ADU Development Can Be Very Profitable!
Taking a piece of real estate and improving it by adding an ADU is a relatively easy form of real estate development that even a novice real estate investor or homeowner can accomplish with the right guidance.
Over the course of the next 16-20 weeks I will take you along as I build a brand new 1,200 SQ. FT. ADU on a property in Hyde Park, Los Angeles. I will be sharing a step-by-step "how to" which covers the entire ADU construction process from the initial design to final inspection.
This ADU is being constructed on a property I own, and I am acting as my own General Contractor. Although I am a licensed General Contractor, the information I provide in this guide will benefit anyone who is ready to start designing and building their own ADU.
If you have any questions or would like to discuss your own ADU construction project, please do not hesitate to contact me with questions or comments. I look forward to sharing this process and I encourage all homeowners and investor who can add an ADU to their property to do so. They are phenomenal investments and can enhance your life tremendously, whether you plan to use it for personal or investment purposes.
California needs more housing, and homeowners can help by providing additional housing options for our fellow Californians.
Planning an ADU
The first step when deciding to build an ADU is to determine what type of ADU best fits your personal needs, and the physical characteristics of your property.
As most of you reading this already know, the State of California has passed laws that make building an ADU fairly easy, and for all intents and purposes all homeowners can decide to build either a detached ADU in their backyard, an attached ADU that is part of a home addition, or an ADU conversion which includes the conversion of part of your existing property into an ADU (including the conversion of an existing garage into an ADU).
The ADU I am building will be used as a rental, so I wanted to maximize my return on investment. With that as my primary motivation I chose to design and build the largest ADU that was allowed under the City of Los Angeles' ADU Ordinance.
Larger ADUs tend to rent for more money, and every square foot of new construction you add to your property translates into a higher resale value once you decide to sell.
Why Did I Decide To Build A Detached ADU?
I wanted a 3bd/2ba ADU that I could rent for top dollar. I chose to build a detached unit because I had room in my backyard, and I thought that a detached ADU would be more desirable for a family looking for a home. And as any real estate investors knows, families tend to stay longer which equals less tenant turnover which equals less headaches and lost revenue due to tenant turnover.
Once I settled on the type and size of ADU I wanted to build the next step was to get a design in place and ADU plans and construction drawings produced.
Do I Need To Hire An Architect To Build An ADU?
No, in the State of California you only need to hire a licensed Architect if you are building residential construction that is taller than two stories. And conveniently the California ADU laws do not allow ADUs over two stories high, so building an ADU anywhere in California does not require an Architect. But even though you do not need an Architect, most cities do require that your plans be reviewed and stamped by a Structural Engineer to ensure they are structurally sound.
Since I did not need an Architect, I was able to save a lot of money on the architectural design and structural work, which added up to tens of thousands of dollars saved.
It is particularly important that you hire a draftsman or architect that is experienced in designing ADUs, and experienced processing ADU plans in the city you live in.
DO NOT try to save a few dollars by hiring someone that does not have experience with ADUs, or an Architect or designer that is not familiar with the ADU ordinance in your city. An inexperienced designer, Architect, or Engineer can add months to your project timeline if they are not familiar with the ADU ordinance and how each city treats the permitting process.
Once the designer is done with the ADU plans the next step is to submit the plans to the city building department and wait for their comments or approval. In my case it took the City of Los Angeles about 30 days to review my plans, and after I made a few minor corrections to the plans based on the cities feedback, I had permits in hand and was ready to start construction.
Construction - Building An ADU
With approval from the city and permits in hand, you can move on to the construction of your new ADU. The following paragraphs detail the construction process for a typical small home in Los Angeles, but the process will be similar throughout California.
Site Clearing & Building Pad Preparation
The main house was built it 1914 and was an old craftsman style bungalow. At the time it was built it apparently had a two-car detached garage space, but at some point over the last 100 years the garage had been demolished or destroyed. I am not sure what happened to the original garage, but it wasn't standing when I bought the property in the Summer of 2019. The only evidence that a garage once existed was contained in old building permits from 1914 that showed the size and location of the original construction. It was the existence of these old building permits that lead to the first delay in the construction of my new ADU. Since the building departments records showed the existence of a garage on the property, I was required to pull a demo permit to remove the garage. A garage that no longer existed on the property. And to top it all off, the City of Los Angeles required that I send all my neighbors within 500 feet a notice notifying them that I was going to demolish the garage and give them 30 days to voice any concerns regarding the demo to the city.
You want me to apply for a demo permit, send my neighbors a "notice of pending demolition" and waited for 30 days to start my project so that my neighbors can protest the demolition of my garage that doesn't exist?
Yes, that is what the City of LA required. A complete waste of time and money since I had to pay 30 days worth of mortgage expenses and taxes waiting for a demo permit for a garage that had long ago been demolished. Oh well. Unfortunately these types of delays are inherent in the construction process and is why a contingency of 10-15% of your construction budget is so important.
I finally had the permits complete and was ready to start building my ADU.
The backyard is almost completely flat, so my engineer designed a slab-on-grade foundation for the ADU. This is the least expensive foundation to build and is perfect for an ADU foundation on a flat property.
But slab-on-grade foundations require a clear and flat surface to build on and so I went to work clearing out all the trees and vegetation that was in the footprint of my new ADU. You will see from the picture below that there was one old tree that was the biggest obstacle. A quick call to a tree trimmer I found on Craigslist and the tree was removed and hauled away for $1,100.
The tree removal was a bargain and much less expensive than the $3,500 I had originally budgeted for this line item.
The engineer designed a 6" thick slab with 18" wide and 18" deep footings. Since the dirt was relatively soft and the foundation area relatively small, I decided to hand dig the footings as the cost of renting equipment would have doubled the overall cost of the footings. I used two hard working construction laborers to help, and with my guidance I was able to dig the entire foundation and prepare the footings in a little under 16 hours of work. Now that we have the footings dug it is time for the next step... underground utilities.
At this point in the build it is necessary to run any underground utilities that will run underneath the foundation slab. For this build I have chosen to run the property entirely on electric power. I chose to use electric only foir two reasons. First, to save a little money on the build. Running only electric to the ADU meant I did not need to run gas lines which saved about $3,500. Second, with an all-electric home we will be powering the ADU with a renewable resource and not Natural Gas. In the long run the State of California will require all new homes to be built with all electric power, so I'm a little ahead of the curve with this ADU.
The decision to use electric power means that the only underground utilities I have running under the foundation slab and through the footings were my plumbing waste lines.
And if any of you are wondering, the electric power is being served by overhead wire, so there is no conduit for electrical power running through the footings and under the foundation slab either.
The picture below shows the underground plumbing lines installed.
At this point we called the city inspector to come out and approve the foundation pad and footings, and to perform a water test and approve the underground plumbing. With the inspectors blessing we back filled the sewer trenches and started progress on preparing the slab for our concrete.
Adding Structural Rebar
After the underground plumbing was complete and the plumbing lines backfilled with soil and compacted, it is now time to place the rebar to our footings as designed by our Structural Engineer.
Rebar is structural steel that is placed inside the concrete footings and provides the concrete with added strength. In addition to rebar in the footings, the engineer also called for the slab to be reinforced with wire mesh, as well as a vapor barrier over the soil which would prevent moisture from the ground soaking into the slab from the bottom.
The picture below shows what the foundation looks like just before we placed the concrete.
Placing the Concrete
After we placed the rebar into our footings, the with vapor barrier and wire mesh across the slab area it was time to pour our concrete. We called the city inspector out to the job site to approve the rebar, vapor barrier, and wire mesh. The inspector gave us his blessing and told us to call him back out after we were done with the rough framing portion of the project.
A quick note on inspections... never cover up any work until that work is seen and approved by a city inspector.
In this case when we pour our concrete we are going to cover up the rebar, vapor barrier, and wire mesh work we performed, so it was necessary to call out the inspector before that work was covered. Once the concrete is placed into the ground the work gets covered up and there is no way for the inspector to verify we performed the work to code or the approved structural design.
Always, always, always call the inspector before you cover up you work. You will see as we progress on the project that the inspector is always called out right before we cover work.
Back to pouring the concrete. The engineer called for a standard 2,500 PSI concrete and our calculations showed that we needed about 27 yards of concrete to complete the slab. We hired a skilled set of concrete finishers to place and finish the concrete. A crew of four men were able to get the concrete poured and finished in about 4 hours.
The picture below shows a progress picture of the concrete being placed into the footings and slab.
Stripping the Forms and Framing Layout
I let the concrete set-up and dry over the weekend and came back of Monday to strip the wood forms from the foundation and to perform framing layout with my framing crew who would be performing the rough framing for my ADU.
You will see in the photo below that there are bolts sticking up from the concrete slab at the perimeters of the foundation. Those bolts (called "hold downs") were installed prior to the slab being poured and will be hold the foundation to the rough framing. This is a crucial step for the structural integrity of the new home and is required wherever you build, but these bolts are especially critical in California where earthquakes can easily shake a home of its foundation.
The next step in the ADU construction process is the Rough Framing. This is when the construction of your ADU gets fun as you see the new home rise out of the ground. Us builders refer to this stage as "going vertical".
I specifically designed this ADU to be inexpensive to build by using off-the-shelf products and traditional dimensional lumber with no Structural Steel framing or large structural beams. As such my framing crew will be able to complete the rough framing portion of this project in about 12-14 working days. My job now is to make sure the framers have the lumber and materials they need, and to make sure my windows are ordered as we'll need the windows after the rough framing is complete.
The video below shows the progress after 5 working days. It's amazing how fast a small home like this can be built with an experienced crew of framing carpenters.
And these pictures show the progress after 10 working days. At this point the crew needs to finish the roof rafters, roof sheathing, sheer walls, and perform the framing pick-up. Three more full days and the framers will be 100% complete with the rough framing portion of the project.
And here are a few pictures from four days later when the rough framing for our ADU is 100% complete.
Insider Tip : Always ask the rough framing crew to install your vinyl windows as part of their service. Most rough framing carpenters are experienced installing standard vinyl windows and will include this service for a nominal upcharge. It will be much less expensive then hiring a dedicated window installation subcontractor to come in after the framers are finished to install the windows. But this advice only applies to standard vinyl and builder-grade windows. Custom windows should be left to professional window installers.
With the rough framing now complete it is time to get the plumber, electricians, and HVAC subs started with the installation of their rough work. These trades are referred to broadly as the mechanical trades.
MEPsAt this stage in the project the MEP subs started. What's an MEP? Good question. MEP stands for Mechanical, Electrical, and Plumbing. These subs are lumped together because their work is all happening at basically the same time.
The MEP subs are running all their work that will be within the interior and exterior walls of our new ADU. All the water supply lines, sewer drain lines, electrical wires, and HVAC supply and return lines are being installed at this point in the project.
Your building plans should contain all the MEP specifications so that the subs know where to install their work. Without good plans the subs will be bumping into each other all over the place. For example a plumber might run a waste line where an electrician is supposed to install a recessed light fixture. These issues can be kept to a minimum with a good MEP plans.
We scheduled two full weeks to let the MEP subs complete their rough installation at which point we will need to call the city inspector back out to inspect and approve their work.
For the roofing I went with a standard dimensional asphalt shingle in a very dark grey color. Since we are building in California and are subject to the Title 24 energy efficiency guidelines it is very important to chose a roof material that is certified by The Cool Roof Council to meet Title 24 requirements.
Most of the large shingle manufacturers make roof shingles that meet Title 24 Cool Roof requirements, but for this project I chose the ECOASIS NEX by Malarkey Roofing. Their Desert Noir color I thought was perfect for the Modern Farmhouse design and comes with a lifetime warranty on the material.
For the siding I chose to use a board and batten style cement siding by James Hardie. It will give our ADU the very popular Modern Farmhouse look, and will be a very long lasting option. Watch the following video for a updated walk-through of what the exterior of our ADU looks like at this point.
Now that the siding for your ADU is complete the only step remaining on the exterior of the ADU is the exterior paint. I went back and forth a million times trying to decide the best paint color for the outside. I was choosing between a dark, dramatic color that would give the ADU a bold and trendy look, or a more light, bright white color that is very popular and classic look.
Ultimately I chose Original White by Benjamin Moore paints and I'm really happy with the way the exterior paint turned out. I will also be painting the front door a more modern color that will generate some interest from the street, but I am holding off on painting the door until the project is almost complete.
Don't paint the front door until the end of the project. If you paint the front door too early the paint will inevitably be scratched or ruined by the trades as they haul material into the project as we finish, which will mean we have to repaint it anyway. It's better to just hold off until the end.
As you will see in the video below, all the rough electrical, plumbing, and HVAC is complete. The interior electrical panel is complete, the HVAC mini-split heads are installed, and the plumbing is all stubbed out to our kitchen, laundry room, and bathrooms.
At this point we call the city inspector out again to ensure the subcontractors have followed building code, etc. With the inspectors blessing we are now able to insulate the walls and install the drywall.
Now that our MEP's are complete and the inspector has passed all the work that will be hidden within the walls of our new ADU, we can go ahead and start insulating. The plans call for R-19 insulation in the walls and R-38 in the ceilings.
But in addition to the insulation you also want to make sure that any cracks and penetrations that exist in your framing are filled to ensure that air leakage through your exterior walls remains low. Our understanding of building science and how air leakage effects the efficiency of your new ADU has evolved in the last few years. It is no longer adequate to just insulate, you need to be blocking as much air as possible for seeping into and out of the ADU.
The drywall portion of the project will consist of two parts.
The first part is installing (or hanging) the gypsum drywall material. Fire code and general building practices will dictate what type of drywall you should install, so make sure to check your plans for areas of the drywall that must be fire rated, and what material thickness is specified.
The following video shows the ADU project after step #1 of the drywall installation is complete. The drywall is hung and all the corned bead is installed. At this point we must call the city inspector back out for a drywall nailing inspection. The inspector will verify that the drywall material we used is correct and the nailing (or drywall screws in our case) are installed properly.
The second part of the drywall installation is the taping and mudding portion and is the part of the drywall installation process that gives the drywall its look and feel for design purposes.
The exterior of our new ADU is complete and all inspections requiring scaffolding have been passed, so we can now remove the scaffold and get a look at the completed exterior.
This isn't necessarily a line item in the construction process, but it does mark an important step in our time line.
And it is great to see an unobstructed view of the ADU without it wrapped in scaffolding. Once the trim and front door are painted it will look very similar to our original 3D model.
Interior Paint & Laminate Flooring (In The Wrong Order)
With the drywall complete it was time to move onto the interior painting. There was only one problem, my painters were swamped with work and could not start the interior paint for about 10 days. I did not want to try and find a new painter since I have worked with the same painting crew for years and their work is top notch. but I also did not want to have a project sit idle for 10 days while I waited for the painters to start, so I pulled the trigger on installing the floors prior to paint.
Under normal and ideal circumstances I always like to paint the interior walls prior to installing the floors. The real advantage of painting first is that you don't need to cover the floors with paper when you spray the paint on the walls.
With the decision made to lay the floors first, I proceeded with my plan of installing a nice Luxury Vinyl flooring that is manufactured to look like wood. This flooring type has become increasing popular the last few years and I love this type of flooring for rental ADUs. The flooring is very resistant to scratches and damage, is waterproof, and looks very convincingly like real wood or engineered wood flooring.
My flooring installer provided the flooring and installation labor, and with a little negotiation included the baseboard installation as part of his project price. The crew of 3 professional flooring installers completed the project in a little under three days which allowed us to cover the floors in time for the painters to start the following week.
Ready-To-Assemble (RTA) Kitchen Cabinets & Quartz Countertops
Once the floors are installed and the paint complete it is now to to start putting the finishing touches on and wrapping this ADU project up.
I chose a white shaker style RTA cabinet for the kitchen. RTA cabinets are a great alternative to custom kitchen cabinets and are 1/2 the cost. All the cabinets including labor to build and install them was about $6,000. I would have spent twice that much for a custom kitchen cabinet package from a reputable company.
For my countertops I chose an off-white quartz, which is well known for its durability and good looks. I think the off-white was a good choice as it matches well with the bright white cabinets and the warm wood-look vinyl floors.
And to bring the whole design together I chose brushed gold kitchen cabinet hardware. The brushed gold has a nice warm tone that pairs with the floors and countertops.
Finishing the Bathrooms
At the same time as my crew was finishing up the kitchen I had my tile installer hard at work tiling the tub and shower surrounds upstairs.
To keep within budget I chose to install a pre-manufactured acrylic shower pan instead of building a custom tiled shower pan in the Master Bedroom.
For a little over $200 I was able to buy a 32"x60" shower pan that installed in an hour or so, and for my purposes the end result was exactly what I was looking for.
With the shower pan installed, next we hung 1/2" hardibacker concrete wallboard to the walls, taped and waterproofed the seams, and called the inspector back for inspection. With the inspectors approval we moved on to installing the white and gray subway tile to the shower walls. Below are progress pics of shower as well as pics of the finished project.
We followed the same process for the secondary bathroom which has a prefab bathtub installed. Below are some progress pics for the secondary bathroom with the tile installed.
And to finish the bathrooms off we installed inexpensive floor tiles and prefabricated bathroom vanities. These options kept of cost low while providing a good looking result. Take a look at the finished result below and let us know what you think of the design.
What's up next?
Check back in next week for updates on the ADU construction process.