How to Build an ADU in the Bay Area
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- Опубліковано 8 лип 2024
- If you live in the Bay Area, have you looked into how to build an ADU, guest house or in-law quarters? After researching accessory dwelling units in my area (San Jose, CA) I tracked the entire process and cost to build an ADU. Here is what I'll cover in this video:
0:00 Intro
1:08 My Reason For Doing It
2:27 Steps in the Process
7:49 How Long it Took
7:58 The Cost to Build
11:53 How I Paid For It
REASONS FOR BUILDING AN ADU
I saw this as a good investment opportunity. The Bay Area has lad a lack of available housing for quite some time. This has really driven up property values and rents. While the rents you can get are high, the expense of buying a property can make it difficult to invest here.
Other areas are more affordable, but don't demand the same rents as the Bay Area. I know areas where friends/clients have bought and have positive cashflow (Columbus, OH, El Paso, TX) but then you better trust your property manager when you can’t often check on the property yourself.
Cities are making it easier to build because of the need for affordable housing in the Bay Area (or just housing of any kind). They have relaxed setback requirements and made same-day permit approval possible.
STEPS IN THE PROCESS
I first spoke to a friend and colleague who had built an ADU with GoldBar Builders and he was very happy with the result. I saw what he had built, liked the quality and layout, and thought it would fit well on my lot.
When the time came, I did a site walk with Greg Popovich, the owner of Goldbar Builders. We discussed size, using the existing structure (I had a finished detached garage in back), or building new. After discussing what was involved, I understood that building new was definitely the best way to go.
Up front, Greg explained that the construction process was fairly quick. The holdup would be with the planning and building departments. Here are the dates for each important stage in the process:
Sept, 2021. Signed the contract and paid deposit
Nov 2021. Plans and initial permits and city review, waiting in queue
Feb 2022. Approval of plans and waiting to start
March 12, 2022. Garage demo’d
March 22, foundation area dug and trenched for plumbing/electrical
March 31, foundation poured and framing going up
April, plumbing and electrical
May 6, drywall
Mid June, stucco done, interior nearly complete (cabinets, counter tops, bathroom fixtures, shower,
Aug 8, made final payment, final approval waiting on solar
Sept, solar installed and officially turned on 10/11/22 with all permits finaled
HOW LONG IT TOOK
The construction itself lasted less than 5 months. The total process, start to finish, was 13 months, but it would have been 10 months if I had gotten the solar done sooner. Both Goldbar builders and SunPower solar did great work and communicated well.
COST TO BUILD
The total cost to build, including plans, permits, materials, labor and solar was $253,562. The 2.55kW solar panel system was just under $11,000 and allowed for a 26% credit toward income taxes for installing.
PAYING/FINANCING
Knowing the cost would be around $250k, we considered the best way to pay for the project.
My first thought was a HELOC (home equity line of credit), since we had a lot of equity in our home. I also considered a construction loan. But a lender I use often recommended a cash-out refinance.
We refinanced from 4.25% to 2.75% for a 30 year fixed mortgage, and pulled $185k out to mostly finance the project. This allowed us to keep our monthly mortgage payments low, and still leverage the equity in our home for an investment opportunity.
Please LIKE, SUBSCRIBE, and REACH OUT if you're interested in this and want the contact info for the vendors I used.
Michael Majchrowicz
Coldwell Banker Realty
linktr.ee/michaelmrealestate
@michaelmrealestate IG, FB, TikTok,
Thank you. I'm building ADU in SJ right now! We are waiting for permit approval. Great info. Thanks again.
Glad this was helpful!
This is great. Basically getting a licensed contractor to manage everything for the start. One thing I wanted to know was, what did it get appraised for ARV? I’m looking to build ADU in the Bay Area also. And how many Sq Ft was yours
Mine is just under 500 ft.². I didn’t have an official appraisal, but seeing other properties near me sell with ADU, I think it added about $300k. So I wouldn’t build one as a value add, necessarily.
Thanks for the info, super insightful as well as your thought process. I feel you on the not making the maximum possible on rent for the peace of mind.... If you dont mind sharing, maybe I missed it in the video, but what is the sqft of your lot and the sqft of the main house?
Thank you! The adu is just under 500sqft and the main house is just under 1500sqft
San Francisco requires a separate electric meter and does not allow the ADU for AirBnB.
Awesome. I am doing a garage Jr. ADU for my parents, and I am also thinking about doing a stand-alone ADU in the backyard.
Solar isn’t required in contra costa where I’m at I think but it so vague online that I don’t know where to even start
The fist step is to start with and architect. They will tell you what is your maximum size or an ADU you can build. Right now I belive you only need to be 4 ft a way from your property lines. I am a General Contractor with Civil engineering background and have worked in multiple ADu projects with getting permits and managing contractors.
How many Aluminum there is