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With rising real estate costs, ADUs are becoming more popular than ever. They are an excellent value proposition for current and prospective homeowners. 

What is an ADU?

Also known as an in-law or mother-in-law unit, secondary dwelling unit, granny flat, backyard apartment, tiny home or she-shed, ADUs are smaller, independent residential dwelling units located on the same lot as a stand-alone (i.e., detached) single-family home.

How much do they cost?

The average cost of an ADU can come in anywhere between $100,000 and $300,000 - much less than the cost of a single-family home, but with all of the same amenities.

ADUs got a major boost recently when California governor Gavin Newsom legalized duplexes statewide, allowing people to subdivide single-family lots, according to The New York Times.

This means that anyone in the state of California can now build an ADU on their property.

Why is this important? ADUs can be a perfect housing solution for older children, aging parents, or the need for more space without being forced to move.

College-aged or mid-20s children are facing inflated rent and real estate prices, and an ADU can provide the independence and privacy of moving out without the hefty price tag.

Aging parents who would prefer to age in place rather than enter a senior living community can move into an ADU to be close to family and still have their own space.

So whether your new ADU will be grandma’s house, a home office, or the teen hangout spot - in this guide, we’ll introduce you to price ranges for different types of ADUs, the process of obtaining a permit, and additional costs you need to be aware of.

The Cost Of Different Types of ADUs

Attached

An attached ADU looks like an addition, as it is connected to the home, but it contains a kitchen, bathroom and everything else a home would need.

Here are the requirements for an attached ADU:

  • May be built up to 1200 square feet in some cases
  • ADUs may be up to 16 feet in height
  • Can never be more than 50% of the primary dwelling size except to allow for a minimum size of 800 square feet
  • Connects to an existing house, typically through the construction of an addition along the home’s side or rear
  • Must have second entrance located on the exterior of the ADU
  • Needs shared wall on the interior

Real Cost Examples:

CostSq footageCost per Sq Ft
$106,000500204
$126,000361349
$157,000820191
$167,000660253
$216,000439492

(According to buildinganadu.com)

Detached

A detached ADU is the opposite of an attached ADU - it does not share a wall with the main dwelling and is fully separate. Many people might prefer a detached ADU because it offers more privacy for both parties.

Detached ADUs are especially attractive for anyone looking to rent out their ADU as an Airbnb and want to give their guests some distance.

Because detached ADUs are being constructed from the ground up, they are generally more expensive than attached ADUs.

Here are the requirements for a detached ADU:

  • Cannot be sold as a separate property
  • Some jurisdictions will have “setback” requirements for how close the ADU can be to the property line
  • Some jurisdictions will have minimum distance requirements between the ADU and primary dwelling unit or the garage

Real Cost Examples:

CostSq footageCost per Sq Ft
$160,000515310
$202,000607332
$160,000731219
$265,000750353
$285,000750380

Interior (upper level)

An interior (upper level) ADU is what’s commonly known as a duplex. It’s a portion of an existing home— an entire floor, part of a floor, or an attic or basement, that’s partitioned and separate from the other floor. It would only be considered an ADU if it had a separate address, proper permits, and fulfilled all the necessary requirements to make it a living space.

An interior (upper level) ADU might be for you if:

  • You are cost-conscious, because you already have an existing structure in place

  • You’d like an ADU with two floors

  • You have the space for a:

    • Separate entrance
    • A living space
    • Any appliances required

Cost:

It depends. The cost of converting a single-family home into a duplex will vary heavily depending on what you already have in your home. If you already have a separate second-floor entrance, for example, or an HVAC, or a kitchen up there - it will be significantly cheaper than if you’re building all of this from scratch.

Create a list of requirements and get an estimate from a contractor to get a better idea of the cost.

Interior (lower level)

This type of ADU is similar to the previous, except it’s the conversion of a home’s existing basement into a private, separate living space.

If you have a separate basement entrance to your home, consider converting your basement into an ADU.

Real Cost Examples:

CostSq footageCost per Sq Ft
$100,000799125
$150,000610246
$150,000659227
$261,000795328
$380,000800475

Above Garage

An above garage ADU means adding a second story ADU above your garage, or building a new structure for both people and cars.

If you already have a garage, this is a great option because it doesn’t require any extra square footage for construction - you’re just building up.

Real Cost Examples:

CostSq footageCost per Sq Ft
$160,000932171
$195,000790171
$225,0001250180
$226,000657344
$440,0001644267

Garage Conversion

However, if you’re not really utilizing your garage, you can also insulate your garage and turn that space into a small residence. It can be difficult to encompass everything you need for a living space within a garage area, but this can be a cost-effective way to create an ADU.

Real Cost Examples:

CostSq footageCost per Sq Ft
$80,000576138
$110,000325338
$150,000370405

Additional Cost Factors 

Besides the actual labor and materials, there are other costs you need to keep in mind with an ADU.

Permits & Blueprints

Since you are building on an existing primary residence, you will need approval before you can begin construction on your new ADU. This will require building permit approvals (your local gov’t municipality has info on how to begin this process) and the cost of developing plans to take to contractors. 

To get a permit, you’ll need planning and blueprints. Normally, your contractor/builder/designer will submit, or at least help with submitting, your planning and blueprints to the local government.

The cost for ADU permits varies but can range anywhere from $450 to $14,000 depending on your location.

The cost for custom plans/designs from an architect and or engineer range anywhere from $8,000 to $13,000.

Utility Upgrades 

Depending on the site, the current electrical supply system may be unable to handle the increased electrical demands of an ADU - which means you’ll need to upgrade. Make sure to discuss this with a contractor and factor it into decision-making.

Site/Ground Work

Depending on the type of ADU, you may need to expand the foundation of your primary residence, or create a new foundation for a standalone ADU. Any sort of stand-alone ADU or addition will require a new foundation, where builders will have to dig into the ground. Depending on what exists below the surface (rocks, piping, etc. this may add onto the cost).

Interior Finishes & Materials 

Are you planning on luxury or custom materials and finishes, or more mid-range fixtures? While sometimes finishes and materials are the last thing you decide on for your ADU, they can drastically change the budget - and you’ll want to go into the project knowing various estimates for your choices so you aren’t shocked by the final price tag.

Does Adding an ADU Increase the Value of Your Property & Is It a Good Investment?

There are many reasons why you might want to develop an ADU on your property, with one of these being an increase in the value of your property.

In fact, the cost of construction can often seem small in comparison to the added value that it can bring.

A guide by Rost Architects shares a great example, indicating that: “In Southern California, if you were to construct an ADU for $250-300K, the resale value of the property could increase by up to roughly $600K depending on the local market. If it takes 12-14 months to permit and build the ADU, this would be a great return on investment.”

This is a key piece of information to securing financing, especially given that some lending products are based on your home’s future value.

An NBC Bay Area article from earlier this year comments that: “Long term, an ADU is a good investment. The matter is: can you come up with the two, three, or even four-hundred-thousand dollars to do it?”

It’s for this reason that choosing the right way to finance your ADU is so important.

An ADU can, and will, increase the value of your home, so finding the right financing option can help to make this addition a reality.

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