Home Addition or ADU: how to make the right decision

You have most probably seen me writing previously about accessory dwelling units (ADUs). Why am I writing about regular home additions today? Well, ADU is a house hack for an addition that you might not know about.  This is a good example of how our construction concierge can save you money even before you start working with us.

Before a major remodel, undertake a small construction project.

I say to everyone planning a major remodel, build an accessory dwelling unit first. Read on why it is not as crazy an idea, as it sounds initially.

TLDR of ADU advantages over a regular addition (both add space and increase property value):

1. Flexible use for a lifetime – suitable for family members, extended family and even strangers when the family has no need for additional space any more;
2. Does not have the same tax consequences as a traditional home addition for those who bought home 10+ years ago;
3. Trains you on how to tackle major construction projects on a small scale without disturbing the life of the main house;
4. You can live in it while you are doing that remodel in the main house and save on rent.

Are you considering a home addition? If so, you’re likely excited about the possibilities, but also anxious about the potential challenges. A comprehensive home addition planning guide can make the process easier by helping you understand what to expect and how to prepare. We’ll provide an overview of the key steps in the process and some tips for making your dream a reality. Let’s get started!

What Is Home Addition Planning?

Home addition planning generally refers to the process of designing and drawing up blueprints for an addition to an existing home. This can be a small room, such as a bathroom or kitchen, or a larger space, like a garage or extra bedroom. 

The planning process usually begins with an assessment of the needs of the homeowners. This includes taking into account the desired size and layout of the new space, as well as any special features that may be required, such as plumbing, HVAC systems or electrical wiring. 

Once the needs of the homeowners have been determined, the next step is to create a floor plan for the new space. This will include specifying the location of walls, doors, and windows, as well as any built-in features that are desired. Finally, once the floor plan has been approved, with the building permit in hand, construction can begin on the new home addition.

Things To Consider For Home Addition Plan

House additions are big projects. There are many things you need to take into consideration before you start such as: the cost, the building permit, the zoning of your property, the size and the location of the addition, if you need an architect, a structural engineer, a designer, or a contractor.

First, you need to determine how much money you are willing to spend on this project and if you will need to finance it. Home addition costs vary greatly, and most people use a mix of financial instruments ranging from home equity line of credit and home improvement loan to good old credit cards. Project cost is driven by the type of work required. Second-story addition will be more expensive as it often requires structural work. Laundry room and bathroom addition needs plumbing work and also brings additional costs.

It is important to factor in the cost of permits and other necessary approvals. Consider property taxes – they will increase proportionally to additional square footage. However, significant changes to existing house may trigger re-assessment of your overall property taxes.

You will need to get a building permit from your city or county. Building permits are a separate art form. It all starts with research. Research the zoning of your property so that you know what is allowed to be built on it. Your city ordinance will have front, side and rear yard setback requirements determining how many feet away from the property lines you can build. Some local building codes have plan height requirements and limit the possible height of the building. All this influences where the new addition will be located.

Then think about size of the addition. Local codes will also drive the maximum extra square footage you can add. Do you want it to be an new room, for example a primary bedroom or a new living room? An extension of an existing room? An in-law suite? A detached garage? Remember, these days we have the opportunity to add space not only through conventional additions but also with garage conversions.

To become a good investment and have no issues during permitting process, an addition construction project needs an experienced designer or an architect to develop architectural plans. For additional foundation work you will need to engage a structural engineer.

Will you need a general contractor? If you are going to do most of the work yourself or act as an owner-builder, then you won’t need a contractor. If you are going to hire someone to do most of the work for you, then you will need to get bids from different contractors. Look for home addition contractors who have years of experience – they are the ones who can help you find most cost-effective ways to add needed square feet.

Hire a qualified contractor who has experience building additions. Be sure to get several bids and ask for references before making your final decision. Once construction begins, be sure to stay involved and inspect the work regularly to ensure that it meets your expectations. With a little planning and effort, your home addition will be a success.

If you are overwhelmed by the entire project, you may consider hiring an independent project manager to look out for your interests during the construction.

Knowing what you want ahead of time will make the process go more smoothly. The more details – the better. Great home additions increase property value. Making detailed plans and checklists is a great place to start.

How To Plan A Successful Home Addition?

A home addition is a great way to add extra living space to your home. But before you start construction, there are a few things you need to do to ensure the project is successful.

First, your contract with the general contractor. A Must-have. No questions asked.

Next, building materials. You may be eager to start you project as soon as you got your building permit. But wait – do you have all of the necessary materials on site? Recently, a lot of projects are stalled because of delays on deliveries. Your construction crew leaves the site to start a new project elsewhere and you lose momentum. Ask you contractor for the schedule and items that might stop construction.

Benefits Of Home Addition Planning

Any remodeling or home improvement project involves a certain amount of planning in order to be successful. This is especially true for a home addition, which can be a complex undertaking. By taking the time to develop a detailed plan, you can help ensure that your project stays on track and on budget. 

In addition, a well-planned home addition can add value to your property and provide you with the extra space you need to live comfortably. If you are considering a home addition, be sure to consult with a qualified contractor who can help you develop a plan that meets your needs and fits your budget. With proper planning, your home addition can be an enjoyable and rewarding experience.

What Is The Cost Of A Successful Home Addition?

The cost of a successful home addition can vary depending on a number of factors, including the size and complexity of the project, the materials used, and the location of the home. However, there are some general guidelines that can help to estimate the cost of a home addition. For instance, in the Bay Area most additions will cost between $300 and $700 per square foot. 

You will not be spending less or more per square foot, this is not the point.  Labor is expensive, cost of materials has increased, this Bloomberg article has done a good job describing the situation. If you are thinking about a major remodel in California today, you must be either brave or pretty desperate. Or both.

There are two other line items that most miss until it is too late.

What additional expenses will you incur with a home addition?

One is the cost of additional upgrades to the main house, often required by the city as part of the project. The second is a tax increase on the whole house after you are done with your major remodel. ADUs do not trigger any of it.

Well, #1 is not entirely true. You might need to upgrade a distribution panel to accommodate an additional load from an accessory dwelling unit, or do some work to clean up the sewer system. When you think about it, both sound as side benefits that let you avoid unforeseen expenses down the road. For those new to construction, unforeseen equals “have to be fixed urgently”  equals “homeowner is a hostage” equals expensive. Additional benefit: these items do not have the same amount of impact on the main house and everyday life of its residents, as updating all plumbing and electrical fixtures might have.

As for #2, when you decide to add a room to the main house, and do some improvements to it that an Assessor office calls “substantially equivalent to new”, it qualifies as re-appraisable new construction, i.e. higher taxes. If you bought your property more than 15 years ago and are still paying the taxes based on that value, this might come as a very unpleasant costly surprise. Think of a difference between taxes on a home appraised at $300,000 and one appraised at $3,000,000. Feel the difference. And now think of it as an annual expense.

Side benefit of an ADU as a home addition

If you were thinking of moving out of the house for the length of remodel, you will save money on rental too. Renting is an expense, ADU is an investment that shows up as increased property value as soon as you are done with construction.

The current market is ruthless not only to first time home buyers. Everybody is talking about Californians leaving the State, and yet California real estate remains as hot as ever. Real estate investors and house flippers compete with first time home buyers. Former luxury condo dwellers compete with those who want to upsize their current homes. I have friends with budgets ranging from $1.5M to $3.5M who cannot find what they need.

Is home addition the right move?

To sell and move? Or to stay and build? Know thyself. What sounds easier: packing and unpacking in a new place or living on a construction site in a familiar environment?

And when deciding between a move or a home addition, do not forget the closing costs associated with selling and buying real estate. Check here for all costs associated with building an ADU.

Side note for first time home buyers: please read home inspection reports. This is a potential source of major maintenance expenses. I see people making emotional decisions and closing their eyes on problems with foundations, termite inspections, wiring. There is no doubt, this stuff will catch up with you when you are living in the house. And this is exactly why more than 60% of first-time homebuyers regret their home purchase decision – they underestimate maintenance costs.

My experience tells me that to get the right answer, you need to phrase the question correctly. So, if you come to an architect to discuss the home addition, this is exactly what you will get: a discussion on a way to enlarge an existing house that will take months to pull a permit for.  Let us take it one more step back, you will start by looking for an architect to help with your home addition, so the pool of references that you have will include just that: professionals versed in home additions. A limiting factor for your options in today’s market.

I know about it from personal experience. I have been doing my local construction project before I became familiar with the benefits of ADUs, and certainly before I became a certified ADU Specialist.  None of the people I talked to mentioned ADUs. And believe me, I talk to a lot of professionals.

Look for professionals with ADU experience.

Now as I am involved with ADU professionals across the country, there is one takeaway – you need to find people who have done ADU projects before. It is still, what they call, a fairly young “cottage” industry. A builder who has an ADU to show is still a rare bird. If anyone tells you they have built hundreds – run away. There is only one company I know that has been doing it long enough, but they had never answered my emails, so I cannot mention them in good faith (what if you read this, reach out to them and they won’t answer your emails either…).  All other companies are making their baby steps.

I have spent last year interviewing ADU professionals in 20+ live events. I have interviewed companies that were mentioned in newspapers as ADU builders before they built their first unit. A Working Group of the Casita Coalition, the only statewide, multi-sector organization that brings together all key players to remove policy barriers for small homes, is starting to build an ADU Registry. Here is what we all agree on – when vetting your ADU builder, ask if they have built homes before in your neighborhood. Note, I have said homes, not ADUs. Talk to their clients. Study the way they make their estimates.

Or let our construction concierge do the work for you. We will help you figure out the trade offs between addition, Accessory Dwelling Unit and Accessory Structure. We have a specialized crew for every option.

So there you have it, our comprehensive home addition planning guide. We hope this has been helpful and gives you a good starting point as you plan your own home addition project. If you have any questions or need help getting started, feel free to reach out to us – we’d be more than happy to help. Good luck!