ADU Cost Breakdown

Average Costs by Size (2025)

Size Urban Areas Suburban Areas Rural Areas
400 sq ft $160,000-$200,000 $140,000-$180,000 $120,000-$160,000
600 sq ft $240,000-$300,000 $210,000-$270,000 $180,000-$240,000
800 sq ft $320,000-$400,000 $280,000-$360,000 $240,000-$320,000
1,000 sq ft $400,000-$500,000 $350,000-$450,000 $300,000-$400,000

Cost Components

Pre-Construction (10-15%)

  • Design and architecture: $8,000-$15,000
  • Engineering: $2,500-$6,000
  • Permits: $5,000-$12,000
  • Site survey: $800-$2,000

Site Work (15-20%)

  • Foundation: $15,000-$30,000
  • Utility connections: $5,000-$15,000
  • Grading and drainage: $3,000-$8,000
  • Access improvements: $2,000-$6,000

Construction (50-60%)

  • Framing and structure: $40,000-$80,000
  • Electrical and plumbing: $25,000-$45,000
  • HVAC systems: $8,000-$15,000
  • Finishes and fixtures: $30,000-$60,000

Additional Costs (10-15%)

  • Project management: $10,000-$20,000
  • Insurance: $2,000-$4,000
  • Contingency: 10% of total budget
  • Landscaping: $3,000-$8,000

Financing Options

Home Equity Line of Credit (HELOC)

Overview

A HELOC allows you to borrow against your home's equity with flexible draws and payments.

Advantages

  • Lower interest rates than personal loans
  • Interest may be tax-deductible
  • Flexible draw period
  • Only pay interest on what you use

Considerations

  • Requires home equity
  • Variable interest rates
  • Uses home as collateral

Construction Loans

Overview

Specific loans for new construction that convert to permanent financing.

Advantages

  • Designed for construction projects
  • Can include contingency funds
  • Single closing costs
  • Converts to permanent mortgage

Considerations

  • Higher interest rates
  • Strict draw schedules
  • More documentation required

Cash-Out Refinance

Overview

Refinance your existing mortgage for more than you owe and take the difference in cash.

Advantages

  • May lower existing mortgage rate
  • Single monthly payment
  • Fixed interest rate
  • Potentially tax-deductible

Considerations

  • Closes existing mortgage
  • Higher monthly payments
  • Closing costs required

ADU-Specific Loans

Overview

Specialized loans designed specifically for ADU construction in California.

Advantages

  • Tailored for ADU projects
  • May include technical assistance
  • Flexible terms
  • Lower down payments

Considerations

  • Limited availability
  • May require specific contractors
  • Income restrictions may apply

Grants & Incentives

California ADU Grant Program

CalHFA ADU Grant

  • Up to $40,000 in pre-development funding
  • No repayment required
  • Income limits apply
  • Must be owner-occupied property
Learn More →

Eligibility Requirements

  • California property owner
  • Single-family home
  • Income below county limits
  • Owner occupancy required

Local Incentives

Fee Waivers

  • Impact fee reductions
  • Permit fee waivers
  • Utility connection fee reductions
  • Varies by jurisdiction

Tax Incentives

  • Property tax exclusions
  • Solar tax credits
  • Energy efficiency rebates
  • Depreciation benefits

Energy Programs

  • Solar panel incentives
  • Energy-efficient appliance rebates
  • Weatherization assistance
  • Green building rewards

Return on Investment

Rental Income Potential

City Studio ADU 1 Bedroom ADU 2 Bedroom ADU
San Francisco $2,500-$3,000 $3,000-$3,800 $3,800-$4,500
Los Angeles $1,800-$2,300 $2,300-$2,800 $2,800-$3,500
San Diego $1,700-$2,200 $2,200-$2,700 $2,700-$3,300
Sacramento $1,400-$1,800 $1,800-$2,200 $2,200-$2,700

Investment Analysis

Property Value Increase

  • Average increase: 20-30% of ADU cost
  • Higher in urban areas
  • Varies by location and quality
  • Immediate equity boost

Rental Income

  • Monthly cash flow potential
  • Strong rental demand
  • Inflation protection
  • Tax advantages

Break-Even Analysis

  • 5-7 years with rental income
  • Faster in high-rent areas
  • Depends on financing costs
  • Includes property value increase

Tax Implications

Tax Considerations

Property Taxes

  • Reassessment may be required
  • New construction value added
  • Proposition 13 protections
  • Exclusions may apply

Income Taxes

  • Rental income reporting
  • Depreciation benefits
  • Interest deductions
  • Operating expense deductions

Tax Credits

  • Energy efficiency credits
  • Solar installation credits
  • Local incentive programs
  • Historic preservation credits

Ready to Finance Your ADU?

Let us help you explore your financing options and create a funding strategy that works for you.

Schedule Consultation View Planning Guide