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Collins: Building ADUs in Santa Clara County

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Since 2016, several important laws have been passed in California, removing regulatory barriers that have hindered the construction of ancillary housing units, commonly known as ADUs. As a result, ADU permits have increased more than 10-fold from 1,269 in 2016 to 14,702 in 2019.

With Rising popularity of ADUI would like to highlight the process by which the two homeowners build their own ADU and explore the lessons learned in the process.

A Gilroy homeowner named Juanita shared her journey with me. Juanita decides to build an ADU on her property to create a dwelling for her sister. She conducted her own research and looked for a reputable company with experience building ADUs locally. Juanita has found a builder who has secured a budget of $ 255,000, funded the project from savings and retirement funds, and handled all the details from start to finish.

Based on Juanita’s budget, the builder designed a beautiful 850 square foot, 1 bedroom, 1 bath unit. The project took 6 months to complete from start to finish. Overall, she said Gilroy was very manageable. However, there were some curved balls along the way, the biggest of which was the requirement that the ADU need solar panels. Fortunately, Juanita was able to find a company that installed solar panels for free in exchange for some of the extra energy generated.

Tragically, during the construction period, Juanita’s sister fell ill and died. Juanita was still able to move forward to complete the ADU and eventually lend her new unit to a nurse working near her. Since then, they have become great friends.

Another homeowner named Gary in Morgan Hill also shared his journey to build an ADU on his property. His construction had two purposes. The long-term motivation is to secure a landing site when a boy needs it and to build an ADU to provide consistent cash flow for retirement rent. He first met the architect about a year and a half ago. The company designed a two-story ADU, but when Gary brought those plans to a custom homebuilder, he found that it wasn’t economically feasible.

From November 2020, when the plan was first drafted, to April last year, when the project was planned to start, Gary’s lumber estimates alone jumped from $ 47,000 to $ 78,000. So he evaluated his goals and decided to start over.

He contacted three different builders specializing in ADU and received bids from $ 400,000 to $ 600,000. The new design was a 990 sq ft one-story house that blended better into the existing property than the original two-story design. Gary hopes that the two-bedroom ADU will provide a monthly rental income of $ 2,500 to achieve his goals.

If you are considering building an ADU, there are a few things to consider. The first consideration is whether to build a detached ADU or a connected ADU. Both of the above examples were separate designs. Next, you need to consider whether your lot is not only large enough, but also laid out in such a way that it is even possible to build an ADU.

As mentioned earlier, many of the regulatory barriers have been removed in the last few years, but financing remains a challenge. Financing opinions are limited if there is no cash available to build an ADU. Since ADU is classified as an “accessory” in the main building, it is difficult to obtain a single loan with ADU as collateral. A more common approach to securing funding is to use a mortgage loan facility that leverages the shares of the main residence.

It is highly recommended to choose a construction company that specializes in ADU construction. Traditional “stick build” and “modular prefab” panel constructions are the two most popular structural styles. Gary started with a custom home builder and quickly learned that using professionals could streamline the process.

There are also additional considerations, such as the finishing touches. Building an ADU does not follow the same process as building a small house. In the case of Juanita, the construction company made a closet at her request, but nothing more. The “closet” was a box. There was no organizer or clothes rod. Be prepared for cost overruns and schedule extensions due to workforce, supply chain, and permit issues.

If you’re considering building an ADU, the Santa Clara County Real Estate Agents Association has built a great one ADU resource page..There are also some in San Jose Pre-approved ADU design From multiple vendors that save both time and money when building an ADU.

Neil Collins, a columnist at San José Spotlight, is the CEO of the Santa Clara County Real Estate Agents Association, an industry association representing more than 6,000 real estate professionals in and around Santa Clara County. His column appears on the 4th Thursday of every month.Please contact Neil [email protected] Or follow @neilvcollins on Twitter.

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