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- Accessory Residential Units (ADUs) have become popular as a backyard addition for a variety of purposes, including residential family members, creating office spaces, and generating rental income.
- Prefabricated ADU kits offer streamlined construction processes and pre-built units ready for assembly by companies such as Studio Sheds.
- The cost of the Adus varies widely, starting at around $40,000 for the base model, and reaching over $250,000 with a larger, sophisticated design, with additional costs for site preparation and utility connections.
Mail order catalogs from the late 1800s can easily lead to home purchases. Sears, Lowbucks and Company offered a five-bedroom artisan-style home with wood, paneling, windows, doors, shingles, flooring and even a kitchen sink for $1,945. Equipment was delivered via a railroad boxcar. The client assembled the house himself.
The concept is alive today. Take Catherine McNeill’s Vashon, Washington, and studios, for example. Surrounded by one of half lavender plants, MacNeal’s 12 x 16-foot retreat was ordered from Studio Shed, based in Boulder, Colorado, and offers an eco-friendly prefabricated construction.
It is sophisticated and modular, with French doors and windows at the front, offering views of the mountains and water. Easy access to Dachysiana’s beds, kitchens, bathrooms and boats and kayaks make it all the traps for a nice getaway.
Known as Accessory Dwellings (ADUs), these small buildings appear in backyards around the country as spaces for in-laws, offices, or rental units.
MacNeal rents Betty’s Blue Studio for 10 months on VRBO.com for between $140 and $165 per night, with the studio’s total rental income of between $22,000 and $27,000 a year.
“It’s small and pretty, so I usually do it myself, so it’s minimal overhead,” she says. “And there are some amenities and improvements every year.”
Manufactured at Studio Shed’s factory, MacNeal’s ADU was built on local government codes and shipped to her as a kit that includes Drywall, lighting, floors, paints, appliances, cabinets, countertops and finishing items. The studio shed contractor built the foundation, assembled the ADU and trimmed the interior and deck. Local technicians completed the bathroom, electrical wiring and heat panels.
When Rene Daniela bought a house in Los Angeles, it already had an ADU. She rents it to family and friends for $3,000 a month or about $125 a night. “Rent is a big investment because rent is a significant portion of my monthly mortgage,” she says.
Budget preparation for accessory housing units
In 2008, Jeremy Nova, co-founder of Studio Shed, created a storage solution for mountain bikes. Fast forward to today, he produces studio sheds of 500 people a year, ranging from $39,000 to about $250,000 for a 12 x 16-foot studio.
When mapping plans, it is important to remember the additional costs. “The main costs other than kits are the foundation and cost of connecting the utility to the site,” says Nova. “Our prices include plumbing and electrical work within the building, but do not include the cost of installing these utilities at the site.”
Nova isn’t the only one who sees great potential in this market. Dwell starts Adus at $439,000. Cottages and Avodus starting at $200,000 start at nearly $230,000. Even Samara, the company of Joe Gebbia, co-founder of Airbnb, offers studio ADUs starting at $279,000.
“Demand for ADUS continues to steadily increase and grow before the (Covid-19) pandemic,” said Gregg Cantor, president and CEO of San Diego-based design and construction company Murray Lampert. “Zoning, parking and building regulations are in the ADU’s advantage here.”
With median home prices in San Diego being over $1 million, Adus is a very popular rental unit.
Things you need to know before building an ADU
A typical time frame for building a separate ADU is approximately 6-8 months depending on the existing conditions, architecture and finish.
“It’s important to have a real estate feasibility study to determine whether research, soil engineering, utility upgrades, or right-late improvements are required,” Cantor says.
Securing a permit begins with submitting construction documents to the local government. “In some parts of the country, the permitting process can take several weeks, while in other regions it can take up to six to nine months,” says Nova. “The laws governing Adus are primarily at the local level, and all states allow them in some places in some ways. That’s a rather local patchwork of regulations.”
Can Adus add value?
Rental income from ADUs depends on where you live, the size of your ADU, and how many bedrooms it has. “In the short term, the added value of ADUs to existing properties is at least equal to the cost of the work,” Cantor says.
The fully furnished Adus that his company builds ranges from $200,000 to $500,000 in design, permit fees, construction costs and ranges.
“In San Diego, property values continue to rise and there is a housing shortage,” Cantor says. “In the long term, Adus adds value and passive rental income and creates more valuable assets through resale.”
