Tiny houses and Airbnb are rising in popularity. This is partially due to prime locations like Placer County with a dozen colleges and universities. Not only is there a need for short-term rental property, but also off-campus living.
Accessory dwelling units (ADU) are becoming popular for vacation destinations and student housing. Families are also using ADUs for multi-generational housing.
Have you heard of granny flats or mother-in-law quarters?
Building a guest house is also in vogue. Small self-contained units allow friends and relatives to visit without overstaying their welcome. The best news is that most ADUs can be a revenue source when not used by family and guests.
ADUs are sought after because they deliver increased property value. Is it time for you to build an ADU in Placer County? Read on to learn how you should build an accessory dwelling unit on your property.
Accessory Dwelling Unit—ADU
Building a guest house or a granny unit is not rocket science. City and county programs exist to make your project a viable dream. Some of the best locations in Placer County includes the following cities:
Auburn
Colfax
Granite Bay
Grass Valley
Lincoln
Nevada City
Rocklin
Roseville
ADU contractors have been able to work seamlessly with the above cities. The entire experience goes well when you follow the proper steps. ADU contractors like Built Environment have long-term relationships with many zoning boards.
Airbnb Opportunities
There are a growing number of Airbnb locations in Placer County. Prices start at $63/night and go up to $347/night. The most popular are well-priced ADUs.
Parents visiting their kids in college or university enjoy staying in ADUs. Others like to find locations in the woods, on lakes, and in quiet areas. Still, others prefer to be near the locals and take part in hometown events.
There are plenty seeking an Airbnb for their trips. This drives the average ADU to pull in $1,500 per month in extra income. But before you can turn your ADU into a revenue stream, you’ll need to understand what it takes to build one.
Planning an ADU
ADUs vary in size from 150 sqft. to about 1,000 sqft. or so. But don’t let these small homes fool you. They still need permitting and must meet housing codes.
Your plan must include foundation work and the connecting of utilities (water, sewer, and electric). Insulation is also a key factor as part of the weatherproofing process. If your ADU is for aging parents, you might need to address handicap accessibility guidelines.
Rental Planning
Some individuals rent backyard homes for short-term rentals like Airbnb. In the case of long-term rentals, consider researching your city and county credits and tax breaks for renting to seniors and the disabled.
Certain qualifying mortgages can be up to $50,000 at 0% interest when renting to the disabled or seniors.
Check with Placer County to learn what ADU rules exist for rental units. Your construction will also need certain approvals from the zoning board. Your entire project needs approval from your city as well.
Working with the City
All builds need a review of the building ordinance. You’ll also need a plat of survey or some level of plans that show official property lines. And, you’ll want to understand the permitting process.
Verifying your utilities is mandatory before construction. You'll need to know if connecting to the house's sewer and water will work, or if you'll have to pay to connect directly to the city.
If you have a well or septic system, you may have to replace the entire system to meet the code. Having an expert assessment done, by a company like Built Environment, you'll learn if you can add on to your septic and avoid the expense of replacing it.
City Pushback
Sometimes special permitting gets involved. Your land might need a variance. If your project receives a lot of pushback from the zoning board, you may need to file an appeal.
Your city may have rules to follow like area or dimensional regulations. Other rules might include set back rules, height restrictions, privacy barriers, etc. Many cities have regulations on how much open space must remain after the build.
The greater the red tape in your city, the safer it is to bring in a seasoned company like Built Environment. They know the business well enough to preclude many questions before they arise.
Construction Estimate
A general contractor with ADU experience can calculate an estimated construction budget. This number will cover from concept to completion.
If you’re going to be the contractor, you’ll want to spend a significant amount of time in research. You'll want a clear understanding of all building elements within the process.
The exception to the rule is purchasing a prefab unit. Those have a set price that includes everything from building the foundation to caulking the attached modules. If you prefer a customized home, you’ll want to consider hiring a general contractor.
Architect and Contractor
You don’t need an architect or a contractor. But things will go easier if you take advantage of their expertise. Some homeowners only involve the architect and contractor for city-related efforts.
The architect is an expert when it comes to getting city approvals for design and permitting. Likewise, a contractor becomes very useful during the inspection and occupancy walkthroughs. Homeowners with little experience prefer that the contractor manage all project milestones.
If you’re interested in a customized ADU, it makes sense to hire both an architect and contractor for the duration of the project. Architects tend to focus on creativity and not cost reductions. Contractors focus on efficiency and buildability.
Built Environment offers both design and build services. They can even act as a translator to make sure that you understand the architectural and design nomenclature. Their build projects span Northern California including Tahoe, Auburn, Meadow Vista, Roseville, Rocklin, and Sacramento.
Placer County Pre-Approved ADUs
After working with experts like Built Environment, Placer County took recommendations and pre-approved three ADU concepts. This reduces the number of steps required through the extensive approval process.
The one drawback to the quick approval process is that Placer County only allows ADU rentals that are greater than 30-days. This would disqualify the ADU for Airbnb use. If Airbnb is your goal, then it's best to have Built Environment walk through the long approval process on your behalf.
Financing Options
Real estate financing is straightforward unless you have certain unique circumstances. This simplicity drives an immediate increase in home value once the city approves your ADU for occupancy.
This built-in value allows some areas to offer loans based on home improvements. Programs may be available if the ADU is modified for a senior age in place program or a disability program.
FHA Home Style Renovation Loan
This construction loan empowers homeowners to do renovations on their property. The loan can qualify for 30-year financings at low-interest rates associated with mortgages.
Reverse Mortgage
Downsizing is an attractive solution for seniors in a financial bind or living on a fixed budget. Many times, the cash from the reverse mortgage can fund the construction. The seniors could then move into their backyard homes and rent out or sell their old primary home.
Cash-Out Refinancing
This option allows owners to refinance their property. This is done by resetting their payment schedule or lowering their interest rate.
Cash is pulled out based on the equity in the home. The cash then covers the cost of building the ADU. This can be done without touching the payments.
Home Equity Line of Credit
Depending on your equity, you may qualify for a home equity line of credit for home improvements. When you draw down on the line of credit, it is at a higher interest rate than a mortgage. The purpose of a home equity line of credit is to maintain proper cash flow during the project.
Self-Directed IRA
An IRA can be used to invest in real estate. By setting up an account as a self-directed IRA, funds from the IRA can be used to build an ADU as an investment property. Most areas that allow this process need a custodian to manage the rental income and expenses.
Construction
This process can take two weeks to two months. Keeping a keen eye on the process is critical to come in within budget. Fortunately, there are design and build contractors that can manage the entire process. They are experts when it comes to feasibility, design, permitting, and construction.
Contractors who build ADUs often can provide turnkey solutions to homeowners. This gives you a single point of contact for your project. It also guarantees your project comes within your planned budget.
DIY Attempts
Many homeowners start the process like a typical weekend project. They learn that there are lots of moving parts that they can’t manage properly within their schedule.
ADU builds require a significant amount of time. The project also requires experience and practice—which most homeowners don’t have. Most home improvement DIYers realize that the workload belongs in the hands of professionals.
ADU Experts—Built Environment
The good news is that ADU projects increase the value of the home. Also, the ADU can drive about $1,500 in monthly rentals. This extra cash flow improves living conditions for those on a fixed income.
Companies like Built Environment specialize in ADUs with great Airbnb potential. They understand the whole process of building an ADU. Their team is able to work from planning to budgeting, and from permitting, to the final build.
Contact Built Environment today to learn about how they can manage your ADU project. It won’t take long to turn some of your equity into a new revenue stream. Join the many individuals living in Placer County with new ADUs that pay for themselves.