If you’ve been looking at homes or exploring remodel opportunities in LA over the next few years, you’ve probably heard about ADUs. What is an ADU? An ADU, or an accessory dwelling unit, is a secondary housing unit on your property.
As a result of the housing shortage we have in LA and California at large, there has been a series of legislation designed to encourage creation of additional housing units. This includes new state legislation that makes it even easier for homeowners to build these ADU’s on their property by removing many of the barriers put in place by local municipalities. Even more recently, new California laws have effectively eliminated single family zoning, allowing for multi-unit development on single family lots.
Why might someone consider an ADU? An ADU can be used to produce rental income, serve as a home office, support multi-generational living, or be a place for guests to stay. Typically the home renovations that are most likely to generate a ROI on your property are ones that add square footage, add a bathroom, or add a bedroom. With the addition of an ADU, you can check off all three of those! And because there is state legislation encouraging the development of additional housing units, it may actually be easier to get approvals for building another unit than doing a traditional addition.
Generally, I believe that building an ADU is a good investment but before you decide to pull the trigger, here are some important things to consider.
1. Make A Plan
How do you plan to use the space? Determining whether it’ll be rented out or used for a yoga studio will have a big impact on how you go about building and designing it. When planning your space, be sure to consider your goals down the line as well. Similar to buying a home, you’ll likely have to make compromises in one way or another. Sit down and make a list of your must-haves vs. your nice-to-haves. This will allow you to assess what you really need and what may be extraneous. And I always recommend considering the impact on resale value. What will future buyers be looking for out of the space? I am happy to weigh in on this part!
2. Hire Professionals
Just because an ADU is smaller than a home doesn’t mean you should skimp out on the design process. While you may be focused on making your ADU cute and cozy, an architect will help out with things like space planning and functionality. To avoid construction nightmares, hire licensed contractors with good references. The process of building and designing an ADU will be a lot quicker and easier with qualified help and it’ll be well worth it in the end.
3. Do Your Due Diligence
Laws are changing all the time. In fact, new laws just went into effect on January 1st allowing ADU’s to be taller and closer to property lines. If you live in a Historic Preservation Ordinance Zone such as South Pasadena, Hancock Park, or Windsor Square, you may have additional restrictions. So before you begin your building plans, find out what you are allowed to build and how you can maximize that.
4. Make A Budget
Nobody likes a half-finished project. Before you begin building your ADU, put together a realistic budget that includes architects, engineers, permits, and other consultants you may need. If you’ve ever done a home project, you know that things usually end up going over budget so be sure to set aside a bit more should that be the case.
5. Location
Choosing where to build your ADU is not something that should be taken lightly. When building your ADU, be sure to consider your neighbors. Will your new build interfere with their privacy or obstruct their view? Another thing you’ll want to consider is the orientation of the sun, as having natural light is great for making a small space feel larger. Consider the trade-offs in converting an existing space (like a garage) or building a net new structure. Finally, do yourself (and nature) a favor and try to protect mature trees. Not only do trees provide privacy, shade, and beauty, they also add value to your property! So before you chop down your old oak tree, do think twice.
6. Understand Rental Rules
Once you add an ADU to your property, your single-family home and the ADU are now considered multi-family housing. Because of this, your entire property now falls under the Rent Stabilization Ordinance (RSO), a law that limits rent increases and restricts evictions. With an ADU on your property, you will have new responsibilities such as registering your rental property, paying fees, and reporting vacancies.
7. Be Aware Of Additional Costs
Yes, unfortunately your taxes are likely to go up if you build an ADU. If you want to get an estimate, you can call the city’s property tax department. Eliminate surprises and get ahead of it!
If you have any questions or need references of people to talk to regarding your ADU, give me a call!
