Case Study of Building an Accessory Dwelling Unit (ADU)

Is your unused bonus room filled with clutter? This could be an unseen source of income for you, and it could help the planet. Or at the very least, it could be one step towards easing the California housing supply crisis.

California is having issues providing enough housing for its residents. As a result, the state has started fast-tracking the development of Accessory Dwelling Units (ADU) to offset this crisis. ADUs can be anything from a long-forgotten laundry room to a garage and can be converted into everything from a studio apartment to a mother-in-law unit. They are designed for the resident who cannot afford a larger place to move into.

​And now is the perfect time to embark on this project. The real estate industry is undergoing a makeover, as the buying frenzy of 2021 has become a memory and the rising mortgage rates and inflation woes of 2022 start leveling out. Economists predict that in 2023 the market will rebound, and real estate sellers will be the biggest winners.

ADUs are a way to not only aid the California housing crisis but to invest in your home and make some serious bank. And ADUs aren’t just for multi-unit property owners, Rick says. Pan American is currently planning to build an ADU for a young man who bought a single-family home. “He wants to rent it out as a way to offset his mortgage,” Rick says. Ultimately, it’s a win-win situation for both property owners and the state.”

​We asked Rick to share with us the company’s recent ADU success story. Following is what he told us.

Converting a Bonus Room

The first step in building an ADU is to look through your property and see which room lends itself best to being converted into a living space. At the request of a client, Pan American recently converted a bonus room into living quarters.

How to Get the ADU up to Code

“The next step is to see if your project qualifies as an ADU,” Rick says. Once you have ascertained that, you will need to meet with the proper people to ensure you meet all state requirements in order to get an ADU up to code. “We met with architects and engineers to draw up the plans. Then the city had to review them and approve them.”

What Renovations Do You Need to Make?

For the bonus room, Pan American installed bathrooms, washers/dryers, along with all the normal fit and finishes.”

How Did You Increase the Home’s Value and Cash Flow?

“On average an ADU costs about $100,000 and increases the value of your property to about $300K, earning you a return of $200,000,” Rick explains. This is in addition to the additional monthly cash flow it will bring from future tenants.

There’s No Better Time Than Now

Rising interest rates and inflation costs have begun to level off, and housing inventory remains tight, with prices on existing houses still high. So that while more people will be priced out of buying a home, they will be able to rent instead. Building an ADU is a way to help these people find a home they can afford,

Why You Need Pan American Properties

So before you store away your great aunt’s china in that bonus room, give it a second look as a potential for an additional source of income. And hire Pan American Properties to help you with all phases of this process. They are a one-stop shop and have everyone from architects to contractors on staff, ready to help you. They will do an assessment of your place to see if it qualifies and then build it according to code. Call today at (888) 754-9700 or email [email protected] to learn more.

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