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  • Writer's pictureRudy Garcia

How to Pay for ADU Construction in Los Angeles: A Guide for Homeowners

Updated: Oct 28, 2023



As a homeowner in Los Angeles and its surrounding areas, you may have heard about Accessory Dwelling Units (ADUs) and the potential they hold for adding value to your property. Whether you’re considering an ADU for additional living space or as a potential source of rental income, one of the first questions that come to mind is likely, “How can I afford this?”

The Cost of Building an ADU in Los Angeles

The cost of building an ADU can vary greatly depending on the type and size of the unit, as well as the specific requirements of your property. On average, the cost of building an ADU in Los Angeles and its surrounding areas can range anywhere from $150,000 to $300,000 and up.

Benefits of Building an ADU

Building an ADU comes with a multitude of benefits. Here are a few key ones:

  1. Rental Income: An ADU can generate a steady stream of rental income, helping homeowners offset their mortgage payments or other expenses.

  2. Increased Property Value: An ADU can significantly increase a property’s resale value and home equity1.

  3. Additional Living Space: An ADU provides private living spaces for extended family or elderly parents1.

  4. Community Development: ADUs add more housing units while maintaining the character of a neighborhood.


Top Ways to Finance Your ADU Project

Here are some popular financing options that homeowners can consider:

  1. Home Equity Loan: Also known as a second mortgage, this loan allows you to borrow against the equity in your home.

  2. Home Equity Line of Credit (HELOC): Similar to a home equity loan, a HELOC provides a revolving line of credit that you can draw from as needed.

  3. Cash-Out Refinance: This involves refinancing your existing mortgage for more than you currently owe and using the difference to finance your ADU project.

  4. Construction Loan: These are short-term loans specifically designed to cover the cost of construction.

  5. Unsecured Personal Loan: These loans don’t require collateral but may come with higher interest rates.

  6. Credit Card: While not ideal due to high-interest rates, credit cards could be used for smaller expenses or short-term financing.

  7. Government Grants and Incentives: Some local governments offer grants or incentives for homeowners who build ADUs456. For example, the Accessory Dwelling Unit (ADU) Grant Program provides up to $40,000 towards pre-development and non-reoccurring closing costs associated with the construction of the ADU.

Remember, it’s important to carefully consider your financial situation and consult with a financial advisor before deciding on the best financing option for you.

Ready to Take the Next Step?

If you’re ready to explore the potential of adding an ADU to your property, visit www.miguelangelodesigns.com/service/adu or click to "Book Now" and fill out the contact form to book your no-cost in-home consultation.




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