Gain a working understanding of questions to ask, types of costs (hard and soft), and other key considerations before building an Accessory Dwelling Unit (ADU).

Understanding the Soft and Hard Costs of ADU Construction

Today’s housing shortage and high housing costs are driving more homeowners with larger lots or unused living space to consider construction of an Accessory Dwelling Unit, or ADU. If you’re seriously considering an ADU, then this blog may prove a helpful companion in the deliberation and preparation process.

Sometimes referred to (or better known as) an in-law cottage, alley flat, garage conversion, or carriage house, an ADU is separate, yet functional, living space with basic accommodations – a kitchen, bathroom, and bedroom – as well as its own entrance. Such units are becoming more and more popular because they can be used as a rental unit to drive passive income, as convenient accommodations for an aging loved one, or to provide independent living space for adult children who may lack the qualifying credit and/or income to purchase their own home. 

Although your reasons for wanting an ADU may vary, all who are interested in having an ADU built, must consider and address the same basic set of questions regarding construction. 
The right ADU for you can be best determined by compiling your responses to the following 14 key questions. 

Pre-Construction ADU Questions:

1. What are all of the ADU requirements and restrictions set by your local jurisdiction and the state of California, and how might the Addendum to the 2025 ADU Handbook impact you?
2. Will your local zoning ordinances – which dictate where an ADU can be built, its size, height, design, setbacks from property lines, etc. – allow for an ADU to be built at your primary residence address?
3. Provided your residence address is zoned for an ADU, do you have adequate open lot space available for construction of a detached ADU?
4. Considering the total square footage of your primary residence, could any unused interior space be made available for an attached or repurposed ADU (be sure to factor in your attic, basement, and/or garage space)?
5. What accessibility issues will you need to address with your ADU if it is intended as a residence for an aging or disabled loved one or potential renter?
6. Will construction of your attached or converted ADU need to accommodate people living or working in your home during the process and throughout all phases of construction? If this is the case, can you trust your general contractor to respect your need for accommodations?
7. Will you need a geological survey or a soils report for construction of your ADU?
8. Do you plan to engage your own structural engineer and architect to develop and prepare your ADU plans/architectural drawings for review by your city or county; or will you contract with an ADU-savvy licensed general contractor (who may have pre-approved plans that help speed the permitting process) to coordinate and manage the complete ADU project details for you? 
9. Are there any special financing options available to you (in terms of grants or subsidies for which you may be qualified) for dealing with the soft costs of ADU construction?
10. What can you expect in terms of hard costs for your ADU; and what will the milestone-based payment schedule look like?
11. Have you set aside 15-20% of your available budget for contingencies that may arise due to discovery of water intrusion, pests, or other unknowns in your primary residence/home when constructing an attached/converted ADU, or Junior ADU?
12. An ADU/JADU necessitates a permit, so how much time will it take for plan review and permits to be granted prior to construction start?
13. How long will ADU construction take, from start-to-completion, inclusive of final inspections and walk-through?
14. Should any issues arise over the course of the ADU project, are you aware and prepared to take on the responsibility for dealing with such matters, or will your general contractor bear this burden to help ensure the process runs smoothly?

Although tackling this considerable laundry list of essential questions and concerns can prove rather daunting, an experienced, full-service, licensed general contractor can eliminate much of the stress and completely streamline the process. 

Ed Neir Construction has aided many of its clients by providing start-to-finish ADU estimates, plan development, review submission, permit procurement, design solutions, expertise, and contingency plans that delivered excellent results and the optimal ADU for each client.

What Type of ADU Can Be Built?

Whereas an ADU offers private and independent living space on the property of the primary residence, it may be constructed in ways that fall into one of three types:

• Interior or Repurposed ADU: this uses converted space within the primary residence, as with a garage, attic, or basement conversion.
• Attached ADU: this is delivered as an addition to the primary residence.
• Detached ADU: this is a separate standalone dwelling unit.

The ADU type that may be right for you will be dependent upon various factors – such as what your local city or county will allow – together with what your individual vision and budget for your ADU might dictate.

For example, one of our clients wanted to continue to afford her aging father both privacy and independence, yet she also wanted to ensure his safety and well-being. Based upon this client’s stated needs, as well as the requirements of her city, an interior JADU proved to be her best option.

For a client with a larger home on a spacious lot, whose intended use was housing for a newly married adult child (who was not yet financially ready for the costs of a home of his own), a detached ADU proved to be the right choice.

If you’re seeking passive income and have plans to rent out your ADU, then your choice of ADU type will depend on the options available to you per local zoning laws and restrictions, as well as how you envision your life as a landlord. Would you be comfortable converting your garage into an ADU? Or would a detached ADU in your big backyard, with a separate side yard entrance, better suit your needs? 

Reviewing your options is a wise way to begin. Ask for an estimate. Discuss, in detail, all of your ideas and any of your concerns. Explore the various design possibilities. And then, make certain to choose a general contractor with whom you can feel comfortable and who is knowledgeable about such projects. Reaching out to a full-service, licensed general contractor, such as Ed Neir, is a great way to launch your planning effort, while also ensuring that you avoid any gotchas or gaps in your ADU project.

What are the Costs Associated with ADUs?

For an ADU, regardless of type, there are two sets of costs: 

1. Soft Costs: upfront and out-of-pocket costs for plans, permits, surveys, and anything else that may be required by your city or county.
2. Construction (Hard) Costs: site work costs, such as grading, excavation, and any demolition of existing structures; foundation and framing; utilities costs, such as installing or extending electrical, plumbing, and HVAC systems; construction materials and labor costs to install them; final interior finishes, such as paint, flooring, and countertops; along with final exterior considerations involving necessary or desired landscaping, patio, and plants to enhance curb appeal and accommodate adjacent parking.

Prior to December 28, 2023, those who qualified in the state of California, were able to source Grant funds to be reimbursed for their soft costs. Depending on location and financial situation, some homeowners qualified for these helpful finance options.

Construction costs for an ADU will vary as a consequence of factors such as materials availability, supply chain concerns, applicable tariffs, inflation, and the going interest rates as well as common cost fluctuations in labor and materials. 

Typically, an ADU is more costly to build than a single-family home – on the order of $400 to $600 per square foot. The reason for this is simple and reflects the following: 

• An ADU costs more per square foot because there are fixed costs associated with permits and design fees, regardless of the size of the construction project.
• Margins are smaller for general contractors, sub-contractors, and architects, who, as state-licensed professionals, must follow regulatory guidelines. ADU construction is a type of work that requires professional skills and expertise. Per the CSLB, no other type of contractor may pull the needed permits other than a general with a current and active B-1 license.
• ADUs are equivalent to building a new house in that they require everything a home requires: a foundation, walls, windows, doors, plumbing, electricity, heating and cooling, as well as its own roof and entrance.
• The most expensive square footage is the construction of a kitchen and bathroom. In a single-family home, the addition of extra living space in the form of multiple bedrooms, living rooms, dining rooms, hallways, etc., is far cheaper square footage that helps to bring down the total cost per square foot. This is something NOT available in the construction of an ADU, which consists of little more than a kitchen, bathroom, and bedroom.

While the cost of an ADU (per square foot) is usually higher than that of a single-family home, it packs more value into a smaller living space. California homes on the market featuring an ADU, regardless of type, tend to attract more buyers and receive more offers than comparable single-family homes. This is because the ADU offers added living space for loved ones as well as serving as passive income, in the form of monthly rent, for the prospective home buyer.

If you’re ready to explore construction of an ADU, give Ed Neir Construction a call at 707-999-5878 or text 408-368-7162 for a free consultation. Ed is an ADU-savvy, actively licensed general contractor who can help you with every aspect of your project, from start to finish.

Ed Neir, General Contractor
License #: 928715

Before you hire a contractor, read this: Whole House Remodel? Rely on Ed Neir Construction!