Recent transactions for SFHs with ADUs in the Bay Area

16 Replies

For a lot of you, whether to build an ADU or not depends on the resale value/appraised value after the ADU construction. The same applies to me - I personally built an attached 630 sqft ADU in San Jose back in 2019 (more details here: https://www.biggerpockets.com/...) and I'm now building a detached 1,200 sqft ADU in Santa Clara (more details here: https://www.biggerpockets.com/...), so I constantly track the transaction values for SFHs with ADUs in the Bay Area.

I found some recent transactions data (almost all from second quarter of 2021) in the bay area that might be of interest to you: 

You can see that in all of these cases (whether with detached or attached ADUs), ADU added more value than the estimated construction cost, which shows that building an ADU can be a proven strategy for bay area home owners to not only improve cash flow, but also immediately add equity value. Buyers are willing to pay $$$ for additional flexible spaces that can be used as office, gym, guest home for elderly parents or adult kids, or simply as rental to help pay off the mortgage. This might not apply to other lower-cost areas, so please do your own research if you are in areas like SoCal or Portland.

However, I do think that one of the biggest mistakes when building an ADU is to overspend on an ADU. You definitely want to make sure your construction cost doesn't exceed the potential value an ADU can add. So picking the right ADU design and the right team to work with is critical. Let me know if you are looking for referrals. 

yea, we actually converted our existing garage into a 425sqft ADU for around $50k including labor and materials
and now we're going to build a 650sqft new more modern looking garage/office/storage for ~$150k
so all in around $200k invested, but we're adding 625sqft total.  which would've cost us around $450k going with any of those ADU companies out there right now.

Originally posted by @Yi Chung Chen :

yea, we actually converted our existing garage into a 425sqft ADU for around $50k including labor and materials
and now we're going to build a 650sqft new more modern looking garage/office/storage for ~$150k
so all in around $200k invested, but we're adding 625sqft total.  which would've cost us around $450k going with any of those ADU companies out there right now.

 Wow!! Kudos to you! The one you did looks amazing!! Please do share tips on how you pulled this off with only $50k!

contractor is unlicensed, before you hate on him, he's very skilled, here are some images of his work on my main home

In terms of the ADU, we even valued the kitchen/family room, and bath is very luxurious :P

yup, pulled owner permit on the main home remodel and all inspections passed and closed.

and now in the process of getting owner permits for legalizing the garage -> ADU conversion as well as the new garage/office/storage.

have got to know a lot of the city people, Sarah Shull (DM me for her email) is suuuupppppperrrr helpful.  She even got a senior permit specialist to help and upload all my docs for me so that I didn't have to sit through one of those virtual appointments.  She's so amazing!

yea, I designed everything in Keynote (I call it KeynoteCAD 😝) and was lucky enough my contractor understood everything we wanted.  

have some sexy flush baseboards with 1/2" reveal, floating peninsula island, hidden doors, pivot doors, concrete (concreate.net) panel feature wall, wood panel kitchen ceiling with 1/2" gap, and LEDs galore.

contractor nailed it!

Finding a good, skilled handyman that charges less than licensed contractors is a great find. 

I do want to point out the process is full of risks.  Many unlicensed handymen are unreliable and often unskilled.  It appears you used him for smaller projects, gained some trust/confidence in his reliability and skillset.  This is the process I recommend for anyone that wants to attempt to do what you did.  If they hire a handyman that has not yet earned their confidence in reliability, work quality, and work price, they may be more likely to get burned than to get the high quality workmanship that it appears you receive. 

In summary, vet anyone you hire.  If you go the unlicensed route you are taking additional risk (reliability, work quality, insurance, etc.), have little recourse if something goes wrong, and are at risk of having the work shut down if the the project has a cost over $500 (a license is required for work over $500 - seems too low for current coastal Ca wages).  The unlicensed contractor has their own addition risks for work over $500 that can include fines, unenforceable contracts, etc.  Unlicensed contractors should be vetted more thoroughly than licensed contractors.  

I regularly use unlicensed contractors for various small jobs. By regularly I mean a lot, I have two handymen that I am virtually their only customer.  Note they know their limits and I recognize jobs that warrant licensed work.  For example, I need a retaining wall replaced.  It is not very high (~2’) but fairly long (~125’).  I plan on using a licensed contractor.  It is a big job, far more costly than the unlicensed project cost limit.  It is somewhat visible, so the work will be obvious (I want no risk of the job being shut down).  It is slightly skilled.  I want it to last 50 years, so I want it done right.  Note if it was a higher retaining wall, there could be safety and liability reasons for using a licensed contractor.  What if wall fails and someone gets hurt?  What if wall fails and neighbors yard slides down?  At 2’ these are not much on an issue.  I have two properties with ~15’ walls.  One the original builder put in.  The other was added by an owner prior to my purchase.  Definitely this type of walls should use licensed contractors.  

good luck


Originally posted by @Yi Chung Chen :

yea, I designed everything in Keynote (I call it KeynoteCAD 😝) and was lucky enough my contractor understood everything we wanted.  

 I might be one of the few that got that. haha

There is no such thing as a "unlicensed" contractor in California. A contractor by definition has a contractor license. That includes license, bond, liability insurance and other requirements . A handyman can do $500 in work, labor & material. No you can't break it up by task to evade the law.

https://www.cslb.ca.gov/contractors/journeymen/journeymen_unlicensed_consequences.aspx

https://www.cslb.ca.gov/consumers/report_unlicensed_activity/How_Can_I_Report_Unlicensed_Contractors.aspx

Hello @ChenZhou

I just recently completed my own ADU in the upper peninsula. I've noticed in the listings for the properties you listed the ADUs tend to be assigned their "own" Street number address (Main home 123 Main St & ADU 125 Main St). The City we built in is extremely tight with building ADU, new state law is the only thing that really helped, personally I felt like they hated that I was building an ADU and only allowed designation as Unit B.

Do you think this will hurt resale value as it doesn't have street number second address? With your personal experience how did your appraisal go? 

I didn't build for resale, rather cash flow but i'm still interested in value add. below is the link to my story.

https://www.biggerpockets.com/...

Originally posted by @Ralpheal Doe :

Hello @ChenZhou

I just recently completed my own ADU in the upper peninsula. I've noticed in the listings for the properties you listed the ADUs tend to be assigned their "own" Street number address (Main home 123 Main St & ADU 125 Main St). The City we built in is extremely tight with building ADU, new state law is the only thing that really helped, personally I felt like they hated that I was building an ADU and only allowed designation as Unit B.

Do you think this will hurt resale value as it doesn't have street number second address? With your personal experience how did your appraisal go? 

I didn't build for resale, rather cash flow but i'm still interested in value add. below is the link to my story.

https://www.biggerpockets.com/...

I don't think the address of the ADU makes much difference at all:)