Newbie Starting an ADU

[Henrik Moya]

Hi everyone, 

I am a newbie working full time and planning to build an ADU in my primary residence. I work in healthcare and plan for extra cash flow either renting the ADU or doing Air BnB. It can get exhausting working in Healthcare at times and I plan to have the extra cash to have more family time. I am in the planning stages after I got my HELOC funded.

My questions are:

1. I am deciding on an Attached vs Detached. I prefer attached to save most of my backyard. However, an architect advised me to get the property surveyed to see if an attached ADU is feasible or if I can push the fence closer to the side walk but it costs $3000. Is this a normal starting point for anyone building an ADU, to have a survey of the property done? Is that a fair price?

2. How much square per sq ft is the going rate from a contractor for an ADU right now?

3. From start to finish - what is the ballpark cost for an ADU (650-750 sq ft)

Thank you in advance. 

Henrik

[Dan H.]

ADUs can not be used for short term rentals.   

When analyzing the cost of attached versus detached, you should also evaluate the value added, ease of renting, impact to you as an owner occupant.  The detached has a lot of advantages.  

ADU values as set by appraisers are varying significantly. There are some getting valuations similar to duplex, but there are others getting valuations between $40k and $90k. Make sure you understand the value added by the ADU as often the ADU adds far less value than the hands off cost of an ADU addition. If you cannot find comps justifying a valuation, you are at the whim of the appraiser to establish the value and do not be surprised if it comes back far less than the cost of the addition. This implies the initial cash flow often goes to recover the negative position.

As for the cost of your ADU there are too many variables for an accurate forecast including site, finishes, whether at <750 there are no impact fees (the law states there is not, but various school districts have ignored this and so far there have been zero repercussions even with HCD being aware).

In general there seem to be many better investment options than adding an ADU for cash flow. S&P 500 has lifetime return approaching 10%. Many RE syndicators forecast ~20% and have history of out performing forecasts. My BRRRR have consistently hit the infinite ROI. This is just some examples with varying risks and level of efforts. BRRRR require a lot of effort and some skill to achieve the outstanding return. Syndications have risk. S&P has risk but minimized for long term hold.

Good luck