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These Are The 10 Steps Everyone Must Follow on Their Path to Building an ADU in Utah

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We Are Your Resource for Creating Your Accessory Dwelling Unit in Utah

Our mission is to provide a path for individuals to create a successful plan of how to the tool of an ADU to assist with financial and family goals from now and into the far future as changes occur with the family

Proven Experience

Having experienced the challenges of implementing a successful ADU plan, we know your plans will include more than just building an ADU. They include long-term plans like rental management, business plan, retirement plans, and much more. We bring to the table expert partners who can assist you with the long term success of your ADU.

Knowledge

Great decisions are based upon in-depth knowledge. You’re making an investment and you want a positive return on that investment. Our job is to help you get the information you seek and deserve in order to make a great investment decision on your ADU. We provide resources on accessory dwelling units in the greater Salt Lake City area as well as the cities in Davis, Weber and Utah Counties.

Great Support

Our team of experts is committed to your personal ADU success story. ADU Utah has a team of key partners whose knowledge and services offer you a holistic answer for all your ADU questions and plans, both now and in your future.

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Step 1: Determining Your Why

You’re looking to build an ADU to solve an issue. We’ve found there are three general reasons people invest in ADUs. Your personal “why” will become your measuring standard for the rest of your journey. Setting concrete goals based on your personal why will help to focus your strategy.

Finances

You may want to use your ADU to create long-term financial freedom by adding an additional income stream with rental income. This also includes tax breaks, tax advantages, and long-term ROI.

Future

Caring for elderly relatives both medically and financially, or receiving such care yourself, may be in your future. An ADU can be leveraged to maintain independence, while creating an in-home assisted living environment.

Family

An ADU can help give your children a place to launch, supplement the income of a growing family, provide space for in-need relatives, and provide something for you to eventually pass down to your children.

Your Why

Your personal why is likely a hybrid of these reasons. Your goals in the short-term may be to supplement your mortgage as your family grows, while your long-term goals orient toward retirement planning. You may also have a pressing need to house an elderly relative, while simultaneously hoping to develop your investment portfolio. Defining exactly what it is you hope to attain with your ADU will guide the design decisions you make. Contact us here and we would be happy to help you develop a clear understanding of the many benefits an ADU can provide.

Step 2: Create a Wholistic Plan

Regardless of what your personal “WHY” is, it’s important to approach your ADU with a holistic plan. You should know how exactly you intend to manage this resource well before it is built. Having a plan in place will prevent major headaches down the road. Here’s some things to consider:

Managing Tenants

Approach your ADU like starting a business. Consider setting up an LLC, and work with a property management company and other contractors to maximize your ROI.

Medical Accessibility

If your goal is to create an assisted living space, whether for your parents or to house on-site medical staff, your ADU needs to be medically accessible and ADA compliant.

Long Term Planning

The purpose of your ADU is likely going to evolve over time. Consider how these goals will shift over the long term, and design the space in such a way that it can accomplish both your short-term need and your long-term goal.

Build Your Team

An ADU is a business, and assembling a team of specialists is critical to your success. Here at ADU Utah we get you in touch with all the specialists you may need to assist you with your long-term planning and management of your ADU. Contact us here to find out more.

Step 3: Research, Research, Research

At this point, you understand your “WHY”, and you have both a long-term plan in mind and an idea of what you want to build. Before you get any further with your ADU plan, it’s time to see what is allowed in your area. You don’t want to waste money submitting a plan that won’t get approved. It’s time for research!

City Ordinances

Locate your city or county ordinance regulations to determine what you can legally implement on your property. You may have more than one regulation with which you need to comply. Click here to access our City Ordinance Guide.

Legal and Physical Limitations

Your property may also present limitations that have little to do with legal restrictions such as: easements, parking access, utilities access, limitations of physical size, and accessibility concerns. You must know this to create a design that will be both legal and practical to build. If you’re confused on what is possible, contact us here to find your what you can specifically do on your property.

An ADU’s Impact on Your Lifestyle

An ADU can have a great impact on your property use and your lifestyle. Define ahead of time what will work for you and what will not. Issues such as sharing a backyard, noise, and parking can create tension if not planned for ahead of time. For assistance with this, contact us here with your questions.

Dealing with the City

Like it or not, city regulation will determine what you can and cannot implement. To legally build and rent and ADU, you must meet your city’s regulations. This will mean obtaining a building permit, filling out forms to register your ADU with the city, and reading and signing all documents the city requires to implement your ADU and rent it out. Each city has their own unique set of requirements and documents. Contact us here and we can work with you to get through the process with your city.

Step 4: Estimate Your Cost

Armed with knowledge of what your area allows, what your lifestyle and property best support, and a plan for working with your city, it’s time to start looking at financing. In this step, we’ll help you create a ballpark estimate for your budget. Remember, you are building a home. It’s a small one, but it’s a home. Here’s what you need to consider:

Building Costs

Building costs for new construction projects in Utah vary based on design and builder but can often be $200 to $300 per square foot. Remodel of a basement can cost between $100 to $200 per square foot. To get a precise, actionable estimate you must have a complete design that is approved by the city. Contact us here to learn more.

Site Prep and Connections

Connecting your home to utilities can require significant and, at times, unexpectedly high costs, ranging from $12,000 to $30,000. An onsite review of your property is critical to understanding what these costs will be. For assistance with this please contact us here and we can work with you to determine what is required.

Landscape

Construction is messy and can impact your existing landscape extensively. Make sure to budget for landscape items like sprinkler repairs, lawn replacement, patios, walkways driveways etc. Proper planning will limit this cost to your project. For more information about this please contact us here.

Calculate your ROI

With your estimated costs to build, and a financing model to fund this project, you will know about what your monthly expenses will be. Now add the additional cost estimates for utilities, property taxes, insurance, and some monthly maintenance. Research what apartments and houses that are similar to the ADU you intend to build rent for in your area. Use this information to calculate your monthly cash flow ROI.

Consider Your Intangibles

We all know there’s more to life than financial considerations. What are the intangibles with your project? Family, security, caring for parents, property value, retirement, down-sizing, tax benefits etc. To understand more about these, ADU Utah can connect you to professionals that can help you understand these considerations. Contact us here to find out more.

Step 5: Committing to a Design

Now that you have researched your local municipal codes, evaluated the costs, and established concrete goals for your ADU, you are ready to commit to a design.

Plan Twice, Build Once

In order to obtain an approved building permit and begin construction, you must develop a comprehensive building plan. Developing this plan can be a long and involved process, but the more meticulous you are here, the more money you’re going to save in the long run.

Cost

Your cost for construction is based on your plan. The more thorough your plan, the fewer unexpected expenses will pop up. Be aware of the fact that there is always a range of cost in materials and labor, and be prepared in the event that the unexpected happens. Be very specific on the quality and types of finishes you plan to implement.

Bidding & Financing

Approved plans can be used to request bids from multiple contractors to get the best value and accurate pricing for the actual build. Loans from financial institutions can’t be pursued or secured until you have complete construction plans.

We Develop Plans

At ADU Utah we specialize in developing unique ADU plans custom designed for your property and with your needs in mind. These plans are made in accordance with all applicable municipal codes and state laws. For more information of what this process is, and the associated estimated costs, please contact us here.

Step 6: Financing

The financial approval process can be intimidating for multiple reasons: the stress of credit approval, planning for unexpected expenses, trying to account for every little detail, and more. The good news is there are several different ways to cover financing for your ADU. Here’s a quick rundown.

Conventional Financing

It is completely possible to finance your ADU in the same way you would finance a traditional full-size home. This process, though familiar to many homeowners, can take a long time. In some cases, it may be more beneficial to pursue a loan type that is specifically designed to accommodate ADUs. Contact us here for more information about ADU-specific loans.

HELOC

A Home Equity Line of Credit (HELOC), is borrowed against the equity of your home and can be used to finance your ADU. Effectively, since this is borrowed against your equity, you can conceptualize this as borrowing from yourself in the form of money you already own. Contact us here to get connected to a HELOC specialist who can assist you with your options.

Retirement, Savings, Portfolio & Family

It is possible to borrow against your investment portfolio as a financing option for your ADU. Additionally, if family will be staying in your ADU, it is possible to collaborate on the building process by having them become the mortgage lender for the ADU. Contact us here to learn more.

Step 7: Construction

The construction phase is going to be the most involved aspect of your ADU journey. This important phase can be divided into ten sub-phases that will assist you in organizing and building the best ADU possible. Here’s what you need to know:

How to Identify a Good Builder

Choosing your builder is by far the most important decision you’re going to make. Ensure that they perform a site visit in person. When you meet with them, try to get a sense for how thorough they are. A builder that cuts corners is a builder that costs you money. Get real references and contact them. If you decide you need help picking the right builder for you, feel free to contact us here for assistance.

Understanding the Phases of Construction

The better informed you are, the less likely you are to be taken advantage of during the construction process. Here are the major phases:

Making It Through Inspections

There are several inspections that must take place through the construction phase, including utility connections, foundation, 4-way, and final inspection. Reach out to your city building department to determine what inspections they require. Click here to see contact information and ADU regulations for cities and towns in Salt Lake, Davis, Weber, Utah and Summit counties.

Obtaining City Inspection Sheets

You’ll want to obtain copies of the various city inspections and keep them with your records. Get copies of these from the builder or contact the city as they usually post all inspection results online.

The Importance of Lien Release Documents

Did you know subcontractors can file a lien against your property if your general contractor doesn’t pay them? Make sure your builder provides you a list of all subcontractors that are hired to work on your project, then get copies of signed lien releases from all these subcontractors.

Project Planning

It’s important to work with your general contractor to establish the overall project plan, timeline, dates, and deliverables for your project. Don’t forget to factor in holidays and special family events. Establish times and days that work for you and your family. There will be chaos in the construction phase. Communication is key to making this manageable.

Managing the Mess

Construction is a messy process. Dust, mud, loose nails, and waste material can overwhelm your property if you don’t begin with a plan in place to manage them.

Minimizing Landscape Impact

Anyone who has ever had a water or sewer line break knows just how much construction can damage your landscape. Plan ahead to minimize the impact potential accidents can have on your property.

Managing Change Orders

A change order is when something happens that creates a deviation from your approved project construction plans. Know your plans and what is expected to be delivered. If a change is needed, ensure that it is something you approve of prior to the builder implementing it.

The Punch List

A punch list is a checklist of items that must be addressed before construction is considered complete. This is going to include some items you’re familiar with and some items you may not think of automatically. Take time to walk through your project as it is wrapping up and inspect everything for function, fit and finish. Make a list of all the items you feel need to be resolved for the project to be considered complete. Meet with your building contractor and go over these. Agree to the list and both of you sign it.

Project Management

An ADU is a home, and it takes a tremendous amount of knowledge to build a house. ADU Utah has the experience to assist you with managing your construction project. Contact us here to find out how we can make your construction project easier.

Step 8: ADU Asset Management

Your ADU represents a significant investment, so it’s natural to want to ensure that you get a return on that investment. Regardless of what your model looks like, there are several considerations when planning how to financially manage your new income stream or residential space.

Property Management

A property manager handles the business side of your property in return for a small percentage of the lease agreement. While it reduces your income, most find that the convenience is well worth the cost. Like with anything though, there are good property managers and bad property managers. Contact us here for assistance in making the right connections and avoiding unfavorable arrangements.

The Law for Landlords

If you intend to manage tenants yourself, make sure you know and understand the state and local laws that apply to tenants and landlords. You will need to apply these equitably and know how to navigate legal issues should they arise. Issues such as tenant rights, discrimination, eviction, and more can be very costly if not handled correctly.

Think Like a Business Owner

It’s time to think like a business owner. Consider opening an LLC, business accounts, and get a tax strategy. Find resources and service providers to assist you with this responsibility. Contact us here for help making the transition toward becoming a business owner.

Family is not just Family

If parents or children are going to live in your ADU, they are still tenants. You need to manage the relationship both as a landlord and as a family relationship. Lease agreements, even between family members, can benefit both of you and protect everyone involved when challenges arise.

Step 9: Financial Management

In addition to thinking like a business owner, and utilizing sound strategies, here are three ways you can maximize your ADU investment for long-term returns:

Maintenance and Repairs

Set aside money for maintenance and upkeep. Things are inevitably going to break. Don’t get greedy when it comes to your income opportunities make long-term decisions to preserve your income stream.

Set Aside Money for Investment

This additional income presents an opportunity for other investments. ADU Utah recommends that you meet with your financial advisor to understand how you can leverage this income asset for a better financial portfolio of long-term growth. We can connect you to financial planning resources. Contact us here if you have any questions.

Set Aside Money for Personal Use

Finally, we get to everyone’s favorite part. Earmark funds specifically for your goals and enjoyment. An ADU should improve your current living situation. Utilize some of the income for items that will benefit you living experience now.

Step 10: Family in an ADU

Family relationships can be complicated. Maintaining solid relationships with family when living in close proximity to each other can compound these challenges. Here’s how to keep your family close without losing your mind.

Know Your Role as the Owner

You now have two roles: family member and landlord. To keep the peace, you must know which hat to wear, and when, so you can feel comfortable, and they retain their independence. Lease agreements are a must, even between family members.

Expectations for Your Children and Rent

Boundaries with adult children and finances are just as important as boundaries with your parents. Establish your lease agreement and follow it to the letter. If you don’t, it will create a challenge to the relationship.

Care for Aging Parents

It’s easy to get overwhelmed in the care of loved ones. Having parents close makes it convenient to assist them. This convenience, however, can lead to you taking on too much in the way of daily care for your parents. Have clear guidelines on what your plan is to support each other. Have a backup plan for outside assisted living resources should the need arise. Contact us here to find out more on at-home assisted living and the impact of care giving.

Using a Family Trust

Knowing how to transfer property upon a death is vital both to maintaining value long term and to ensuring that your legacy isn’t saddled with inflation and taxes as the market grows.