There are a lot of reasons why now is a wonderful time to build a granny flat, or accessory dwelling unit. Let’s explore the top four.
#1. Laws are Changing
The California Senate passed a state-wide granny flat law in January of 2017. The new law, Government Code 65852.2, deregulates all prior accessory dwelling unit restrictions and opens up development for anyone to build a second rentable unit on a single-family property.
This means that any property zoned for a single-family and that meets local ordinances can be converted into a duplex.
Furthermore, cities like Portland and San Diego waived their development and impact fees (DIF) making the permitting process cheaper and less restrictive. As more cities struggle to maintain a healthy inventory of single-family homes at affordable prices, you’ll see legislation change to support the development of accessory dwelling units.
If you’re curious about the laws in your city, reach out to Maxable and we can help you navigate the process.
#2. Turn 100K into 1.4 Million
With rents in cities like San Francisco, San Diego, LA, Portland, and Austin at an all-time high, homeowners must think of savvy ways to maximize their properties. Monthly rental income can give families the flexibility to travel, save for retirement, or put a child through college.
While there’s a substantial upfront cost to building a granny flat, the long-term return on investment almost always outweighs the initial price tag. A stand-alone unit that costs $100,000 upfront can bring $1.4 million in value over a 30-year period.
So is it worth the investment? Yes, especially if you plan to own the home long-term.
Scenario: We’re converting a two car garage in Los Angeles into a 550 square foot studio unit that will rent for $1800. We expect the permit, design, and construction fees to total $100,000. We can afford to put $25,000 down and borrow the remaining $75,000 with a construction loan with an APR of 2.6% over five-years. If we plug this into our calculator we’ll break even in seven-years.
Which means that in seven years we’ll have made enough in rental income to have completely paid off our loan and recouped our initial investment. Everything from here out is profit. So what does that look like? Below you’ll see what we stand to gain in the following years.
In 10 years, you can expect to have grossed enough to pay for two college tuition. In 30 years, you will enjoy a return of $1,402,000. That’s a 14x return on your investment.
#3. Motivation From a Healthy Economy
The HGTV effect brings Hollywood magic straight to your living room, convincing thousands that renovations, development and real estate deals happen over a weekend for the price of some sweat equity.
The reality is a far cry from the tv magic, but with the economy doing well, low mortgage rates, and strong existing home sales, Americans have a lot of motivation and confidence to invest in their properties. In fact, 2017 saw the strongest spending on home construction projects since 1994.
#4. Flexibility
It’s hard to predict what life will throw at you.
A granny flat allows aging family to stay close to home and maintain their privacy. Grandparents can spend more time with their loved ones at meals or help babysit.
Or perhaps, you decide to start your own business and need space to expand and build. A granny flat can be perfect for a home office away from the shuffle of the main house.
Some people just want a comfortable place for family or friends to stay for longer periods of time.
Often a family’s needs for their granny flat change over the years.
What’s your motivation for building a granny flat? Comment below!
Plan, hire, and manage your ADU project with Maxable.
At Maxable, we believe that building an ADU should be fun and exciting. You shouldn’t have to be the one to deal with confusing obstacles like permitting snafus or ever-changing regulations. We’ll be by your side every step of the way and connect you to experienced designers and general contractors in your area to make sure your project goes as smoothly as possible.
Leave the headaches to us! Check your address and see what Maxable can do for your home during a free ADU Planning Call.
