud financing (internet loans)
• Short term credit (aka credit cards)

The most aggressive financing approaches can involve significant risks, which may be inappropriate for you. Before settling on a financing game plan it’s a good idea to chat with a trusted financial advisor such as your banker, insurance agent, or a financial planner.  It’s safe to assume that not everything will go per plan, so leave yourself some elbow room when it comes to time and money.

Alright, now that we’ve covered the financial stuff, it’s time to talk about DESIGN.