This post was last updated on October 17th, 2022 at 09:54 am
If you live in San Francisco, you’re no stranger to large bills – it is an expensive place to live whether you rent, own, or sell your home fast in San Francisco. However, if you are facing down some pricey mortgage payments, a big source of additional income these days is adding an Accessory Dwelling Unit. While not every jurisdiction allows these spaces to be short-term rentals, that is one of the main uses that people find for them. However, that’s not the only way that they can defray costs for you. If a family member lives with you and contributes to utilities or grocery costs, that can be a major help, and if you get a long-term renter, you can count on a reliable source of income that can help you pay that mortgage.
But not every home is already outfitted with a great ADU, so adding one may require some upfront cash. The best way to price out your potential ADU is to look at the assets of your existing home and decide which option brings you the most value for how hard it is to accomplish.
Less than $10,000: Adding a bathroom or partitions/walls inside your existing house.
In many homes, the layout is such that adding an exterior door, a bathroom, or even just a perfectly located wall creates separate dwelling units. Some of these units can simply be a wing of the home, meaning that it must be accessed through the main home, but others can have a separate entrance that includes its own living space, bedroom, and bathroom. The extensiveness of the ADU will vary, and can be more expensive than $10,000 if you are doing major remodeling or renovation to achieve your goals.
$15,000 and up: Finishing a garage or basement into an ADU
Finishing a basement or garage into an apartment can be an affordable in-between option. While finishing an unfinished space does require some investment, you typically have strong control over the layout and can create a separate entrance as part of the work. Depending on the current state of your garage or basement, this cost could be substantially higher, but such changes can still pay for themselves over time in the increase in home value and any rental income you receive.
$45,000 and up: Adding a separate guest house on your property
If your home’s main asset is that you have enough land to build a separate house, that can be the most appealing option. While the cost is higher when you need to build from the ground up, guest houses are both more appealing to short-term and long-term renters, since they create a separated living space and give some sound privacy as well. When you go to sell a home with an exterior guest house ADU, you’re likely to see a larger bump in home value than if you finish the basement or add a bathroom, though be aware that home value won’t automatically go up 100% of what you spend on the guest house. Look for the return on investment to include any added utility you get from having the guest house as well as any rental income.
