Whats up with the new "We can help you build out a casita/ADU on your property" ads ?

Question

Not sure if you guys have seen all these companies pop up offering homeowners to tap into their equity and build out guest houses on their property? What is that all about?

Denette R. · Answer

I'm not sure what AZ has incentive wise but in Los Angeles because there's a housing shortage there are some incentives that you can take advantage of like...

CalHFA ADU Grant Program

The California Housing Finance Agency (CalHFA) offers grants up to $40,000 to cover pre-development costs such as architectural plans, permits, and utility connections. To qualify, applicants must:

• Have a household income less than $84,160, which is 80% of the area median income for Los Angeles County.  
• Be the primary resident and owner of the property. 
• Apply through a CalHFA-approved lender or nonprofit partner, such as Neighborhood Housing Services of Los Angeles County.

The grant funds must be used for pre-construction costs, including:

• Architectural designs
• Permits and impact fees
• Utility hookups and energy reports 
• Soil tests and property surveys

These funds are not available for construction costs.

Local Incentives in Los Angeles

2. Fee Waivers and Reductions

Los Angeles and other California cities may waive or reduce certain fees for ADU projects, including:

• Sewer and water connection fees
• School district fees for ADUs under 750 square feet 
• Permit processing fees

These waivers aim to lower the overall cost of building an ADU.

Additional Financial Assistance

3. Affordable ADU Loan Program (Orange County)

Although not specific to Los Angeles, this program offers eligible homeowners up to $100,000 in construction loans at 0–3% interest rates, provided the ADU is rented to a very low-income tenant for ten years. The loan is forgiven for each month the ADU is leased, with full ownership granted after the affordability period.

Also keep in mind

• Property Taxes: Adding an ADU will increase your property tax bill, as the value of the ADU is added to the property’s assessment. For example, a $200,000 ADU could raise annual taxes by approximately $2,500.  
• Permitting and Construction Costs: While state laws have streamlined the permitting process, building an ADU still requires an investment of time and money. Homeowners should plan accordingly and consider potential financing options.

Garrett Creswell · Answer

Arizona cities like Phoenix, Tempe, and Tucson have loosened zoning restrictions to allow more homeowners to legally build ADUs (Accessory Dwelling Units) or casitas (often used interchangeably).

• Phoenix passed a policy in early 2024 allowing ADUs on most single-family lots, aiming to boost affordable housing and multigenerational living options.
• Requirements were simplified: smaller lot size minimums, reduced parking requirements, and less red tape for permits.

Phoenix passed a policy in early 2024 allowing ADUs on most single-family lots, aiming to boost affordable housing and multigenerational living options.

Requirements were simplified: smaller lot size minimums, reduced parking requirements, and less red tape for permits.

With the new law passing, builders and developers saw a new market open up:

• They’re targeting homeowners who want to create rental income (especially with the Phoenix rental market staying strong). Or helping families who want in-law suites or guest houses without moving.

They’re targeting homeowners who want to create rental income (especially with the Phoenix rental market staying strong). Or helping families who want in-law suites or guest houses without moving.

Hence, the ads—these companies are selling:

• Full-service ADU construction (design, permits, build)
• Rent-to-own or financing options
• Long-term investment strategies for property owners

Full-service ADU construction (design, permits, build)

Rent-to-own or financing options

Long-term investment strategies for property owners

Companies are marketing these as a way to generate passive income or boost property value

Garrett Creswell · Answer

Most likely these companies combine traditional construction margins with creative financing or investment models. I don't work for or with them but I would assume

• Construction Markup – Like general contractors, they build in a margin on materials, labor, and overhead. For example, it might cost $80K to build but they charge $120K.
• Financing Kickbacks – Some partner with lenders and earn referral fees or offer in-house financing to profit from interest or servicing.
• Revenue Sharing Models – Some newer companies will build the ADU for little to no upfront cost in exchange for a cut of future rental income (often through Airbnb).
• Prefab/Modular Units – By using standardized designs and factory-built models, they reduce build time and labor costs, increasing profit margins.
• Add-Ons – Upselling property management, furniture packages, solar, or landscaping adds extra revenue per project.

Construction Markup – Like general contractors, they build in a margin on materials, labor, and overhead. For example, it might cost $80K to build but they charge $120K.

Financing Kickbacks – Some partner with lenders and earn referral fees or offer in-house financing to profit from interest or servicing.

Revenue Sharing Models – Some newer companies will build the ADU for little to no upfront cost in exchange for a cut of future rental income (often through Airbnb).

Prefab/Modular Units – By using standardized designs and factory-built models, they reduce build time and labor costs, increasing profit margins.

Add-Ons – Upselling property management, furniture packages, solar, or landscaping adds extra revenue per project.

Each company is most likely going to be a bit different, but those are the common ways they monetize the service.

Francisco Milan · Answer

How are these companies that provide Full service profiting ?

Whats up with the new "We can help you build out a casita/ADU on your property" ads ?

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