How Much Money Do I Need To Build An ADU?

If you’re considering building an ADU on your property, one of the first questions you are probably asking yourself is how much money it’s going to take to make your vision a reality – and that is an important piece of information to want to know. I mean, after all, whether you are looking into an ADU for yourself, family or rental, you should be sure the investment of time, effort, and finances are worth it, right?

The amount of money you will need to build your ADU will vary depending on a lot of factors. Your first step is to speak with an experienced ADU architecture and design firm to get a clear picture of what you can build and know in your mind the purpose and general design you want for your ADU – in other words, work backwards. Know what you want in an ADU, find out what you need and what you can do, take stock of assets you have available to draw on, and then you’ll be able to determine how much money you will need to acquire for your build. If you follow those simple steps, you’ll be well on your way to piecing together the total budget for your ADU project.

Step 1 – Know what you want in an ADU

The cost of your ADU will be greatly affected by its type, size, finishes, etc. It is important to remember that this ADU is YOUR’S. Make sure you establish in your mind the purpose for the ADU you are going to build. Is the ADU for generating long-term rental income? Is it for your aging parents? Your adult children? Extra living space? Home office…? You get the picture. Do you have an ideal size? Ideal location? Want it attached to your home? Detached? What are your biggest concerns? Loss of storage space in exchange for more living space? Loss of a backyard? Loss of a perfect ocean view? Do your best to know what YOU want – the clearer your ideas, the better you set yourself up for success in your project and cost determination.

Step 2 – Find out what you can build

Once you know at least a general idea of what your ideal ADU entails, you will want to speak with an experienced ADU architecture and design firm. A design company will provide you with a clearer picture of what you can build and “pre-build costs” as these costs, not just construction costs, shouldn’t be overlooked when creating your budget. Pre-build costs are designs, site prep, and permits. Oftentimes, experienced ADU architect and design companies offer free phone consultations and, after hearing what you want, can also offer suggestions to better use your space, correct anything that might not jive with building codes, and help avert or eliminate some of the concerns you may be facing. Designers may suggest a more detailed feasibility study depending on your needs – these usually come with a relatively minimal cost but are not necessary for everyone. You can check out our blog HERE to know if a feasibility study is helpful for you.

Step 3 – Take stock of assets you have available to draw on

How you finance an ADU will play a role in the final cost. Maybe you have a lot of cash in the bank and would rather get rental income than the measly .06% from your savings account. Maybe your parents are downsizing and are planning to sell their home to pay for the build outright. Maybe, with the incredible market, you have built up equity in your home and want to harness it? There are a lot of financing options (CLICK HERE to check out our blog on financing) and it is important to know your options and the cheapest cost of money for you – this will help your build cost less in the long run and help you establish a budget for what you can afford too.

Step 4 – Determine how much money you will need to acquire for your build.

After talking with a design firm, you’ll want to put together a general estimate of how much money you have and how much money you’ll need to compile to take your project all the way to completion. By this point, you should have a pretty good idea of what preparation you will need to do for your lot, for your designs, and for your build. From start to finish, ADUs can take over a year to complete. You don’t need all your financial “ducks in a row” to get started. In fact, you probably don’t want to fund the most expensive portion – the actual construction – until months down the road from your initial start of design plans. Still, know the costs to plan ahead for.

Here are some costs you’ll consider:

  1. Cost for designs/plans – You should have a pretty good idea of this after talking to an architectural and design firm and receiving a proposal.
  2. Cost for site preparation – Do you need to grade your property, lay a foundation, set up additional utilities? Again, you should have a relatively good idea of what is needed after talking with an architect and possibly being assigned a little homework with your city.
  3. Cost for permits – Your architect/design firm, if they specialize in ADUs, should know the average costs for permits, but you may possibly need to do a little homework with the city as well.
  4. Cost of money – If you are getting a loan, remember you’ll most likely make payments from the time you receive the money. Be sure you account for the timeline of covering costs while your project is in the process; this is why you don’t need all your money upfront and should ideally fund as you go – your biggest cost is going to be construction (materials and labor).
  5. Cost for build/construction – Quality contractors will not give you bids until you have actual plans, or at least preliminary plans in hand for your project so determining the exact cost for construction is near to impossible. However, contractors can usually provide you with price per square foot estimates from the time you start designs with your architect firm giving you a pretty solid idea of the finances you will need for your project build.

Once you have considered your costs, you should be able to gauge how much you’ll be paying for your ADU when all is said and done. Always give your budget a bit of wiggle room for unforeseen costs or timeline adjustments because in construction you will surely encounter something you didn’t plan on. At the end of the day, if something sounds too good to be true, it usually is, so be careful of leaning on the “cheap” side when it comes to your project or when a company you talk with dials in numbers down to the penny with you.

REIG Construction has been a contractor for over a decade serving Southern California. We build ADUs in San Diego and work side by side with expert design firms to make your ADU project as smooth as possible from A to U. On average, clients who build with us pay $190-250 per square foot for their builds and about $250-350 per square foot for the complete project (all-in) when all costs and timelines are considered. We pride ourselves on excellence and transparency. Contact us for free with any questions about your project. We are here to help. (Connect Today)

Are you interested in finding out where to start with your Accessory Dwelling Unit plans? We can help you!