What is a DADU in Real Estate?

What is a DADU?

A DADU is actually a detached ADU which has no shared walls, and it typically looks more like a condo off the existing property. A few years ago, California passed a law that allowed you to now build the secondary units on the same plot of land and they are considered DADUs. DADUs need to be permitted through the city, which means that you need to get a pull a permit.

There are then certain specifications with regards to building them that need to be met in order to qualify as a permitted ADU. Read on to find out what is a DADU in real estate, and how you can be permitted to build one.

What is an ADU?

An ADU is an “Attached Dwelling Unit.” This is when you have a single family house that has an additional dwelling unit that’s attached by a shared wall or could be in the basement, but either way they’re combined together. An ADU is probably more commonly referred to as a granny flat.

Why do homeowners build a DADU

DADU’s and ADU’s are the next hot trend in real estate. Many people build them to increase the rental portfolio, and actually increase their cash-on-cash returns. This is because you can buy a single-family house build a little DADU or an ADU, and rent it out to collect additional income. This is a great strategy if you have the finances to build a DADU.

Why are ADUs and DADUs so Popular?

The reason ADUs and DADUs are so popular is because there’s such a huge inventory issue in California, meaning there’s not a lot of available property out there. This means that ADUs are in high demand.

The cost of living has increased so much over the last you know 10-15 years in California that people are getting priced out the property. This means people are building secondary homes on their property, to either rent out for extra income, or to house additional family members.

DADUs also increase the value of your property. So if you’re looking to sell your property in the future, building a DADU could increase your resale value.

How Much Does a DADU Cost to Build?

This obviously depends on the size of DADU you’re looking to build, and the materials you want to use. But typically, a DADU will cost around $100k to build. An ADU which is attached to your house can be built for less, meaning this might be more suitable for you if you don’t have a high budget.

What to Consider Before Building a DADU

There’s always different steps and things you want to think about before you decide to build a DADU or an ADU. The first thing you want to think about is what city are you actually operating in. You need to go talk to each city and find out what their zoning regulation loss are, and what they will allow you to do.

Talk to your permit department, and let them know what your plans are for your next potential investment, and they will let you know that will actually work. Another resource is to find a local architect that actually works on DADUs and ADUs. It would be extremely useful to hire an architect that specializes in the city and in DADUs. This person is going to be able to fill you in in all the do’s and don’ts of what you need to do when you’re looking at your next deal.

If you’re looking to build an ADU in Glendale, California, the maximum size this can be is 600 square feet.

Once you complete the first and most important step which is verifying that you can actually build these things, then you want to get into the investment analytics.

Steps to Take Before Building a DADU

  • Contact your local city. Meet with and talk to the zoning department to figure out what they allow and not allow. Your DADU will need to be within a specific size.
  • Look at how much capital you have. When you’re looking at that project, do you have enough money on hand to do the larger project?
  • Verify your bill cost when you’re looking at your performance. If you’re really good re-modeler, building might be a new thing and you might build for more monies. Verifying this cost is going to dictate your all-in capital.
  • Get yourself a good land use attorney. Once you’re done building your single family house, your ADU and your DADU you have to be able to condo them off to be able to sell them correctly. A land use attorney is going to be they work with the county, and the condo them off so you can sell them separately. If you cannot sell them separately, it’s more of an apartment building rather than 3 separate units, and it can substantially affect your resale value.

Maintenance of your DADU

Once you’ve completed constructing your DADU, you must ensure you keep it well maintained so it holds its value. If you don’t upkeep your DADU, termite damage or wood rot could occur. Here are some tips to help prevent this from happening.

  1. Maintain gutters and downspouts.
  2. Ensure there is proper grading around the foundation of the home.
  3. Fix any cracks in the foundation or exterior walls.
  4. Fix water leaks in the plumbing.
  5. Properly seal windows and doors of DADU. 

So is Building a DADU Worth it?

Here is the process for valuing your DADU plan. It is not always better to build more property. It is not always better to get more profit. You always want to think about the time lines it is going to take you. As an investor, you should be looking at how much capital you have, how long is it going to be out, and how much is being returned inside the time-frame. DADUs can be a long and expensive process, so as long as you prepare for and put it right, it can be an amazing deal. But make sure you walk through the proper steps before making your decision

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