Most people are surprised at the cost to build an ADU, or accessory dwelling unit. I come across articles all the time misstating the actual cost of construction. So let’s clear up the inconsistencies.

Download our free tool kit, which includes a free cost estimator, to give you a better idea what you will pay for your ADU.

Cost Per Square Foot is Deceiving

ADUs cost more per square foot than typical single-family homes for several reasons.

  1. There are fixed costs associated with permitting and design fees.
  2. Margins are smaller for general contractors, subs, and architects.
  3. ADUs require new foundations, new walls, plumbing, electric, heating and cooling, and a separate roof, just like a regular house.
  4. There are no economies of scale. You know how you get a significant discount if you buy groceries from Costco because you’re buying in bulk? Building a tiny house is the opposite.
  5. ADUs still require a bathroom and kitchen, which are ‘expensive’ square footage.
  6. Because the units are smaller the cost per square foot isn’t offset by extra bedrooms, large living rooms, and hallways you find in larger homes. This space is considered ‘cheaper’ square footage and brings the average cost per square foot down.

Cost to Build a Granny Flat San Diego

The cost per square foot of an ADU can differ dramatically depending on the size and structural form
  • The larger the unit, the cheaper your cost per square foot will be. Detached units can be up to 1,200 square feet or larger if you’re converting an existing space. A 1,200 square foot unit will probably be cheaper per square foot to build than a 450 square foot unit.
  • Building up is more expensive. Most people instinctively want to build an accessory dwelling unit above their garage. If your budget is tight, stick to single-story. Building up will add ~$50/square foot to your project.
  • A garage conversion is the cheapest way to convert space into an ADU. If your budget is modest keep the existing envelope of the garage, meaning don’t expand on the current footprint. This will add extra cost.

Cost to Build a Granny Flat San Diego

Region Will Impact Your Final Cost

If you live in the San Diego, your final cost is going to greatly differ from the final cost for a project in the Bay Area. We’ve broken down everything you need to know below.

San Diego

Los Angeles

Bay Area

Different Build Types

FAQs

How to Start Your ADU

Cost Per Square Foot to Build an ADU in San Diego

Most people’s units cost between $300-$400 a square foot.

Wow. The cost to build an ADU in San Diego seems expensive.

The price tag on an accessory dwelling unit can scare people, but here’s a smart way to assess your investment.

  • Look up the median value per square foot in your neighborhood. For example, in North Park, the median home sells for $687 per square foot.
  • Let’s say you build a 550 square foot unit in North Park for $365 a square foot.
  • You may spend $200,750 on your project, but you’re gaining close to $377,850 in value.
  • That means you’re adding more than 177K in equity to your property. Plus, that doesn’t take into account the added value passive rental income brings.
  • In North Park, a 1-bedroom apartment can rent for up to $1800 a month.
  • (Check out the video above. This is a real example!)

Suddenly, the $192,000 price tag seems a lot more manageable, even savvy.

Cost Per Square Foot to Build an ADU in Los Angeles

Most people’s units cost between $300-$400 a square foot.

Los Angeles ADU prices are fairly similar to the prices in San Diego.

The price tag on an accessory dwelling unit can scare people, but here’s a smart way to assess your investment.

  • Look up the median value per square foot in your neighborhood. For example, in the Echo Park neighborhood the median home sells for $771 per square foot.
  • Let’s say you build a 550 square foot unit in Echo Park for $365 a square foot.
  • You may spend $200,750 on your project, but you’re gaining about $424,050 in value.
  • That means you’re adding about $223K in equity to your property. And it doesn’t take into account the added value passive rental income brings.
  • In Echo Park, a 1-bedroom apartment will rent for a minimum of $2500 a month. Many rent for far more.

Cost to Build a Granny Flat San Diego

Cost Per Square Foot to Build an ADU in the Bay Area

Most people’s units cost between $400 to $600 per square foot to build.

The price tag on an accessory dwelling unit can scare people, but here’s a smart way to assess your investment.

  • Look up the median value per square foot in your neighborhood. The median home in San Jose sells for about $735 per square foot.
  • Let’s say you want to build a 750 square foot accessory dwelling unit in your neighborhood for $450 a square foot.
  • You’re going to spend about $337,500, but you’re gaining $551,250 in value by adding to your home.
  • That means you’re adding about $213K in equity to your property. Better yet, that still doesn’t consider the added value passive rental income brings.
  • In San Jose, a 1-bedroom apartment will rent for about $2500 a month. Many rent for more.

Not so scary anymore, is it?

Many Ways to Build an ADU

cost to build an ADU

Credit: Irvine Company Apartments

Most people are familiar with the conventional “constructed on-site” way of building an ADU, more formally known as a conventional stick framing. However, what most people don’t know is that there are actually two more ways that you can add an ADU to your property:

  1. Prefab
  2. Panelized Modular

The cost of a project will depend dramatically on the construction method that you use, which is why we highly recommend you look into these options.

Prefab

When you’re driving down a highway, you’ve probably come across what looks like a house being hauled down the road by a big rig with a “wide load” sign strapped to its back. That’s a prefab.

A prefab ADU unit is built in a factory and is then hauled to your property where it can be set up in just a couple of days. This option is great if you don’t mind being flexible with the design and layout.

Prefabs typically cost about the same as a stick-built. Click here for a complete cost breakdown of prefabs.

Panelized Modular

The final method is one of our favorites, but not a lot of people are familiar with it.

Panelized modular is where the framing package for your ADU is built offsite and shipped to the job site. Unlike prefabs, however, this type of construction is completely customizable.

cost to build an adu

Credit: Kamal Hyder of SFBayADU

You’re pretty limited with prefab designs and modifications to the standard designs of the factory can be costly, but the great thing about panelized modular is that the entire structure and layout can be designed and customized to your liking.

The price for these is similar to prefabs as well.

cost to build an adu

Credit: Kamal Hyder of SFBayADU

Finally, panelized modular are appraised much higher than prefabs if you decide to sell your property.

If you’re looking for contractors that specialize in panelized modular construction, Maxable can connect you to contractors in San Jose or the Bay area.

Additionally, contractors will sometimes draft up premade plans for ADUs at a discounted price. For example, instead of paying $15,000 on an ADU plan from scratch, you can purchase one of these for just $5,000 and make modifications to it to fit your needs.

Check your address to get connected to some of these contractors too!

Are ADUs a Good Investment?

Keep in mind that ADUs are a long-term investment. If you really want to see a huge return, you should be prepared to keep your property for several years.

We’ve calculated that even a $100,000 garage conversion, maintained over a 30-year period can bring 1.5 to 2 million dollars in value between grossed rental income and property value increases. That’s a 15x return on investment.

Maximize Your Investment

If you do decide to build an ADU, build as large as your lot will allow. If you can comfortably fit 800 square feet in your backyard, I recommend our clients to do so.

Why?

The fixed cost.

Relative to what you’re already spending, adding 200 square feet won’t dramatically impact your budget, but it could significantly increase what you can charge for your rental. It could also be the difference between renting to a couple vs. a single-person unit or having a one-bedroom vs. two-bedroom ADU.

The cost of your ADU will also greatly depend on the level of finish you want. If you want standard appliances and finishes, the finishing cost of your unit is going to be dramatically lower than if you’re ordering high-end luxury custom items.

The choice is really yours as to how you want your finished product to look and also plays a large part in how much you’re going to rent out your unit for.

Another way to maximize your ADU’s investment is to create garden spaces. Gardens and outdoor area is a luxury most renters don’t have access to. With California’s fabulous weather, a patio with an outdoor table can feel like a 2nd living room and be used all year long.

This is a very inexpensive space to create but can make your property much more desirable.

For more tips and tricks on ADUs download our free tools or talk to one of our ADU experts.

Does adding an ADU increase property tax?

Adding an ADU does increase your property tax, but the nice thing is that it will not trigger a reassessment of your entire property.

For example, say you bought your home in 1986 and decide to add an ADU to your property, the state will only assess your most recent addition. You’ll pay property taxes for your ADU for the present year while you continue paying the 1986 property taxes for your main home.

This is called a blended assessment.

Does adding an ADU add value to your home?

cost to build an adu

Credit: Valley Inn San Jose

Absolutely!

Not only does an ADU add monetary value to your home, but also keep in mind the added benefits to your lifestyle.

Whether you build one to house an aging family member, rent it out to an individual, or use it as a guest house for visiting friends and family, an ADU has a multitude of uses that will make your life easier.

When the time comes for you to sell your home, the ADU will definitely add resale value in comparison to a home without an ADU.

Can you get a home loan for an ADU?

Yes, in fact, most people will take out a loan to build their ADU.

The most common way is through a home equity line.

A home equity line of credit allows a homeowner to borrow money from a lender where the collateral is the borrower’s equity in his or her house before any improvements are added. Typically, homeowners must have at least 10% equity in their home or 20% if an investment property or second home.

Another option is through a construction loan.

A construction loan evaluates what the future value of the property will be after the project is completed and allows a homeowner to borrow against that amount. A bank will send the plans to an appraiser to have the project and property appraised. Qualification for a construction loan is usually more difficult than getting a credit line or home equity line of credit.

The final type of loan is a Homestyle Renovation loan which will help if you have limited equity in your current property, or are purchasing another property that needs improvements that you can finance it in before the work is started.

The HomeStyle Renovation mortgage provides a convenient and flexible way for borrowers considering home improvements to make repairs and renovations with a first mortgage, rather than a second mortgage, home equity line of credit, or other more costlier methods of financing.

If you’re wondering how much your ADU will cost, you can download the free cost estimator here.

How to Start Your ADU Project

It’s easy to get overwhelmed with all of the regulations, information, permits, and vetting that you have to get through to build your ADU, but Maxable has a proven formula that has worked to help thousands of homeowners kickstart their project.

We make ADUs easy and it’s free!

Our team of experts will evaluate your property and match you with the best designers and general contractors in your area based on your needs and budget. All you have to do is check your address here!