Does an ADU Increase My Property Value?

Ever since Accessory Dwelling Units (ADUs) entered our lives, things have only gotten better. Thanks to new ADU laws and regulations across Southern California, it’s become easier to bring these tiny secondary suites to life. However, this has raised many questions, perhaps the most common being, “Does an ADU increase my property value?”
That’s why the Go Home Builders team has created this super easy-to-understand ADU guide just for you!

Does an ADU Add Value to Your Home?

Absolutely! Any home-improvement project that increases your existing square footage will also increase your property value, especially an ADU. Think about it: when you purchase a house, you pay a price per square foot, right? It’s the same with ADUs. The square footage of the ADU gets calculated into your house’s square footage as well since it is a living space after all. Building an ADU can significantly boost your property’s value (by hundreds of thousands).

Given California’s sky-high property prices, building an ADU on your land is like finding a cheat code for boosting your Return on Investment (ROI).

Does this mean you should invest all your money in building an ADU right now? Not necessarily.

Cost and Profit Potential in California

Normally, an ADU with all-in design-build costs will run in the $350-450 per square foot range (check out our ADU Calculator for more accurate pricing). The average house price per square foot in California is about $500, but in some cities, it can even surpass $1,000, like in San Francisco, Beverly Hills, and many others.

How Much Does an ADU Add to Property Value?

The math is pretty straightforward. The average ADU size in California is about 400 square feet. Let’s assume you live in a nice area but not a super expensive one (or if you do, you don’t need to keep reading and can just build an ADU next week). The price per square foot in the neighborhood could be between $650-$850. So, the ADU could possibly add between $260,000-$340,000 to your property value.
That said, the exact value addition depends on several factors, such as ADU size, type, quality, and location. And of course, we’re talking short term; for the long term, it can be more than that. You know how wild California home prices can be.

How to Determine an ADU’s Value?

The good thing is that all ADUs have some value (duh), but some have more value than others. Here are the factors to determine how much an ADU is actually worth:

ADU vs. Home Value

Let’s say we have two identical ADUs, the same size, same design, same everything. One is in Palo Alto and the other in Pasadena. Do you think both will have equal values? Of course not. To get the most value out of your ADU, you must build it in the right location, obviously. This is the #1 factor in determining ADU value.

ADU Size

A larger and more spacious ADU will have a higher value than a smaller one. Square footage indicates how much value an ADU will add to your property. It’s the same idea as when you build a house. Higher square footage equals higher value.

ADU Type

Detached ADU? A garage conversion ADU? An attached ADU? There are a few different types of ADUs. So, which one is best for increasing value?
The answer is a detached ADU. A detached ADU will increase the property value the most since it’s like a mini version of your home. Right after, on the list is the attached ADU, and the last one is an ADU conversion (a garage conversion).
It is important to note that all types of ADUs will increase property value, some just a bit more than others.

ADU Quality, Build, and Design

We’ve seen it all: homeowners who invested their money in an ADU but went cheap on the finish materials, and on the other hand, homeowners who overqualified their ADU compared to their home. There is a big hidden value in a proper ADU design. When you invest in high-quality materials, smart planning, and aesthetically pleasing design, you can see a great return on your investment.

Should I Build An ADU?

SO, after all this information we’ve covered, should you build an ADU? Let us tell you why you should, and why you should not:

Why Should You Build an ADU?

  • Space: Let’s face it, everyone needs more space. A well-planned ADU can give you just that. Whether you need more space to live, host family members from out of town, have a quiet place to work from, or even just a mini getaway for yourself, an ADU can answer all of those questions or at least some of them.
  • Income: Thinking of extra income? An ADU can give you just what you wish for. ADU rental has become a hot topic these days. There are two ways of doing it: short-term rental (Yes, you can Airbnb your ADU!) and long-term rental. Having a student, a couple, or even a small family renting your ADU could provide you with a nice, steady income without worrying about management and cleaning fees every other week.
  • Property Value: As we covered earlier, building an ADU can increase your property value and may give you a great ROI. It all depends on your current house value and the housing market, of course.

Why You Should NOT Build an ADU?

  • Time: Building an ADU takes time; it’s simple but not easy. An average ADU takes between 4-6 months from start to finish. You must ensure you have the availability to check on the progress from time to time.
  • City Regulations: Every ADU requires architectural plans and engineering calculations attached to it. Once you have the plans, you must submit them to the city for approval, a process that can take up to 6 months (depending on the city). Some people have illegal structures on their property and don’t want to share them with the city.
  • Invasive: Like every home improvement project, building an ADU can be pretty invasive. You’ll have strangers on your property for a long period. You should ask yourself before you start, “Am I ready for this?”
  • Money: Unfortunately, building an ADU is not free. If money is a challenge, you should think twice before getting into it. Most people take a loan to afford it; if you do, make sure you’re 100% comfortable with the payment plan.
  • Property Tax: While adding an ADU can be very beneficial, it will increase your property tax. Some less, some more. The exact amount depends on the ADU’s square footage.

Overall, ADUs have entered our lives and are here to stay. ADUs have pros and cons, like all of us 😉 If you are thinking of adding an ADU to your property, contact our Go Home Builders team today and let us build your dream ADU.

Ready to Start Your ADU Project?

At Go Builders, we’re here to turn your vision into reality. Our team of experienced architects, contractors, and specialists is ready to guide you through every step of your ADU construction process. Don’t navigate the process alone—let Go Builders help you create the perfect space on your property.

Contact Go Builders Today

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