Phase Three
Budgeting & Finance
- Estimate your project budget
- Understand the types of financing available
- Know how an ADU might impact your property tax assessment and home value
Project timeline
Budgeting is part of the Planning phase, which typically takes the first 1-3 months. Most ADU projects take 12-18 months to complete, but some extend to 24 months or more.
Step-by-Step
Estimate your project cost
Budgeting Step 1
It is helpful to avoid having a fixed budget total in your head as you explore your options. The San Mateo County ADU Calculator is a great place to start when developing a budget and our free ADU Guidebook goes through many of the details. It provides a rough estimate of costs and potential rental income and will help you understand how choices can impact your budget over time. Cost per square foot is a good way to estimate, though this too can range — a very rough placeholder for you to use is $450-$600 per square foot for construction (“hard costs”) and design and fees (“soft costs”), depending on your design and the materials you chose.
Keep in mind that initial cost estimates are likely to change as you move through the process, and you won’t know what it will truly cost until you talk to a professional. Current workforce and supply chain disruptions are causing prices to move up and down more quickly than usual. If you have a tax or financial advisor, it is always good to check in with them early on too.
Our ADU Exercises provide some questions to ask and space to record your thoughts.
ADU construction costs (“hard costs”) vary significantly depending on materials, site conditions, and other factors. Hard costs are typically 85% of your total project budget, and can range from $30,000 for a simple interior conversion to $400,000+ for a large detached ADU with high-end finishes on a hillside lot.
Despite what many think, smaller ADUs may cost almost the same as larger ones. Many costs like foundation, kitchen and bathroom work only increase slightly for larger ADUs. Kitchen costs will range from $25,000–$50,000 with each bathroom ranging from $15,000–$25,000.
New construction, both detached and attached, tend to be the most expensive. Garage conversions are not much cheaper than new construction if at all. Conversions of interior space (basement or otherwise) are often the cheapest.
Other factors:
- Quality of interior finish work and amenities
- Architectural form and details
- Extent of utility, structural, mechanical, electrical, and plumbing upgrades required
- Required site upgrades (sidewalks, sewer and water)
- Whether sprinklers are required
- Whether doors and windows meet emergency exit standards
- Lot complexity (slope, trees, fault lines, etc.)
“Soft costs” include everything aside from the physical construction of your ADU and typically total about 15% of your total budget. This can include (but is not limited to) fees for:
- Design (architect/designer)
- Engineering (structural, civil, geotechnical)
- Assessments and surveys
- Permitting
Design fees cover the work of your design team and vary with every project. Clarify what costs are and are not covered by your contract with your design team (including surveying, engineering, and others).
Permitting fees are charged by your local government, the State, and other agencies. Some fees are based on the details of the project while others are fixed. Surprisingly, local governments do not control many of the most expensive fees, like school and water fees, which are assessed by other agencies and dependent on the size or location of your ADU.
The fees listed below are often required, but the exact list of fees and when they are due will vary depending on where you live. Contact Planning staff for more information. Fees may include:
- Planning review/permit fees
- Plan check fees
- Building permit fees (generally due when your permit is issued)
- Other department fees (staff will let you know what applies to your project)
- School District fees (ADUs over 500 SF)
- Development impact fees (ADUs over 750 SF)
- Utility and sanitation (contact utility agencies as you develop the design for your ADU for more information)
See the Permitting page for an overview of permits.
Key Resources
ADU Calculator
Estimate the cost of your ADU project using real-world numbers, changing the size, construction type, rents, and other variables to see how they affect your budget.
Assess financing options
Budgeting Step 2
Many homeowners use a mix of options to finance their ADU, like their own savings and assets, funds from family, and/or loans. It is strongly recommended that you do not begin construction without your financing plan in place. Be sure to factor in potential rental income since it will be a source for repaying any loans. The San Mateo County ADU Calculator can help estimate income. Our free ADU Guidebook and accompanying ADU Exercises can help you assess your options.
Financing options include:
- Cash savings or other liquid assets
- Loans from family or friends
- Home equity
- Loans from a lender
Key Resources
Frequently Asked Questions
Here are a few of the most frequently asked questions about budgeting and finance. See the content above for more guidance, resources, and tips for all steps of the process.
How much does it cost to build an ADU?
In general, it is helpful to avoid having a fixed budget total in your head as you explore your options. Cost per square foot is a good way to estimate, though this too can range — a very rough placeholder for you to use is $450-$600 per square foot for construction (“hard costs”) and design and fees (“soft costs”), depending on your design and the materials you chose.
The San Mateo County ADU Calculator is a great place to start when developing a budget. It provides a rough estimate of costs and income and will help you understand how choices can impact your budget over time.
How am I going to pay for an ADU?
Many homeowners use a mix of options to finance their ADU, including savings, funds from family, and/or loans. It is strongly recommended that your financing is in place before construction starts. Be sure to factor in potential rental income since that will help you repay loans. See our ADU Exercises for more details on financing options.
What if I don’t have a lot of money available right now to build an ADU?
If you have equity in your home, a cash-out refinance or home equity loan/line of credit (HELOC) might work for you. Financing is typically unavailable for homeowners with lower income and insufficient home equity, but in the past the California Housing Finance Agency (Cal HFA) ADU Program has provided a grant of up to $40,000 to qualified homeowners – check their website for the most up-to-date information. Local financial agencies may also offer financing support or specialized loans, such as the San Mateo Credit Union.
How will building an ADU affect my taxes and property value?
Adding an ADU will likely affect your property taxes and the resale value of your home. However, your primary house will not be reassessed, and your property taxes will only increase based on the added value of your ADU. For example, if you build an ADU that adds $150,000 to your property value, and your tax rate is 1%, your taxes will increase by 1% x $150,000, or $1,500 per year.
Building a JADU will have a significantly smaller impact on assessed value. In some cases, your taxes will not increase at all. Home sharing will also not increase the assessed value of your home. Generally, garage conversions will not raise your tax bill as much as new construction, but they will also not add as much value.
Each property will require a one-on-one analysis to determine the added value of an ADU, so contact the San Mateo County Assessor’s office once you have an idea of your plan. They will be able to provide you with a rough estimate of tax implications.
Adding an ADU may impact your income taxes as well. This can be rather complicated, and it’s best to discuss these with a tax advisor.
Can I eventually sell my ADU separately from the main building?
No. You will need to record in a deed restriction for the property that the ADU cannot be sold separately from the primary home. Contact local staff to find out what local rules apply.
What about the money I could make renting the ADU?
Rental income is a major benefit of having an ADU or JADU on your property – for many people, it provides flexibility in their budget or an opportunity to grow their savings. In many places, you cannot rent your ADU for less than 30 days at a time (e.g., AirBnB, Vrbo), and shorter-term rentals are not permitted. Review your local ADU rules to see if your property is subject to restrictions. The San Mateo County ADU Calculator can help you estimate how much rental income could be generated by your new unit.
Estimate the cost of your ADU project
Play with size, type of construction, rents, and other variables to see what affects your ADU cost plus possible return on investment (ROI).
