Why You Should Build an ADU

Followers of this blog will recall that in August I wrote Seven First Steps to Success describing the merits, advantages, and how to begin the process of constructing an accessory dwelling unit (ADU) on your residential property. Briefly, we reviewed the opportunities “Second Units” afford to supplement one’s revenue stream with a relatively affordable initial investment, as well as the opportunity to create additional functional living space.

We also discussed how to approach the process of realizing an ADU, including the need to clarify goals, establish a realistic budget, costs, and anticipated income, identify technical requirements for proceeding, and to consider retaining professional assistance of an architect on an as-needed basis.

Focusing in on the financial aspects in a bit more detail, by way of example for a hypothetical ADU of 400 square feet and an assumed budget of $200/sf, a project budget of $80K would be required. With an initial down payment of $10K the loan amount would be $70K. For a 30 yr fixed loan the monthly payments could be as low as $300/month. Depending on the locality the unit could fetch as much as $1600/month, thus realizing the happy owner a healthy net income of $1200/month.

My August article generated interest from several people, among them Spencer Keenan of Santa Cruz Green Builders. Realizing that we had arrived independently at the same insight as to the growth opportunity ADUs represent to homeowners, we met for coffee recently to compare notes. As it turns out Spencer and his partner Taylor Darling have an section of their website devoted to the subject, including pages specifically devoted to their research on financing, how to qualify, and samples of ADUs they have built. The website is santacruzgreenbuilders.com/

It also generated interest from my colleague local property manager Linda Chattan of CIF Property Management. In conversations we’ve had subsequent to the article, she’s given me some current indicators as to the rental income one might expect in different local areas (City of Santa Cruz, unincorporated areas of Santa Cruz County). For those encouraged to pursue their ADU she has expressed a willingness to help pencil out a realistic financial budget using actual available loan packages and current market rates. She can be contacted at CIF Property Management

At her suggestion I also followed up to find out more about a grant program reportedly offered by the City of Santa Cruz in support of a 2002 City initiative to actively promote ADU construction within City limits. In my subsequent conversation with Housing Programs Coordinator Norm Daly, he confirmed that the 2002 program offering outright construction grants is in fact defunct, funds having been expended since 2006 or so. This prompted Linda Chattan to ponder if there is any initiative afoot to implement another grant program in Santa Cruz or other local jurisdictions: please stay tuned on developments.

Scherer Carriage House
http://www.silvernailarch.com

Finally, just to keep the discussion revolving around things architectural (after all, this is an architect’s blog!), I proffer just one example of the many ADUs we’ve designed over the years, this one the Scherer Carriage House, built way back in 1998. The Carriage House, located in the unincorporated area of Santa Cruz County, is an example of a detached Second Unit having a housing element over a 3-car garage. Private access to the unit is afforded by the exterior stair to the left of the image.

We hope you enjoy and are stimulated by the possibilities we have evoked. If you are inspired to post your comment, please don’t hesitate to click the link at the top of this article to “Leave a reply”.

Our website of course is www.silvernailarch.com where you will find many more examples of our work as well as of course our contact information. We look forward to hearing from you!

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