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I have been intrigued by the idea of small homes in backyards for years, and it was one of the reasons I worked on the San Diego City Council to make it easier to build a so-called granny flat/accessory dwelling unit, or ADU. Personally, I was not ready to pursue the idea until last year.
It has been a humbling learning experience. I pride myself in making well-informed big decisions. I prepared spreadsheets of costs including construction, permitting fees and financing options. I set a conservative project timeline for architectural, permitting, construction and I built in contingencies for delays. I used assumptions for rental income to figure out how I would break even on my investment. This preparation alone took a couple of months, as I was committed to research everything. The end result: I was wrong on all of it, and I still have not received my permit or begun construction. Do I still think it’s a good idea? Probably.
Lesson: Ask yourself fundamental questions to determine if the investment is worth it.
Besides making sure you will not lose money, the loss of privacy is a pretty fundamental issue you must be completely comfortable with if you are going to build in your backyard. Once we decided we were OK with both, we proceeded.
So how wrong were my projections? According to my plan, I should be getting ready to look for tenants right now. Instead, I am likely one month away from a groundbreaking. But it’s OK because I am building two ADUs. What? Yes! About a month prior to submitting my project, the City Council approved changes to allow for the construction of two units. I think if nothing else, this information alone is valuable. Only a few months prior to this, I was not legally able to build even one unit because I live in a multi-family zone where adding an ADU was not allowed. It was a dumb rule that the city also changed. This is an appropriate moment to acknowledge the state for leading the way on ADUs, and Gary Geiler at the city’s Development Services Department.
Lesson: You can build two granny flats.
I suggest you save enough money to get you through two things: an architect, and the permit application. Architects range between $5,000 to $15,000. I went with a great architect on the lower end but found that I needed to be a bit more hands-on. More on that later. The permit application deposit I made was about $5,000. Remember we are building two units, so one unit is likely half of that. The process of getting our architectural drawings and submitting them to the city took about two months. The city staff reviews your application and identifies your “issues” – the things that are wrong with your project.
Lesson: We all have issues, do not be offended.
Every situation is different, but I highly doubt anyone gets full approval after their first review. Having never built anything from the ground up, when the architect sent me the report with issues and said we needed to fix it, I said, “OK, let’s fix it.” After an awkward pause, I realized I was wrong about my assumption that the architect would resolve this or that the city would tell us how to fix it. I began calling through the different “disciplines” or areas to discuss all of my issues. The easy ones were resolved quickly, then came the hard ones like the requirement of a geotechnical study to determine if there was a fault line on my property. We resolved this unexpected issue at a cost of $6,000.
Overall, city staff was patient explaining the issues. But you do have to be persistent. I could see people easily becoming discouraged. This is why I think the city should consider project managers assigned to help rookies like me – someone who could be your advocate and help you navigate the process. I would pay for that service.
Lesson: Project management skills help.
Then there was the requirement to put in new water service. This one hurt, and it took us a couple days to get over it. This water meter card scores the number of fixtures on your property and if you score too high, you need a new water meter. It is very likely that if you are only building one ADU that will not trigger this. Getting water service to the ADUs it will cost us about $40,000.
Because of historic low interest rates, we decided to finance our ADU project using cash from our home equity. While this has helped pay for the many unexpected big- and small-ticket items, there were two mistakes we made. First, we borrowed the money too soon. Being off on the timeline meant I had to pay interest for a couple months. Second, the amount was not enough, and we will need to borrow more.
Lesson: Wait as long as possible to borrow money.
There are many other details that I could share, and likely a few more issues will arise. I still need to finalize selection of a contractor and then patiently wait for six months of construction work. But I hope that my miscalculation of time and costs can serve as a lesson to anyone else considering building a granny flat. Start by asking the questions I missed, and hopefully you will be much better prepared.
David Alvarez resides in Logan Heights and is a former San Diego City Council member. He is chief strategist of Causa Consulting focusing on community engagement work and is a founder of the Latino Equity Council.