8 Reasons Why Now is the Best Time for An ADU

For years people have sat on the American dream of the house with the white picket fence in the big backyard, 60 years later we are finally hitting the tipping point in Los Angeles where we have a population of 10 million people and not enough homes are vacant and with many more people on the way due to hurricanes on the East, floods on the Midwest, and fires in the north, the population will continue to outgrow homes. Now, it's no secret that the valley in Central LA in particular has about 90% of this garage is converted. Why? Because homeowners are often shocked at the cost of permitting and dealing with LADBS in the ‘90s. Someone that owns a home that makes $40,000 a year might not have $80,000 laying around for city fees. The banks won't dare give loans out to an unpermitted building which is why there are so many illegal garages plain and simple.

Now there are many reasons why building an illegal accessory dwelling unit was out of the question:

• Most people underestimate the cost of building an ADU before 2017 and ADU came in with the same impact fees as building a brand new home. Rec rooms and storage rooms were cheaper, parking on the street is cheaper so why build an ADU?

• Garages built on the property line that was converted into ADUs needed their setbacks mandatory. Fire sprinklers needed to be added and you needed to provide another garage for the main residence.

• LADBS needed the property to be a specific size restricting about 70% of the R-1 properties 

• No loan officers would ever consider lending you money to convert your garage into an ADU or a guest home to rent out

• Many people were and still are tempted to try to play the role of a general contractor to save money on city fees and extend the savings they have by converting their garage illegally. The problem that has come with that is that subcontractors that are either flakey or shady, many people to this day will fall into the trap and see their savings disappear with nothing to build. 

• Say you found the neighborhood handyman, after going through countless hoops and finishing your illegal garage for $20,000 to $30,000 suddenly you get an unexpected visit from the city inspector and have you tear down your investment. Otherwise, a substandard lien gets applied to your home.

On January 1st, 2017, new state laws took effect that created new opportunities for accessory dwelling units also known as ADUs second units or granny flats. ADU is a dwelling unit with a full kitchen and bathroom which is an accessory used to the primary or main single-family property. Now there are eight main reasons why now is a wonderful time to build an accessory dwelling unit.

1. New State Laws

The new law deregulates all prior accessory dwelling unit restrictions and opens up the development for anyone to build a second rentable unit on a single-family property. This means that any property zoned for a single-family and that meets local ordinance can qualify to have an ADU.

2. Waived Fees

Los Angeles waived their development and impact fees making the permit process cheaper and less restrictive as more cities struggle to maintain a wealthy inventory of single-family homes at our affordable price, you'll see legislation change to support the development of accessory dwelling units.

3. Rentable ADUs

ADUs are rentable - let's think about that for a minute. The illegal unit you have at the moment gets you $600 to $700 a month. Most apartments or ADUs in Los Angeles start at $1,200 a month, in five years that’s $72,000 compared to your $36,000 you're receiving at the moment. ADUs over 800 square feet are in the $1,800 a month, $1,800 a month is $108,000 in five years, and a whopping $260,000 in ten years. Rent isn't getting cheaper and if you're a millennial living at home, you can finally give back to your parents by paying for an ADU.

4. Grandfathered in Garages

Garages built on the property line are grandfathered in.

5. No Incremental Expenses

No in-home sprinklers need to be provided, that's a savings of $15,000 right there.

6. No More Garage Prerequisites (with conditions)

If you live half a mile away from public transit, you no longer must provide a garage or a carport. 

7. Hassle-free Construction

Now there are consultants with experiences that can take care of your designs and permitting expediting construction.

8. High Return on Investment

With rent in Los Angeles hitting an all-time high, monthly rental income can give families the flexibility to travel, save for retirement, or put a child through college. While there's an up cost front to building an ADU, the long-term return on investment will always outweigh the initial price. A standalone unit that costs $85,000 can bring 1.2 million in value over a 30-year period.