With property values continuing to rise in nearly every California neighborhood, adding an accessory dwelling unit (ADU) continues to be way to increase the living space in your property and potentially increase the value of your home. So, is this the year you decide to make a big change and add an ADU to your property? Could you convert your garage to additional living space, add a “granny flat” or otherwise expand your home?
Decide what your goals will be for the ADU
Before you start the process of planning an ADU, getting the required permits, and obtaining financing, decide why you want to add it in the first place. Do you have family members who will move in once you have space for them? Or is your family crowded already, and could use the extra space? Each situation dictates a different timeline.
If you’re planning to add an ADU and use it as a rental, are you in financial need, or are your plans more along the lines of increasing your property value over the longer term? If you’re looking to increase your property’s value with an ADU, your project may not be as urgent as one which will accommodate family members or serve as a rental.
Your home value vs. the cost of the ADU
According to Zillow, home sale prices in the Los Angeles-Long Beach-Anaheim metro area are going to increase about 1.4% in 2020. This isn’t quite as much as Los Angeles proper, where home values are set to increase by 3.5%. With median sales prices in the metro area of $443 per square foot compared to the average cost of building an ADU at about $300 per square foot, you will increase your home’s value by about 50% — on average. ADU projects can vary in cost and benefit to your property, so all of these calculations can change.
Interest rates are predicted to hold steady for 2020
Fannie Mae, Freddie Mac, and other home loan corporations predict that interest rates will probably hold steady in the year to come. If you want to increase the space your home has for your family or add value to your property, 2020 can be an excellent year to start a home renovation project adding an ADU. Work with an experienced home lending professional to learn what your options are in an ADU.