How much it really costs to build an ADU

[Virtual Presenter] Good morning, class. Today, we will be delving into the subject of constructing an ADU and understanding the true expenses associated with this project. ADU stands for Accessory Dwelling Unit, which is a secondary living space on a property. These units are gaining popularity as a means to provide affordable housing options or to add additional living space to a property. However, the cost is a major concern when it comes to building an ADU. This is where an accurate appraisal becomes essential. During this presentation, we will focus on how to confidently appraise the expenses of building an ADU, as well as how to avoid any unexpected surprises along the way. The key to achieving an accurate appraisal is to gather all necessary information, such as materials, labor costs, permits, and any other additional expenses that may arise during the project. This training will teach you the most efficient methods for gathering the essential information needed to accurately appraise the cost of your ADU project. We want to ensure that you are well-prepared and have a clear understanding of the true cost before starting your project. So let's begin and learn the art of accurately appraising the cost of building an ADU. By the end of this presentation, you will have the necessary tools and knowledge to confidently and accurately appraise the cost of your ADU project. Trust me, the time and effort put into this is well worth it to guarantee a smooth and successful project. Let's not waste any more time and embark on our journey of building an ADU. Thank you for joining us, and let's begin..

[Audio] We will now discuss the first big question that is commonly asked about ADU costs - "Why are ADU costs so confusing?" Different cost estimates for the same project are not uncommon, which may be due to varying perspectives on what is included in the cost of an ADU. Some contractors and articles may only consider construction costs, while others factor in additional aspects such as preconstruction, design, and site preparation. It is important to clarify the purpose of the ADU and gather all necessary information in order to accurately appraise the cost and avoid any surprises. The location and type of ADU project can also greatly impact the cost. Thank you for listening and please proceed to the next slide for more information on the cost appraisal process..

[Audio] The pre-construction phase is an important part of accurately appraising the cost of building an ADU. It includes everything that happens before construction begins, such as feasibility analysis and pre-planning. Site surveys may be necessary and must be factored into the overall cost. The main pre-construction cost is for designs and plans, which involve hiring professionals to bring the owner's vision to life. Obtaining necessary permits is the next step, with fees paid upfront and the possibility of additional impact fees depending on the size of the ADU. Permit expediter services are also an option for a smoother process. Soft costs, including title 24 and soil reports, must also be considered. The percentage of project costs typically allocated to pre-construction is 15 to 25%, but this may vary depending on the complexity of the project and site conditions. This sheds some light on pre-construction costs and their contribution to the overall cost of building an ADU..

[Audio] The next step in accurately appraising the cost of building an ADU is site preparation. This process is not the same for every lot and you may not need to consider all of the costs. For example, if you want to build an ADU in your backyard and there is a garage already on the lot, you will need to consider the cost of demolishing it. Even if you are converting the garage, it may be more cost-effective to knock it down and build a new structure in its place if it is in poor condition. Grading and excavation are also common site prep costs, which can depend on the slope of your lot. If your lot is flat, you may not have to factor in this cost. However, utility upgrades such as sewage, water, and electricity are usually required for every ADU. In some cases, the main panel of the primary home may not be sufficient and an upgrade or additional panel may be needed. Access issues can also impact the cost, especially if there is a narrow driveway or fencing and retaining walls that need to be removed or worked around. Finally, the construction costs for different types of ADUs can vary greatly and are also influenced by location. Let's continue learning about accurately appraising the cost of building an ADU..

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[Audio] In the previous slides, we discussed the factors that can affect the cost of building an ADU. Now, let's explore the specific numbers and the impact of different types of ADUs on the overall cost. Slide number 6 provides a breakdown of the average cost for new construction ADUs. This information is relevant for both detached and attached ADUs, as the influencing factors are similar for both types. However, the cost can vary significantly depending on the size and design flexibility. The cost for building an ADU from scratch falls between $150000 and $500000. In some cases, the cost may even reach up to $700000, as was the case for a project involving two connected ADUs. While this may not be the most cost-effective approach, the owners were satisfied with the end result, which is ultimately what matters. Each individual will have their own priorities and preferences when it comes to their property. Slide number 6 also includes the cost per square foot. However, it is important to note that this metric is not a reliable way to determine the project cost. Many sources, such as Facebook, Reddit, and contractors, may provide rough estimates of the cost per square foot without thorough evaluation or plans. This can be misleading and often inaccurate. Why is the cost per square foot not reliable? This metric does not provide a precise estimate of the project cost. Despite the common misconception that it is an effective way to determine cost, it often leads to miscalculations and incorrect expectations. In summary, the cost of building an ADU typically ranges from $150000 to $500000, with outliers reaching up to $700000. While the cost per square foot is often used to estimate costs, it is not a reliable approach. It is crucial to gather all necessary information and evaluate each project individually to avoid any surprises in the cost. On to the next slide..

[Audio] Slide number 7, out of 9, will cover key factors that can influence the cost of building an ADU and how to avoid any surprises. The size and square footage of the project, material choices, design complexity, land slope, and existing structure quality can all impact the cost. Labor and market conditions also play a significant role, as there is currently a shortage of construction workers in California and nationally, leading to higher costs. Interest rates and real estate prices can also affect the total cost. When collecting bids from contractors, it's important to understand what's included and what's not, such as labor and materials. While most estimates will include rough materials, finished materials like flooring and countertops may not be included. To accurately compare bids, carefully review and understand what is and isn't included. Overall, the size, finish level, design complexity, labor and market conditions, and materials included in the bid can all impact the total cost of building an ADU..

[Audio] We are now on slide number 8, out of 9, where we will be discussing the important topic of accurately appraising the cost of building an ADU. In order to avoid any unpleasant surprises during the project, it is crucial to gather all necessary information. During the bidding process, it is important to keep in mind that certain tasks are typically not included in the bid. These tasks include landscaping, appliances, connection fees, permit fees, and anything related to utilities. You may need to seek additional services for these tasks, and it is important to inquire about them when selecting a contractor. Additionally, it is important to have a contingency plan when budgeting for your project, as costs and timelines may fluctuate. When evaluating your budget, make sure to include all costs discussed, from the soft costs to move-in. If you plan on renting the property out, there may be additional expenses to consider, such as property management fees. When selecting a contractor, it is important to consider the "pyramid of contractors", where you must choose between cost, quality, and time. It is unlikely to find a contractor who offers top-quality work, low prices, and immediate results, so it is important to determine your top priorities and make a decision accordingly. On our final slide, we will be wrapping up our discussion and providing some key takeaways. Let's move on to our last slide to see the conclusion..

[Audio] After covering all the necessary information on accurately appraising the cost of building an ADU and avoiding unexpected expenses, it's time to wrap up the presentation with some final thoughts. Understanding and comparing bids can be a challenging task. It is important to keep in mind that no two bids will be exactly the same and they can vary significantly in price. Therefore, it is crucial to compare all bids in a fair and accurate manner. For example, you may receive two bids for the same project, but one may include site preparation and the cost of finishes while the other may not, making it difficult to compare. The same applies for allowances, which are the costs of finished materials included in the total project cost. It is important to have a clear understanding of what is included in each bid in order to make an accurate comparison. To make the process easier, it is essential to ensure that all contractors bidding on the project have the same scope, meaning they are provided with the same materials, timeline, and payment terms. Whether financing or paying in cash, it is crucial to communicate this to the contractors. In conclusion, accurately appraising the cost of building an ADU and avoiding surprises is essential for a successful project. By following these tips and thoroughly comparing bids, you can avoid any unwanted surprises and feel confident in your decision. Thank you for listening, and best of luck with your ADU project..