So you know you want to acquire a property and add an accessory dwelling unit (ADU). Maybe you plan to live in the main house and make some extra rental income from the ADU, or perhaps you are buying purely as an investment property where you will rent out both the primary home and the ADU.

But now what? Where do you turn to find the right property? What’s the right sequence to tackle the scope of work, budget, financing, acquisition, design and build-out of the property? Read on for more about adding an ADU to your investment property.

Why an ADU vs. other options?

Simple

Add an additional unit without re-zoning and with minimal city involvement. This means a faster process so you can start realizing better cash on cash returns.

Predictable

Build essentially the same ADU on several different properties to keep build & maintenance costs down. We offer standard plans with proven build costs and rentability.

Repeatable

Nearly any residential property is a candidate for an ADU. Some neighborhoods offer better return profiles, but there is room to pick the market you want to focus on.

Why are Accessory Dwelling Units a good investment?

Rental Income Opportunity. Granny flats are an in-demand rental class. A 750 sqft 2BR/1BA ADU that costs $350,000 to build can be rented for $3,000+ per month in much of Oceanside and Carlsbad. Annual cash on cash returns, especially with financed properties, are routinely 20-40% for ADUs.

Increased Property Value. Properties with an ADU sell for a premium since they include an income-producing unit and have more square footage of livable space on the property. Constructing an ADU on your property typically increases the resale value of the property, since the house will be appraised versus other homes with ADUs.

Tax Benefits. Owners can accumulate tax depreciation deductions on granny flats, even accelerating the depreciation to take advantage of tax benefits sooner. If the property is your primary residence, it's wise to build an ADU vs. buy a new property, as the capital gains will be deductible. Read more about tax considerations of ADUs.

Easy Exit Strategy. There is a strong market for properties with ADUs, since both investors and homeowners with extended families are interested in purchasing them. San Diego Realtors confirm that more buyers are looking for homes with granny flats.

What Makes A Good ADU Property?

Learn about the top considerations to keep in mind when you are searching for an investment property that will be able to accommodate an accessory dwelling unit. Not only do you need to think about zoning and setbacks, but also the site costs, which can be one of the most variable components of a project. We'll guide you through the most important watch-outs when looking for a property on which to build an ADU.

What Makes an Ideal Lot for an ADU?

Did you know that you can build more units in San Diego?

In the City of San Diego, it is possible to build additional dwelling units under the “Affordable ADU Bonus” program. For every deed-restricted ADU that may be rented out at moderate income levels, you may build another unrestricted ADU that can be rented at market rates. Check out our guide for required income & rent rate limits that apply (spoiler alert: they are still quite high in San Diego, making this a viable option for investors).

ADU Bonus Program Guide

Why a Price Lock is Crucial for Investors

If you are looking at adding an ADU on an investment property, we know that it is all about the numbers. Even though the state of California has eased the permitting process, it still takes on average 4-6 months to get an ADU designed & permitted. During that time, the cost of your build is typically in flux, as builders won't give a final price until closer to breaking ground. If you're financing the deal, this can be a disaster, as your loan value might not cover the final build cost.

We decided to change that and offer a Price Lock as part of the first part of our design process. That means you will have a guaranteed price within 2-4 weeks of kicking off your project with us. This enables investors and homeowners to plan for the financials of getting their ADU built.

Price Lock at Snap ADU

What's included in the ADU build price?

As you are looking for bids for your ADU project, you’ll want to make sure it’s an apples to apples comparison across vendors. We’ve made it easy for you to know exactly what is included in your investment. You can also request a consult so we can estimate your sitework costs and get you a full proposal.

Floor Plans

Each of our standard floor plans lists the vertical build pricing, which is the cost for the construction of the unit itself including standard finishes. Check out our plans page and click into any unit for clear pricing.

Interior Finish Packages

Most of our investor clients prefer a simple off-the-shelf option when it comes to the interior finishes of their unit. Our standard ADU build prices include all interior finishes, including appliances and quartz counters for durability.

Home Features

We’ve listed the exact build specifications you will get as part of our ADU builds. Check out the list of inclusions for the kitchen, baths, interior features, as well as exterior features and construction specifications.

How many accessory dwelling units can you add to a multifamily property?

You can add at least two detached ADUs, plus convert non-habitable space in a multifamily property. Even a duplex can have two ADUs. Our guide covers the basics of adding ADUs to multifamily investment properties.

Multifamily ADU Guide

What Fees Will Apply to the ADU?

As an investor, you want to know all of the costs for your ADU. While the state and municipalities have waived many fees, some still apply to permitting an accessory dwelling unit, including plan check fees, building permits, and impact fees (for units >750 sqft).

ADU Fees

The Complete Guide to Renting Your ADU in San Diego

We've put together a guide for homeowners and investors that focuses on what you need to know about renting out an accessory dwelling unit in San Diego, including what factors to consider before building, how to optimize design for rentals, and average rental rates by neighborhood.

ADU Rental Guide

SB9 vs ADU Comparison: Weighing Your Options

As an investor, you may have heard about SB9, which allows you to split a property into two parcels. The cost structure of splitting a lot and building a new primary unit has some important differences vs. adding an ADU. The right answer for your situation will depend on a host of qualitative & quantitative factors that we have outlined in our guide.

SB9 vs ADU

Investors and ADU Owner Occupancy Requirements

California law has eliminated all owner occupancy requirements for ADUs permitted between January 1, 2020, and January 1, 2025. And importantly, local governments cannot retroactively require owner occupancy for those ADUs. If you are thinking about adding a Junior Accessory Dwelling Unit (JADU), owner occupancy is required, but there is a potential loophole that would allow an investor not to live on the property. Check out our guide for more info.

ADU Owner Occupancy Requirements