More than 30 percent of the country’s accessory dwelling units (ADUs) are in California. This is likely because living in California can be expensive, and ADUs offer a solution. They provide affordable housing and can also generate income for homeowners. So, whether you’re looking for a place to live or want to make some extra money, adding an ADU to your Los Angeles home can significantly increase its value.
Now, you might wonder, “How much extra value does an ADU really bring to a Los Angeles, CA property?” Well, the answer isn’t one-size-fits-all. It depends on a few things.
In the following blog, you’ll discover how an ADU can boost your real estate property’s value and we’ll talk about the factors that play a role in this increase.
Does an ADU Add Value to Your Home?
Yes, adding an ADU to your home can increase its value, just like other home improvement projects. In fact, it can boost your home’s value by hundreds of thousands of dollars, especially in Los Angeles, California where property prices are very high.
So if you’re a homeowner, you can take advantage of this by building an ADU. This can be a smart way to get a good return on the money you invest.
In fact, some real estate experts are saying that adding an ADU is like making money effortlessly. They believe that ADUs can help you make a profit from your property.
But don’t just take our word for it. Let’s look at some local examples to see how you can build an ADU for less money than it will increase your home’s value.
Typically, it costs about $350 to $500 to build one square foot of an ADU, but when you sell your home, you can fetch prices of around $800 per square foot and beyond. Hence, adding an ADU can have a high return on investment!
Before we continue, it’s important to note that there aren’t a lot of homes with ADUs on the market just yet. So, our information is based on early data. This means we can’t guarantee exactly how much your ADU will increase your property’s value, but we’re keeping a close eye on this trend as more homes with ADUs are sold.
Ready to unlock your property’s potential with a custom ADU? you can schedule a free consultation with LUX Construction Group and get an estimate from our experts.
How Does an ADU Add Value to Your Home?
ADUs (Accessory Dwelling Units) offer several financial and social advantages. They not only make your property more appealing to potential buyers but also provide a flexible and practical solution for affordable housing.
Let’s look at some of the ways ADUs can add value to your property in the short and long term:
- Increase Property Value: Adding an ADU to your property can boost its resale value by around 30%, depending on its size and where it’s located.
- Rental Income: ADUs allow homeowners to generate extra income by renting them out, which can help recoup the initial project costs over time.
- Excellent Return on Investment: Investing in an ADU often proves to be a financially rewarding decision, with a high return on the money you put into it.
- Intergenerational Housing: ADUs provide the option for elderly family members to live on the same property, allowing them to age comfortably in their own space while staying close to family.
- Semi-Independent Living: ADUs also enable older children or young adults to have a degree of independence while still being connected to the main household.
ADUs are versatile and can serve various purposes, offering significant value to homeowners depending on their unique needs and project specifics. Continue reading to discover more about how ADUs can benefit you.
How Much Does an ADU Add Value to a Property in Los Angeles?
The increase in the value of your home because of an ADU can vary based on different things like why you built the ADU, how big it is, where it’s located, and what type it is.
Generally in Los Angeles, adding an ADU can make your home worth between $250,000 and $550,000 more right away. Over a longer time, your home’s value can go up even more as property values increase with time.
Factors That Determine ADU Value Addition
The value an ADU (Accessory Dwelling Unit) adds to your home depends on several important factors. Here’s a simplified explanation:
- Current Property Value: If your home is currently worth $400,000, adding an ADU can make it worth about $120,000 more, which is roughly 30%. However, this increase can vary depending on the size of the ADU. Bigger ADUs with larger budgets tend to add more value.
- ADU Type and Size: Different types of ADUs come in various sizes. The square footage of your ADU matters because it affects how much value it adds. You can estimate the added value by multiplying your home’s value per square foot by the square footage of the proposed ADU.
- ADU Build Quality and Features: The specific details of your ADU project matter. Using high-quality materials, unique features, and creating appealing living spaces can add hidden value to your home.
- Local Housing Market: Your home’s value can also be influenced by what’s in demand in your local real estate market. For example, if buyers are looking for features like home offices or sauna rooms, having these in your ADU can make it more desirable and increase your property’s worth.
- Costs and Investment: While building an ADU may come with permitting and other expenses, when you look at the bigger picture, it’s usually a worthwhile investment. You’re likely to recoup the project’s cost within a few years.
These factors we’ve mentioned are essential to consider, but there may be other factors specific to your situation. However, the most significant factor determining your ADU’s value is the type of ADU you’re building, which we’ll discuss next.
How Do Different ADU Types Add Value to Your Home?
As we’ve talked about before, how much your ADU is worth depends on different factors. So, yes, some ADU types are worth more than others.
The most valuable kind of ADU is one that’s separate from your main home, like a detached ADU or a granny flat. Next in value is an attached ADU that’s connected to your main house. The third most valuable is when you convert a space inside your house, like a garage or basement, into an ADU.
Detached ADUs are like separate small houses that can be as big as 1,200 square feet. They’re usually more spacious than other types of ADUs and give the people living in them more privacy because they’re not connected to the main house.
Imagine you’re building a detached ADU that’s 1,000 square feet in size. If we consider that, on average in the state, each square foot of your property is worth about $500, your property’s overall value could go up by around $500,000! That’s a significant increase!
According to the Los Angeles ordinance, if you want to attach an ADU to your main house, it can’t be bigger than half the size of your current home.
So, if your house is 1,200 square feet, your attached ADU can be up to 600 square feet. This might make your property worth $300,000 more on average across the state.
It’s a good increase in value, but it’s not as much as you’d get if you built a separate ADU, which could add even more value to your property.
Turning a space you already have, like a garage or basement, into a living area can be cheaper than constructing a separate ADU.
However, these conversion projects don’t increase the total area of your property, so they don’t increase its value as much.
While conversions do make these spaces suitable for living, keep in mind that you won’t be able to use them for their original purposes anymore.
How Can You Benefit From ADU Rentals
Renting out your ADU can be a smart way to make money without putting in a lot of effort. Let’s take a look at what you can benefit from short-term rentals (STRs) and long-term rentals (LTRs).
Short-term rentals (STRs), which you can do through websites like Airbnb, have become more and more popular recently. If you’re situated in a tourist destination or other popular area, you shouldn’t have trouble finding people who want to rent your space.
Depending on your ADU’s amenities, size, and exact location, you might be able to charge a higher per-night fee. Just remember, however, that there are local municipality regulations that govern short-term rentals.
If your local government doesn’t allow short-term rentals (less than 31 days), you can consider renting your space for longer periods, like a month or more, to make money without too much hassle.
Long-term rentals have some advantages. You won’t have to clean and maintain the place as often, and it’s simpler to take care of. You can decide whether you want to rent your main home or the additional living space (ADU) and temporarily live in the other one. It gives you flexibility and a way to generate income.
ADU Rental Income in Los Angeles: What Can You Expect?
In Los Angeles, if you have a small ADU (like those made from converting existing spaces and are less than 400 square feet), you can typically rent it out for around $1,200 to $2,500 each month.
If you have a medium-sized ADU (which is between 400 and 800 square feet), you could expect to earn roughly $1,500 to $5,000 per month by renting it out.
And if you have a larger ADU (sized between 800 and 1,200 square feet), the monthly rent you can charge might range from $2,500 to $5,000.
Can an ADU Be a Good Investment?
Absolutely, it’s pretty straightforward! Understanding how much value an ADU can add and choosing the right type of Accessory Dwelling Unit for your needs and budget might seem a bit tricky. That’s where we come in – we can guide you through your options and help you decide what’s best for you and your property.
Having an ADU has become more popular recently. It can boost the selling price of your home and make it more appealing to potential buyers. This is especially true if your house and ADU are located in a desirable neighborhood or near the beach.
No matter which type of ADU you choose, you can be confident that it will significantly increase the value of your home. All three ADU types are great options, depending on your specific situation, and we’re here to help you figure out which one suits you best.
If you want to get the most out of your investment, it’s important to work with a reliable contractor who won’t surprise you with hidden costs and fees. LUX Construction Group provides comprehensive services, including design, permits, and on-site construction. We build your ADU in our facility after a quick site survey and can typically deliver it in less than six weeks. If you’re ready to invest in your future, don’t hesitate to reach out to us today.
Get Instant Value with LUX Construction Group!
Now is a great time for homeowners who have a backyard or extra space they can transform, and who can afford to build an Accessory Dwelling Unit (ADU) using a loan or their savings.
LUX Construction Group offers a straightforward step-by-step process for qualifying, designing, getting permits, and building your customized ADU. Building your ADU has never been more convenient, so why wait? Start building your ADU today with us today!