3 Facts About ADU Investment in San Francisco

A lot of cities around the Bay Area now have permissive zoning regulations that persuade homeowners to build additional dwelling units like ADUs. Consequently, homeowners are thinking of adding and starting their next San Francisco ADU plans—increasing the number of additional dwelling units in the area. Here's a quick overview of what's in store for homeowners who are looking to invest in San Francisco ADUs.

01 Garage ADUs are Popular Rental Spaces

These are the most common San Francisco ADU types. Also, if you're looking to build an affordable ADU, this is the best option for you! Converted garage or Garage ADUs has a cost range of $60,000 to $100,000 yet the average earnings you can get from renting it out is approximately up to $42,000 annually. Think of how this inexpensive rental space could pay down your investments in just a couple of years! 

02 The City Permits High ADU Production

You could build your own ADU anytime! No need to worry about your fellow homeowners who have started having theirs ahead of you. In 2018, San Francisco just allowed a total of 382 ADU projects—hitting an above-average number of production compared to the rest of the cities statewide. The increased number of additional dwelling units in San Francisco is one of the factors that resolved the housing crisis in California. It is also one of the reasons why housing regulations have eventually eased up. As per the state law, all residential zoning districts—including single-family and multi-family—are now permitted to build additional dwelling units. 

03 An ADU Can Make Home-Selling Easier

Whether you're planning on moving out to a new home or simply thinking of kickstarting your property investment journey, home selling is a painstaking task. But, did you know that building an ADU could not only spruce up your house's aesthetics but also boost your home value? Apparently, primary dwellings with additional dwelling units built with it are easily sold in the market. Homebuyers are keener to purchase properties with multifunctional home additions like San Francisco ADUs. A big payoff will be felt once you've decided to put up your homes in the market. The big payoff will soon be realized when it is time to appraise your home—because there are a habitable space and a rental unit combo.

Your ADU Plan

California, being one of the biggest housing markets, is undoubtedly a costly place to build. It is because of the existence of older homes and due to the high demand for home remodeling. However, if you look at the added value an additional dwelling unit brings, it is still worth every penny.

A ballpark figure for a San Francisco ADU is $100 to $200 per square foot. This amount may vary because the overall cost would be highly dependent on your desired home design and construction materials. For instance, you've thought of getting a 500-ft ADU, the remodeling cost would range from $50,000 to $100,000.

For a much clearer overview, here's a sample calculation:

Let's say you are currently residing in a 1,490 square-foot primary dwelling and planning to build and rent out a 1-bedroom, 1-bathroom 500 square-foot ADU in San Francisco. The overall cost to build this (fully loaded) prefab ADU would be $155,749 (which may seem exorbitant at first) but then you've decided to let it be financed at 90% Loan to Cost so this would lead to a $550 monthly payment for 30 years. A forecasted rent for this 500 sq. ft. unit is $2,050 (an approximation base on the location). After all the projected loan payments per month, property and insurance tax increase, and a few other miscellaneous costs, this ADU would bring you an anticipated $1,400 net return per month. A good bit of cash to help you pay-off other home expenses and create a solid stream of cash inflow.

At first glance, ADU investment could be painful and costly (especially if you’re doing it all on your own). But with the help of trusted home remodeling experts, homeowners can start booking free consultations and get their free quotes instantly! Want to start investing in additional dwelling units? Download our latest ADU guide and book your appointment with Eano Home Renovation today!

*All images used are from the internet.

Sources/references:

https://intempuspropertymanagement.com/the-costs-and-benefits-of-adding-an-accessory-dwelling-unit-adu-to-your-property/

https://www.goodlifemgmt.com/blog/are-accessory-dwelling-units-worth-the-cost

https://www.housable.com/city/san-francisco-ca-361986

https://www.modative.com/how-much-do-accessory-dwelling-unit-cost-in-los-angeles

https://californiamodulars.com/costs-financing/