A project of the Solano County Planning Collaborative

Phase Three

Budgeting & Finance

  • Estimate your project budget
  • Understand the types of financing available
  • Know how an ADU might impact your property tax assessment and home value


Budgeting is part of the Planning phase, which typically takes 1-3 months. Most ADU projects take 12-18 months to complete, but some extend to 24 months or more.


Here are a few of the most frequently asked questions about budgeting and finance

Step by Step


Keep in MindInitial cost estimates are likely to change as you move through the process, and you won’t know what it will truly cost until you talk to a professional. Current workforce and supply chain disruptions are causing prices to move up and down more quickly than usual. If you have a tax or financial advisor, it is always good to check in with them early on too.


Step 1

Estimate your project COST

Your budget is one of the most important parts of your ADU project. You will need to balance design with what you can afford, but also consider potential rental income. A larger or higher-end ADU will likely go for more rent and may result in a larger loan. But if you wish to rent it at an affordable rent, you may need to compromise on size and/or design.

If you haven’t already, now is the time to estimate your project costs.

A very rough placeholder for you to use is $250 to $350 per square foot, including construction and other costs (design, permitting, etc.). The real number can vary widely and depends on many factors.

Keep in mind any initial estimates are likely to change and you can’t know specifics until you talk to your professional team (designer, contractor, etc.).

Key Resources


Step 2

Assess financing options

Many homeowners use a mix of options to finance their ADU, like their own savings and assets, funds from family, and/or loans. It is strongly recommended that you do not begin construction without your financing plan in place. Be sure to factor in potential rental income since it will be a source for repaying any loans.

You can use assets like cash or stocks to pay for some or all construction costs. You can also withdraw retirement savings, but this should be considered with caution.

This can benefit everyone if the person lending gets a higher interest rate and the person borrowing pays less than they would on the market. Another option is planning for friends or family to live in the ADU – they live rent free in exchange for contributing money for construction. In either case, you should come to a formal agreement and have a lawyer prepare a contract, not just with a handshake.

Your equity in your home is the portion of your home’s value that you own outright. It is calculated by subtracting your current mortgage balance(s) from the value of your home. Homeowners with sufficient equity in their homes (at least 15-20%) can take out a second loan or line of credit. Banks will typically offer a loan that is 90% of the equity a person has in their property.

If you think you may want to borrow, you’ll need to figure out how large a loan you qualify for (and feel comfortable with). Banks usually require two things: equity from your home and enough income to make payments. A good option is to call a mortgage broker and/or a bank, explain that you are considering building an ADU, and ask about loan options. Brokers and lenders consider it a normal question and will be happy to talk. There is no obligation and no cost for an initial conversation.

If you are planning to buy a house and build an ADU, the Federal National Mortgage Association’s (Fannie Mae) Homestyle loan program may be a good fit for your project. The Homestyle loan allows you to finance both the purchase of a home and the costs of remodeling, building an ADU, or converting your garage in one single loan.

See Casita Coalition’s ADU Finance Guide for Homeowners for more details on financing options and our Worksheets for questions to help you decide a financing strategy.

Key Resources

CalHFA Grants

The Cal HFA ADU Program offers up to $40k for qualified homeowners to develop an ADU. Visit their website for more information.

Start planning your project financing

Check out our ADU worksheets

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