Financing

How are you going to pay for the ADU?
Everybody’s situation is different. It’s up to you to look at your individual financial situation to see how building an ADU can make economic sense.

How you pay for your ADU can depend on how you plan to use the ADU.

Are you going to rent the ADU?
Renting an ADU is a great way to finance building costs and add extra monthly income.

According the the UCSC Housing Department, studio apartments within the city of Santa Cruz currently rent for up to $1200/ month and 1 bedrooms rent for up to $1,800/month.

A HELOC (Home Equity Line of Credit) loan of $150,000 requires a $480/month interest only payment. That leaves you with an extra $730/month if the rent is $1,200! Note: This sample loan rate was given to us by Santa Cruz Community Credit Union. The actual loan rate will vary. Your situation will vary depending on the loan you receive and the amount you charge to rent your ADU. However, with the right loan/rent ratio, you could build an ADU that pays for itself and also gives you a monthly income.

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Are you going to have family live with you in your ADU?
As our parents and kids get older, our living needs change. The kids grow less dependent, while the parents can often use a little extra help.

Having your elderly parents live in an ADU on your property is a great way to lend a helping hand and save them a lot of money on rent. They would enjoy the security of knowing family is nearby, and you could benefit from their presence by having them help with the kids or simply taking care of the house when you’re not around.

ADU’s can also add space for kids, especially when they are ready for more independence. An ADU can give them their own living space with a private entrance and responsibilities, while still keeping them within arms reach. Besides if you’re going to help them with rent, doesn’t it make sense to be paying yourself?


Will you use the ADU as a home office?

Having a separate office space could help define your home business. An ADU can be configured to function as a small office, with a client greeting area, separate work spaces, and even a separate entrance if you have an alley or side-yard. The design is up to you.

Keep in mind, the homeowner has to live in either the main house or the ADU.

 

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