Creating a Budget for Your ADU Project: A Step-by-Step Guide

Adding an ADU, or accessory dwelling unit, to your property can be a great way to increase the value of your home and provide additional living space for your family, friends, and relatives. But before you get started, it’s important to plan ahead and create a budget for your ADU project. Knowing what costs are involved will help you make informed decisions about how much money you need to set aside for your project, what type of ADU project you can afford, how best to finance your project, and how long the project should take. 

In this guide, we’ll walk you through each step of creating a budget for your ADU project, so that you can ensure its success from start to finish.

Determining the ADU’s Size and Layout

The first step in creating a budget for your ADU project is to decide how large of an ADU you want, since size is the main determinant of project cost. If you’re planning to convert your garage into an ADU, this will be pretty straightforward, although you may decide to expand the structure by building extra square footage. In California, ADUs can be as small as 150 square feet to as large as 1,200 square feet, and most cities will allow 2-story ADUs.

A good way to determine the size of the ADU you want is by the number of bedrooms. Generally, you can assume that:

• Studios range from 300-500 square feet
• 1-bedroom units range from 400-700 square feet
• 2-bedroom units range from 600-900 square feet
• 3-bedroom units range from 800-1,200 square feet

Calculating Building Costs

Once you know the estimated square footage of your ADU, it’s time to calculate the approximate cost for its construction. This includes materials such as lumber, drywall, insulation, cabinetry, appliances, and heating and cooling systems, as well as labor costs like plumbing, heating, air conditioning installation, electrical work, painting, and more. All these are called “hard” construction costs. Make sure to include “soft” costs, like creating the architectural plan set and fees associated with permits in your calculations too.

For a garage conversion in the Los Angeles area, the “hard costs” of construction (labor and materials) often range from $250-350/sqft, while for new construction, hard costs tend to range from $350-450/sqft. Our ADU Budget Calculator can provide you with a line-by-line estimate of likely project costs.  

Estimating Interior Design Costs

Give some thought to what furniture and decor items you want for the ADU’s interior design. This will include any flooring, kitchen appliances, and other fixtures that are required for a comfortable living area. Additionally, if there is any landscaping involved with the ADU project (e.g., fencing or decking), then take these costs into account too. Of course, more premium items will increase your costs, but you might decide this is worthwhile depending on how you want to use your ADU.

Forecasting Pre-Construction Expenses

Before any dirt starts moving in your backyard, you’ll need to work with an architect and designer to create an architectural plan set. This typically includes a boundary survey, project designs, a structural engineering report, and an energy efficiency report (this is called Title 24, referring to a section of the California building code). If you’re planning to build a new ADU (rather than convert an existing structure), you’ll also have to equip it with solar panels. 

Also, when you apply for a permit from your city, you’ll have to pay permitting fees, and you may be charged fees associated with new construction, such as a school district fee and an energy surcharge. These fees vary from city to city.

Be sure to factor these “soft” costs into your overall budget plan ahead of time. Our ADU Budget Calculator includes estimates for typical pre-construction expenses.

Preparing a Timeline of Payments

When you sign a contract to work with an ADU contractor, you won’t pay for the entire project up front. Instead, you’ll make 4-8 payments over the course of the project, with payments due when major milestones (like permit approval) happen.

So when creating a budget for your ADU project, ask your contractor when payments need to be made throughout each stage of construction – from initial deposits on materials and labor services through final checks before completion. That way, you can plan ahead for when payments will be due, helping you and your contractor complete the job efficiently and effectively.

Setting Aside a Contingency Fund

As anyone who’s done a home renovation project before can tell you, the best laid plans sometimes go awry. That’s why your budget should include a contingency fund, which is an amount of money set aside to cover any unexpected costs that can arise throughout a construction project. Rising materials costs and supply chain delays are unfortunately common these days, and planning for some cost escalation will help you to be fully prepared for your ADU project.

We recommend that you budget a construction contingency equivalent to at least 10% of projected hard costs. Setting aside these funds now ensures that unexpected expenses won't catch you off guard during your ADU build process.

Conclusion

Following this step-by-step guide will help you proactively manage your ADU project, while keeping project expenditures under control too. With accurate estimates of construction costs, plus consideration for interior design items and pre-construction expenses, plus budgeting for contingency, you can confidently go forward with bringing your vision for extra living space into reality. 

Ready to create your project budget? The Revival Homes ADU Budget Calculator can help you get started. And we’re always available to answer your questions.