What's the best approach to building an ADU? Here's your checklist.
Initial Project Outline
o Read up on State permit rules which provide the baseline of what you are allowed to build on your property.
Stop by the California Department of Housing and Community Development (HCD)
Read the ADU Handbook
Read the SB-9 Factsheet
o Call or stop by your local municipality to discuss what expanded opportunities they allow to be built on your property.
Note: Not all permit departments are up to speed on State law, or they may be dragging their feet. It may be helpful to bring the ADU Handbook and SB-9 Factsheet for questions. When in doubt, submit your questions to the form in the HCD web site.
Run the (Financial) Numbers
o Schedule an appointment to discuss:
Optimal configuration for maximum rent or sale proceeds. This helps you determine the best number of units, bedrooms and bathrooms to build.
The best loan option to finance 100% of construction with little to no money out-of-pocket. This determines your construction budget.
You may start the loan now or later in the process but get preapproved.
o Talk to an architect or design/build company to begin to add detail to your plan. Expect plans, tests and other pre-permit requirements to take 2-3 months. The more complete your permit application, the faster it will be approved with minimal changes.
o Submit for permits. Expect approval to take 4-9 months.
o After submitting permits, research and secure your construction company. This ensures your project gets on their schedule by the time permits are approved.
o If you haven’t already, secure 100% of needed financing plus 10% in case of cost overruns. Also plan for cash reserves for the end of construction when loan payments are high. Above all, do not run out of money mid-construction.
o Begin construction which should take 4-8 months depending on size and complexity.
o Approximately 1 month from construction completion, advertise for rent on list it to sell to ensure your project quickly starts to cash flow. This also may allow the occupants to choose any final details if desired.
o When construction is completed and you receive the final permit (Certificate of Occupancy), review your construction loan and whether to refinance to a better option. This ensures you pay off your loan quickly at the lowest cost possible.