Build Your ADU Now!
November 12, 2019
Every time I speak to someone about why there’s so much hype about ADUs, it always comes down to the numbers. I will make this bold claim, “building an ADU is the best, most secure investment you can make today in California.” Lack of awareness is the biggest obstacle. As soon as I explain the process and the benefits, people often respond with some version of, “wow, I can’t afford to wait – I need to build an ADU now!”
Let me give you some numbers to chew on: It costs roughly $250-300/square foot to build a new detached ADU. It can cost much less if you are converting a garage or other space into an ADU. Real estate in San Diego sells for $500/SF or more in most parts of San Diego. Building an ADU can give you instant equity on your property (in many cases).
The cashflow you can earn monthly is much higher than purchasing investment real estate. Assume you build a 2-bedroom ADU for $250,000. If you use financing, your mortgage, taxes and insurance would cost about $1,400/month. A new 2-bedroom apartment rents for at least $2,400 in most places in San Diego. That would mean you would net $1,000 per month. That number only increases as rents steadily increase. Could you use an extra $1,000 in your bank account each month? California has a massive shortage of housing, so this also helps the overall goal of providing places to live for our residents.
Here’s another big benefit: there’s no better way to keep your family close. We’re finding that about 80% of our clients build ADUs to rent them out. The other 20% keep them to help accommodate family. In one scenario, an ADU was built for a client to house her full-time dog sitter!
With the right partners, building an ADU can be a low stress, maybe even fun process! A few words of caution: building an ADU is a big expense and project. If the contractor you choose isn’t spending the time to do a proper bid, you may be upset when change orders come because it was under-bid at the start. Additionally, if a contractor is available to start work right away, that’s a red flag. The construction industry is very busy, and all reputable builders have their schedules booked for the next several weeks. Do your due diligence to pick the right partners and get your ADU built!
Henish Pulickal, Broker CalDRE 01866631
Blake Hedrick, Contractor CSLB 1044138
4250 Morena Blvd Suite E
San Diego, CA 92117
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