Top 5 Reasons to Build an ADU

Top 3 ADU Types That Increase Property Value (Ranked)

Building a Tiny House or Accessory Dwelling Unit (ADU) in your backyard has never been easier.

With newly passed legislation by the State of California, most Los Angeles homeowners are now allowed to build a Guest House, Granny Flat, or Backyard Cottage in their backyards.

The City of Los Angeles encourages the construction of these accessory units, and has done their best to make the planning and permitting of these ADUs as painless as possible.

Every homeowner has their own reason for building an ADU, but below is a list of the Top 5 reasons a homeowner might want to build an ADU.

  1. Increased Property Value

    The average price per square foot for all single family homes in Los Angeles is around $470 (and in many neighborhoods this number is much higher). The City of Los Angeles allows most single family homeowners to build up to 1,200 square feet of new construction (limitations apply, and each property is different - contact CALI ADU for more info and a free property evaluation). So, let's do the math… 1,200 square feet of new construction x $470 per sqft = $564,000 increase in property value. That's some serious equity!

    For this reason alone it is a no-brainer to add Backyard Cottage or Tiny House to your property if for no other reason that it will drastically increase the value of your home.

  2. Housing For Aging In Place

    As the population of Los Angeles ages, more and more homeowners are looking for alternatives to typical assisted living or elderly care facilities for an aging parent or loved one. Instead of paying huge rent at assisted home communities, many Los Angeles homeowners are choosing to design special ADA compliant ADUs that will allow aging parents to stay close to their families.

    A single level Granny Flat is perfect for aging in place loved ones. It allows your loved one to stay close to home while keeping their independence in their own small home within steps of caretakers.

  3. Guest House

    Do you host a lot of out-of-town guest? Do you have family or grown children you want to provide guest accommodations for? An ADU is perfect for providing a safe, comfortable, private area for guest to stay and enjoy. How much more fun will a visit from your friends or family be when you can host them in your backyard in luxury? Have your friends and family stay close when they're in town visiting.

  4. Recent Graduates Returning Home

    Many recent college graduates find it very difficult to find affordable housing options in Los Angeles. If you could help your returning child for a few years until their income allowed them to branch out on their own, would you help? A lot of our clients find themselves in this exact situation and a new Guest House for a recent graduate is a prefect solution. The Guest House allows the new graduate to return home while at the same time having a place to call their own and be independent.

  5. Long Term or Short Term Rental Income

    Would you say no to an extra $1,000/month? Many of the homeowners we work with that are interested in build an ADU to rent out, find that their NET cashflow is $1,000 or more per month.

    Let's do the math on an example ADU in Los Angeles. Say you spend $250,000 all-in on a beautiful new 1,200 sqft ADU, and the new ADU rents for $3,000 per month (or $36,000 per year). Assume you spend 30% of the monthly rent on expenses like taxes, insurance, maintenance, etc, and you're left with a NET income of $25,200 per year on the rental of your ADU. That $25,200 equates to a +10% return per year on your initial investment of $250,000. A safe investment like that is hard to find anywhere else. Building an ADU can be a very smart investment!

So, as you can see there are many reasons why homeowners are building ADUs in their backyards. Your reason will be as unique as your property and we are here to help determine how the ADU laws can be best used to unlock the potential in your property.

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