Do You Want to Make the Most of Your Home?

How Can I Afford an ADU?

Last Updated: February 23rd, 2022

Do You Want To Make The Most of Your Home?

Hey, we’re Framework First! We’re determined to make the most of each and every home through our courses, content, and ADUs! Our only question for you… will yours be next?

I don’t know if I can afford to pay for an ADU. Is there help? We’ve got you covered.

WOULD YOU LIKE $25,000 IN FREE MONEY TO HELP PAY FOR YOUR ADU?

The answer is obviously, YES! Who wouldn’t?

Right now the State of California HCD (Housing Community Development) is offering homeowners $25,000 in grant funding to assist with paying for ADUs. California currently has a housing problem, or homeless issues or hopefully people soon to be exiting homelessness. Now Governor Newsom has helped to enact several laws to help homeowners add small houses onto their existing property. Hence, the ADU, Accessory Dwelling Unit, is born. Not only does this help homeowners create income from an otherwise liability only property, but it also helps add more available housing. Whether these homes are used as rentals or if they are used for family members, this does create more housing options in our expensive State. And it helps homeowners bring in additional income, without buying a rental property. A real win, win.

Where Do I Find Out About Free Money to Help Me?

Go to HCD.ca.gov and you will find not only the $25,000 free grant money, but also other programs. The City of Clovis is offering some cottage plans and possible financing for homeowners wanting to add an ADU. There are actually several Cities and Counties in California offering free plans for homeowners to use to construct their new ADU. While these plans might work for some, unfortunately they don’t work for everyone. There are a lot of Cities and Counties offering free housing plans. These can be fast to get you through the Building and Planning Departments, but then you do have the on site construction process and expense.

What other options are available?

The City of Clovis is not the only one offering some great programs to help homeowners install a new ADU on their property.

Following are a few of the other programs or offerings available to California homeowners:

Santa Cruz County Forgivable ADU Loans up to $40,000
City of San Mateo offers no cost support & help during your ADU project Monterery By Creates affordable ADUs for low-income senior homeowners in the Monterey Bay area.
City of San Jose: Accessory Dwelling Unit Program – Provides pre-approved ADU plans and support for ADU construction.
City of Chico ADU Program — Provides pre-approved ADU plans and support for ADU construction.
Housing Trust Silicon Valley — Provides funding to support homeownership, rental housing, development financing, and offers programs for homeowners.
City of Los Angeles free plans program
Your city or county website. Type in ADU and see your options.

What If I Still Can't Afford a Detached ADU? No problem, There's More Options.

While a detached ADU is really the best option as far as giving you and the person who is lucky enough to live in the ADU some space, there are other more affordable options.

❖ ATTACHED ADU

Part of your home becomes the ADU. Think of a bedroom or two that get separated into a smaller home. This is a more affordable option and say this bedroom or two already has a bathroom attached and all you need to do is add a kitchen. Important to note, it may be possible to convert your home completely into a duplex. SB9 is a newer law (2021) and if you meet zoning, urban and a few other requirements, it may be possible to convert your single family home into a duplex. Possibly even add 2 ADUs for a total of 4 homes and subdivide the lot! However, do some research, even a feasibility study before starting this process to see what exactly is allowed for your property.

❖ GARAGE CONVERSION

The framing and roof is already done, so it’s a much more affordable option than starting from scratch. Just add a kitchen and bathroom.

❖ OUT BUILDING/SHED CONVERTED TO AN ADU OR ILLEGAL ADU If you already have a shed that is pretty large, a detached garage or even an unpermitted ADU, these can be a great place to start. The foundation may need to be upgraded though, so check that first. For an illegal ADU, the Building Dept. is usually looking for safety issues. The State of California will now allow you a couple of years to get your illegal ADU, to be legal. But make sure it is safe now, no hot water heater in the bedroom, windows to get out in case of a fire, smoke and carbon monoxide detectors, safe electrical and other important safety measures. These are affordable fixes and likely once your ADU is legal you can increase the rent also as there is no fear of getting in trouble with an illegal unit.

❖ JUNIOR ADU (JADU)

This is still a good option, usually for a family member. The JADU can be no larger than 500 square feet and it needs to have a kitchen, but can share a bathroom. You can still make this a great option as you can add an exterior door and give them their own side entrance. This can work well for an adult child who wants more freedom or a parent. Many times the homeowner parent will live in the JADU (with some nice improvements and features) and then the adult child with the growing family will live in the main home. And hopefully someone is paying a little rent in one of these situations.

Yes, a detached ADU will likely bring in the most rent as it really feels like it is a separate home. Add a fence or two for privacy and you and your new ADU neighbor will really feel like it is a separate home. You should also think about how you will position your ADU so that the sliding glass door or wall of windows does not face your BBQ area and patio. There are also energy calculations (Title 24) which may affect where you locate your ADU. And yet, detached ADUs are still very popular, but a big investment in your property. How do you afford the beautiful detached ADU?

➔ Savings (obviously, but that may not be possible)

➔ Refinance your home (this will give you the best interest rate)

➔ Home equity line of credit (HLOC) (again good rate, borrow only what you need)

➔ Personal loans (we offer loans through our website: frameworkfirst.com)

➔ Family member loan (I’ve always heard that is a bad idea)

Now the family member loan at first may not sound like a great idea, but wait. What if that family member gets to live in the ADU? And their rent pays off the loan? And then after the loan is paid they start paying you rent? ADUs are really a great ‘value add’ for your property. Sometimes you just need to think a bit more creatively about how you can make this happen. While it would be nice to install a new ADU for your son or daughter to live in, why not rent them the main house with their growing young family who needs all that room. Then you and your spouse can live in the cute new ADU with a small, but comfortable footprint and a lot less bathrooms to clean.

There are more options than you might realize to help get you an ADU or a JADU, or both! Remember the JADU or the main house is only 500 square feet and one of those spaces needs to be owner occupied. But, wait, you are planning to travel a lot in retirement and not sure how to make your property pay you the largest income possible? What if you keep the JADU for yourself and live in it from time to time in between trips or to visit and then you still rent out the main house and your detached ADU. You will still have a place to come home to, still in compliance with the law, but your property will bring in the most rental income (even if it is rented to family) for both the ADU and the main house and you can still have a home in the JADU.

How Much Will An ADU Cost Me?

A word of caution, when you are thinking about all of these different options available to you now with your property, don’t forget about researching first. You can make any or all of these homes or units work for you, but there are fees. Plan check fees, building department fees, water fees, sewer fees, yes a

lot of fees. Get a Feasibility Report by Framework First or another reputable company to see what makes the most sense to you and your wallet before you start. You can do all of this yourself also. Just take notes and ask questions so you cover all of your bases and get all the numbers first to see what makes the most sense for you.

Don’t be afraid to start! You can do this and the longer you wait, the less new rental income you will have. Passive income is how the rich get rich. Do something once that will pay you forever. You can finally have rental income without having to be a whole new property. Make your home work for you!

1 thought on “Can I Afford an ADU?”

Mark
September 7, 2022 at 3:04 pm

Thanks for your blog, nice to read. Do not stop.

Reply