Determining ADU Design

[Ryan Russel]

I am lucky to own a property in the Bay Area with plenty of land to take advantage fo the new ADU laws to build a rental property in my backyard. Funding is secured, but I'm still at a loss for what to build for the best ROI. My city has steep permitting/impact fee increases after 750sq ft, so I'm not sure if I should go for a 1BR 749sq ft, 2BR 749sq ft, or pay the hefty fees and jump up to 1,000+sq ft with 2BR.

If you have experience building an ADU, I would love to understand your thought process on the design you chose and what you recommend to someone with a blank canvas and plenty of space for up to about 1,200sq ft.

The second sticking point is how to determine who to designs the ADU. On one had, there is a cheap design firm that can knock out a simple ADU blueprints for about $11k, whereas there is a phenomenal Architect who will hand-hold and manage the whole process for around $30k. I know going with the cheapest is never a good idea, but is an Architect really worth 3x for what seems to be a pretty straightforward project?

I'm a bit lost on what route to take and appreciate any wisdom you may have. Thank you in advance!

[Dan H.]

I would max the ADU size (1200'?) because:

• You only get one.
• The land is so valuable, leverage it to the max especially if you have enough to easily accommodate 1200'.
• It is not about the initial investment amount, but the total return.  Leveraged debt with a single shot will return more for a larger investment.
• In my market, 1 BR/studio have by far the fastest tenant turn over.  2 BR is far better (slower turn over) than 1 BR.  3 BR is better than 2 BR.   But after 3 BR the numbers start to be very similar in terms of turn over but at some point become harder to place a tenant.  I see no way of fitting 3 BR in <750'.

if I were to do a new construction ADU (not a garage conversion, etc.), I would stay below 750' only if I could not go much higher than 750'. For example, if the max size I could fit was 850', I may be tempted to save the impact fees and only build to the 750' limit. Otherwise I will build as big as I can.

As to your other question, sometimes you get what you pay for but not always.  I suspect you will need to research the options and pick the approach that is best for you.

Good luck and stay healthy