How to build your Accessory Dwelling Unit with confidence in 5 steps

Milestone by milestone

An Accessory Dwelling Unit (ADU) is a second building in the backyard of your main house. It’s a great way to add value to your property while also providing extra space for yourself or family members, to rent it out for extra income or move into it yourself and rent out your main house.

To build an ADU, one has to take on a full-scale construction project. Do not let anyone fool you that it is not.

Frankly, the often-promoted five steps to build an ADU sound more like stages or phases that often take months to complete:

  1. Decide what and where you want to build 
  2. Consider solutions and trade-offs between design options, time and budget 
  3. Document your final design for your permit plan set 
  4. Apply for and get your building permit
  5. Build it

We have recently interviewed a homeowner, who is about to start her fifth construction project in the Bay Area. It took her close to a year to get ready for permit application for her 5th house! It takes time to make decisions. But the more restrictions you have, the easier it becomes. Why? Less to choose from!

Two dwellings

If you want a healthy dose of common sense, and if I have any superpowers, this is definitely one of mine, we have outlined here 15 milestones that need to happen before anyone moves into your new ADU:

  1. Initial Project and Property Information
  2. Options to be considered
  3. Scope of Work and preliminary estimate
  4. Plan Set
  5. Permit Submittal
  6. Plan Check Review by the City
  7. Building permit
  8. Signed contract with builder
  9. Foundation: forms, city inspection, pouring concrete
  10. Framing stage: walls, roof, windows and doors
  11. Rough plumbing, electrical, mechanical (bathroom fans and HVAC)
  12. Insulation
  13. Drywall
  14. Interior Work
  15. Final inspection signed by the city building inspector
ADU at night

With a modular accessory dwelling unit the milestones will look slightly different:

  1. Initial Project and Property Information
  2. Options to be considered
  3. Scope of Work and preliminary estimate
  4. Site specific plan set prepared
  5. Permit submittal
  6. Plan Check Review by the City
  7. Building permit
  8. Foundation: forms, city inspection, pouring concrete
  9. Underground plumbing and electrical
  10. Getting traffic permit to crane the unit
  11. Unit delivery (exciting day with a crane set up)
  12. Connecting the unit to utilities
  13. Building the deck (most modular units are 2 feet above ground)
  14. Final inspection signed by the city building inspector

What to Expect: the ins and outs of building a backyard home.

It’s hard to build an ADU or a new house, but it’s usually not as hard as it seems. The key is taking time to plan out the whole process. If you know what to expect, you can save yourself stress, money and time. Let us look at what you should expect when building a new backyard home.

build an ADU
Project & Property information.

Step One: Decide what and where you want to build

Define your WHYs. Design professionals call this stage Programming.

When you start building a new home, you should take the time to do some research. You should have a good idea of what you need and what you want in a home. Sit down and think about your wants and needs and make sure you know what you are looking for.

Why are you considering the ADU? This is the most important step in the construction process. As soon as you find that personal reason, the process becomes less stressful and more successful. Promise. And it is the same for any construction project. You can read more about it if you are interested in building a true home.

Big table at the entry to ADU

Why are you starting this project? Let me give you two examples:

Say, you have decided to build an ADU for rent. You have to be super careful with numbers, this project has to make sense financially. You will look around your neighborhood to see if renting is in demand, you will check the price per square foot of the homes sold to make sure you do not spend more on it than necessary. You also have to think hard about what finishes you use to manage your future maintenance costs. Will you allow your renters to have pets? This pays better, but your flooring and walls have to be able to withstand the aggressive use.

The second scenario is when you are building an ADU for a family member. This family member will have an opinion on design decisions. Your design will need to address age, lifestyle, color and other preferences of the future resident. We see people add skylights for better lighting all the time even though we tell them straight away that it will increase the budget by more than $1,000 for each skylight.

So even when building an ADU for a family member, we would advise you to watch the numbers but we bet you will be less sensitive to budget in this case. After all, can you buy a new property in the Bay Area for the price you will pay to build an ADU?

In some situations, even if the number seems mindboggling at first, it still makes sense , and even your financial advisor will tell you so. Imagine, you had spent $500,000 on your 800sf ADU (paying a what seems crazy amount of $625 per square foot).

But you live in the neighborhood where a square foot of living space sells on real estate market at $1,000  and gets appraised at this value – at the time you receive your occupancy permit, you have added  extra $187,500 to your property value ( in addition to $500,000  you had spent on the ADU). If the rates were any better, I would suggest looking into refinancing straight after you complete your ADU.

Ideally, you will have a list of things you want to see in this house. If you do not know how to go about creating this list, I have written a whole article about it. The size of the house does not matter.

To reiterate, when building a new home, it is important to establish a budget. It can help you make sure that you don’t exceed it. It sets the limits to what you can do. This will help you to figure out the size and design. Do not be afraid to discuss with whoever is designing your house how much you are willing to spend on it. I can achieve the natural light with two sliding doors $1,000 each or with a folding door that costs $9,000 in Home Depot.

The choice will depend on restrictions that you as a homeowner have told me to observe. Remember, anything custom size costs at least double of what a regular size costs, whether it is doors, windows or cabinets.

There is a reason that goes back centuries why the architects start with programming (what rooms, what size), then move to conceptual design and only then to detailed design and drawings (visualization).

Looking for a shortcut? Interested in some guided selection?

We have a library of 255 floor plans for you to select from.


Cost per square foot to build an ADU

Cost per square foot is a bad indicator of ADU budget.

We encourage you to determine your budget at the start of your project – before you start calling the builders. In September 2020, you could definitely build a 500-550 sf ADU with the most modern design you have ever seen for $200,000, even on a lot with a slope. This is close to $400 per square foot with a fixed contract that covers everything. Today – in 2022 –  the same house will set you back some $250k, if not more.

We have seen anything from $250 per square foot to $1000. In fact, the sky is the limit – one of the home builders who never builds ADUs could not say no to a client with an ADU budget of $1.5M.

Just remember that the smaller the ADU, the higher the cost per square foot.

Please check the costs for San Mateo county here.

You can also use the calculator by LoanDepot to determine how much an ADU might cost in your county.

If anyone is quoting you a much lower number, check their license and references, and ask if they have ever built a house before – not a kitchen remodel, not a bathroom remodel, not even a whole house remodel – a completely new house from the ground up.

To build an ADU without surprises along the way, these costs should be accounted for in your budget – building materials and labor:

— engineering drawings, architect and/or designer fees

— city fees for building permits and inspections

— connection to utilities (fees and trenching)

— foundation, framing, insulation, roof

— siding, windows, doors

— plumbing and electrical

— finishes (wall tile, paint, flooring)

— transportation costs and crane rental if modular

— site setup (i.e. fence, temporary toilet for the crew)

— water heater (heat pump), air conditioning unit

— solar panels (required for new construction since January 2020)

— appliances (stove, hood, fridge, washer, dishwasher)

— kitchen cabinets, closets

— landscaping

You will have to add some furniture and light fixtures on top of the above.

ADU appliances

What exactly you need to know about your property before you sign off your ADU design?

It is often called Zoning information. Are you in a flood zone? WUI zone? Are there any easements that run through your property? Do you have an existing site plan/boundary survey? Any chance of a soil report by a geotechnical engineer?

If you plan to build an ADU, check with your local government first to make sure you’re allowed to do so. Won’t it be devastating to spend money on design only to find out that your property is in high fire severity zone and additional dwelling is not allowed?

You will need to obtain a permit from your city or county before you start construction. Check with local authorities about building permits and other requirements.

If you will be talking to the planner yourself, ask questions. When you hear no, ask more questions. Why? There is always a solution. A different foundation type. A different dwelling type. Sometimes even setbacks can vary within one city. As an example, Los Altos has an exception for small lots that allows smaller side setbacks. Who knew? Oakland has special regulations for small lots too.

Determine how much land you have available.

Before you begin planning your ADU, determine how much land you have at your disposal. This will help you figure out whether you should build a freestanding structure or attach it to your home, or even convert existing space (garage, basement or even a dining room or spare bedroom).

Land for your ADU

Attached ADU, Detached ADU or a conversion of existing space?

A freestanding unit has its own foundation and is not connected to your home. There are several benefits of the freestanding units that make them more attractive than attached ADUs:

  1. they do not affect taxes on the main structure in most jurisdictions (check your local Assessor’s office to be 100% sure)
  2. they do not depend as much on the state of utilities in the main house
  3. they do not cause any demands from the cities to upgrade plumbing, wiring or lighting fixtures in the main house

Conversions are typically the least expensive options because they require less materials and labor. Watch out for structural integrity though.

Why some builders charge for a feasibility report?

Any modular builder will charge you for the feasibility report – and the costs range from $1000 to $4500 – because it takes time and knowledge plus in case of a modular unit, only 30% of lots are feasible for use of the crane. Feasibility report includes the analysis of your city regulations, site analysis, and in our case – several options to build – often with different construction methods.

By going with feasibility report through a single builder – you lock yourself into the construction methods and vendors that this builder knows. What if there are other options that will work better for your site and situation? We work with several vetted construction crews that cover a multitude of construction methods, and we can get you to permit faster.


Something to consider when dealing with costs per square foot:

Do small houses cost more per square foot ? Yes. The smaller the ADU, the bigger the cost per square foot.

Why do smaller homes cost more per square foot?

Do you want to know the main culprit? Fixed costs spread over a smaller number of living space. Here is an example:

ADU matching main house
Trade-off between available options and budget restrictions

Step Two: Consider design solutions

Here comes out first milestone: Reality check.

At this point you have learnt zoning rules and considered your design options, have looked at schematic concept design in designer terms. This schematic design is a good basis to document expected scope of work and develop a construction estimate on the basis of it. Can’t have one without the other.

At the next milestone, that we call Budget approval and financing, it will be time to figure out how much money you can afford to spend on construction costs.

Homeowners typically use a mix of resources to finance their ADUs – from cash to HELOC to refinancing. There are also often state or local grants that you can benefit from. Talk to a mortgage broker familiar with ADUs to advise you.

Compact backyard home, ADU
Drawings, calculations, reports, surveys

Step Three: Document your final design

Now you are ready to sign off your preliminary design. Have you reached the next milestone?

Let us run a quick check. Would you like to learn about easy design red flags at this stage?

Design: Does it match the looks and style of the main house? Your city is most likely expecting it. Floor plan: the unit has living area with space for a bed, kitchen and bathroom. The kitchen has a sink, a fridge, a cooktop and a hood. Good so far?

Exterior: Where is the front door to the unit? Think about how your future resident will walk to your ADU. The fire department will ask for a clear path to your unit. There is not much leeway around it. These guys do not go by local or State laws. They are governed by federal laws that have not heard about ADU revolution yet. Solar panels marked up? These are big items that will slow down your permitting process if not completed correctly.

There are certain interior design details you need to catch early to avoid expensive change orders down the road.

When it comes to comfort it is often the tiny details that make all the difference.

Think of this before you sign off your design to be passed on to your structural engineer.

As mentioned before, all the little details on the plans mean your comfort when you use the ADU after it’s completed and when you move in.

Choose smart materials. Select good quality windows for better insulation and smaller monthly utility bills. Use metal roofing and flame-retardant siding to minimize fire risk in a drier, changing climate.

Use an open-concept design that ties together the living and dining areas, complete with folding or sliding doors to take full advantage of Californian weather year-round. That said, make sure you have egress windows and doors to make the Fire Marshall happy during permitting phase.

Let natural light in, though it is a balancing act with the Title 24 energy efficiency compliance, but stretch it as far as you can. Obviously, it is easy when you have unlimited budget to select vaulted ceilings and floor to ceiling windows. But you can also achieve the same effect if you take regular size 8 feet high doors and place transom windows above. ADUs are compact homes, but it is amazing how much bigger the rooms feel with higher ceiling than they actually are.

Use same type of flooring for seamless transition, and not just between rooms and bathrooms. Hope you are squeezing in a patio into your design. If yes, have the tone of the floor pick up on the tone of the outside, so when you do have an inside-outside room, you don’t go from one extreme contrast to the next.

Think of storage upfront. Think of cabinets to hide appliances and achieve that clean look that everyone covets these days. On a budget? Check IKEA. You can achieve a lot if you tell your designer upfront that you need to fit in IKEA cabinets between walls. After all, these cabinets do come in standard sizes. More difficult to achieve when you are working with existing walls, as in garage conversions, but even then – not impossible.

Custom built cabinets are expensive. Planning for storage at design stage, you save yourself money down the line.

Design development complete? Time to proceed to architectural drawings, our milestone IV.

Before you sign off your designer or architect, go through the drawings together item by item – to make sure nothing got omitted during design phase. All taken care of? Time to get your structural engineer to work on the structural calculations and drawings, our milestone V.

Title 24 is a separate report that is part of the plan set. It does not replace the Calgreen checklist that has to be filled in with features that you are planning for marked up.

Only when you have all this in one pdf, you have a complete plan set – construction documents ready for processing by the local planning and building departments. Congratulations, you have arrived at milestone VI.

ADU with solar panels

Step Four: Permit submittal

There is a number of forms that need to be filled when applying for your building permit. But first, let us decide who is applying for permit. You as an owner-builder? Or your architect, designer or contractor? A permit expeditor? Whoever it is, she should be motivated to make sure you actually get the permit, and not charging you by the hour as soon as she gets a comment from the city.

Big milestone at this point? Milestone VII: Paying city fees.

When it comes to ADUs or any other construction projects, there are planning and building plan check and permit costs traditionally covered directly by the homeowner. The County charges plan check fees when they start processing the permit application, and once the review is complete and they are ready to issue the permit, they will charge building permit fees.

These plan check and building permit costs are typically excluded from any contracts with a contractor, mainly because one never knows what they will be at the time of signing the contract. We can offer the best guess estimate.

interior design for ADU
Building permit, contract, crew mobilization

Step Five: Construction

Finally, you get a call that your building permit is ready. Building permit milestone VIII reached.

Who is pulling it, in other words who is taking on responsibility for this construction project? You as a home owner? Or your contractor? If the latter, the contractor will need to carry or buy the local business license. In some cities it takes a day, in Berkeley it might take good four weeks.

Now it is time to check and confirm scope of work. The city might have made some comments that will make it necessary to update the construction scope and budget.

Time for your next milestone: Sign the contract with builder.

Wait, who is doing construction administration, scheduling, supervision? If you do not know the answer to this question straight away, then it will be you. Sorry.

Schedule vs milestones vs inspections vs payments

These days the contractor often does not own a schedule, he is reliant on his suppliers and vendors – unless you do your homework and have everything stored in the backyard that he needs to build with no interruptions.

There are several items that are vital.

Exterior doors and windows. One cannot complete the building envelope and proceed from framing to insulation without it.

Plumbing fixtures, including valves. One cannot pass rough plumbing inspection without installing of shower valves, and that is one of the first inspections to pass.

Selected electrical appliances. Your electrician has to know the amperage of the appliances to make sure he brings the correct wiring to it at the rough stage, straight after framing.

Detailed layout of the kitchen. Your plumber has to know where to put vents and water pipes.

Couple of words on inspections and payments. My rule of thumb is to tie payments to the milestones, and milestones to inspections. What are the typical milestones?


ADU with stucco exterior

Typical construction milestones usually found in a job card that reflects all necessary city inspections:

X Foundation: forms, inspection, pouring concrete

XI Framing stage: walls, roof, windows and doors

XII Rough plumbing (all faucets and valves), electrical (all wiring for outlets and switches), mechanical (bathroom fans and HVAC)

XIII Insulation

XIV Drywall

XV Final


Thus, your payment schedule should include several of those milestones, and please make sure that the last payment is not less than 20%. You don’t want your contractor to lose interest in your project just because there is not enough money left and there is some new and shiny project looming elsewhere. You’d be surprised at how often this happens if you have just 5% as the last payment.


Patio for ADU

You as a homeowner are looking forward to a completed unit. Looking forward to someone moving in. What you should be getting from your contractor is a completed unit with an occupancy permit. And yes, your final payment should be contingent on this.

An accessory dwelling building (unit) is a second dwelling on the single-family property. It’s a great way to add value to your property while also providing extra space for yourself or family members. To make it happen, one has to take on a full-scale construction project. 

We have covered what you need to know before going through the process. It will help you know what to expect before, during and after starting to build your ADU. Look for these 15 milestones when building your own Accessory Dwelling Unit (ADU) or your house. The milestones are universal.


ADU built

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