Accessory Dwelling Units: Do Your Homework First!

The housing crisis, especially in California, has worsened over the past decade.  There is a report that states California is short three million housing units. This accounts for the additional pressure on home and rent prices.  To alleviate this disparity some cities are reducing the red tape required to build these attached or detached structures on an existing residence. This type of building (ADU) might be called a granny flat, backyard home, casitas, or in-law suite. 

If, as a homeowner, you are considering this type of addition, it is imperative that you do your homework before embarking on this investment.  Each city employs different ordinances and regulations. Don’t depend on the city’s website to inform you regarding the most up-to-date information because it is changing so quickly. 

With this warning in mind, it is best to run your design plans through your city’s planning department before you begin your project.  Although ADUs are small, generally 400-1000 square feet, the cost to build them can be astronomical. Why? Because they include the two most expensive rooms in the house: a kitchen and a bathroom.  Check out size restrictions, set-back requirements, and zoning issues that could sabotage or change the scope of your project.

There may be restrictions on who your renter can/will be.  There is pending California legislation that will affect whether there is an owner-occupancy requirement.  There may also be restrictions in certain municipalities regarding vacation and short-term rentals. Some cities are restricting them or prohibiting them entirely. 

As if all the above is not daunting enough, you must still deal with the utilities.  They have been known to grind more than one project to a halt. Don’t forget to ask about utility incentives or rebates for energy efficiency upgrades.

Bottom line:  Expect the unexpected.  Rules are changing and timelines are typically longer than planned.  Take the time to do the research required to mitigate your risk and put you in the best position to be successful.

And for those who need additional financing to build an ADU, you will want to contact a licensed and trusted Lender.  In fact, you may want to check out a few different types of lenders as some offer different programs with different terms & rates.  Find the best one that fits your needs, to execute your expansion!

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Best, Forest – The Guy in the White Hat
Hard Money Broker and Co-Owner of family owned and operated Sun Pacific Mortgage & Real Estate, serving all of California since 1988! 707-523-2099
CA DRE license #010005559 and NMLS #289456

Note:  Get our financing despite bad credit, difficult to prove income, property a fixer, etc.!  We finance Jumbo loans, Bridge and short-term loans, Owner Occupied purchases and refinances, investment purchases and commercial.

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