Build cost by ADU type
| Type | Per sq ft | What drives it |
|---|---|---|
| Detached new build | $350$250–$500 | Its own foundation, roof, and utility trenching. The most expensive per square foot and the slowest to permit, but it commands the highest rent and adds the most resale value because it reads as a genuinely separate dwelling. |
| Attached addition | $300$200–$425 | Shares a wall and often utility runs with the main house, which cuts cost. Watch for the fire-separation and independent-egress requirements that shared walls trigger. |
| Garage conversion | $200$130–$300 | Usually the best value, because the shell, foundation and roof already exist. Budget killers are raising the slab for moisture, adding insulation to uninsulated walls, and losing covered parking where the local market prices that in. |
| Basement conversion | $190$120–$300 | Cheap per square foot when the basement is already dry with adequate ceiling height. When it is not, egress windows, underpinning and waterproofing can double the budget — get a structural opinion before you commit to a number. |
| Interior conversion | $165$110–$250 | Carving a unit out of existing conditioned space — the cheapest route, but it takes square footage away from the main house, which can reduce its value and appeal. Only sensible when the space is genuinely surplus. |
National planning figures, excluding soft costs. Labor is roughly half an ADU build and metro labor rates swing about 25% either side of the national average — see our local cost guides for how much your area differs.
Judge it on return on cost
Net operating income divided by total project cost. It ignores how you finance the build, which makes it directly comparable to a cap rate or to what the same money would earn elsewhere. Above 8% is genuinely good — often better than buying a rental at market nearby, because you are not paying for the land twice. Below about 4%, the rental case does not stand on its own, and the project needs to be justified on other grounds: housing a family member, flexible space, or aging in place.
Be sceptical about value added
Treat resale value-add as the least reliable number in this model. Appraisers need comparable sales to credit an ADU, and in markets where ADUs are still uncommon they often cannot find them — so the appraised gain lands well below what you spent. Recovery of 50–70% of build cost is a realistic planning assumption; anything above that should be evidenced by actual local comps, not a builder's brochure. The rental income is the dependable return here.
What blows the budget
- Soft costs. Plans, engineering, permits, impact fees, utility connections, electrical service upgrade, site work. Frequently five figures, and routinely left out of early estimates.
- Conversions that aren't ready. Raising a slab for moisture, adding egress windows, underpinning for ceiling height, or waterproofing a basement can each add tens of thousands — and they are exactly the things a walkthrough does not reveal.
- Utility separation. A separate meter, a larger service, or a new sewer lateral can cost more than the kitchen.
- Time. Permitting runs 6–18 months in many jurisdictions, and carrying costs on a construction loan accrue throughout.
Check the rules first
ADU law changed substantially in many states recently and is still changing. Before budgeting anything, confirm your municipality's size caps, setback and parking requirements, owner-occupancy rules, and whether short-term letting is permitted — many jurisdictions allow ADUs only for long-term tenancies. Also confirm how the addition will be assessed for property tax. None of that is modeled here.
Related calculators
- Home Equity Borrowing Power — how to fund the build
- Local cost guides — how much labor costs in your metro
- Rental Property Calculator
- Cap Rate Calculator — the comparison benchmark
- Home Renovation Cost Calculator
- True Cost of Homeownership
Financing changes the ADU math even when the build cost doesn't. A garage conversion priced at this calculator's own $200/sq ft typical rate still has to carry whatever loan funds it — and that loan is competing with the Freddie Mac 30-year benchmark of 6.71% (week of September 3, 2026), even though most ADU financing (HELOCs, construction loans) is priced separately from that conventional-mortgage rate.
Financing the build changes which return matters
Return on cost — net operating income ÷ total project cost — is this calculator's headline verdict because it's financing-agnostic. But most ADUs aren't built in cash. Take a 500 sq ft garage conversion at this module's own $200/sq ft typical rate: build cost $100,000, plus $15,000 soft costs = $115,000 total project cost. At $1,400/month rent, one vacant month a year, and $2,400/year operating cost: NOI = $13,000 — an 11.3% return on cost, in this calculator's “strong” band above 8%.
Finance $80,000 of that at a rate near the current 30-year conventional benchmark of 6.71% over 20 years, and the payment runs roughly $606/month — $7,270/year. Annual cash flow drops to about $5,730 against $35,000 of actual cash invested: cash-on-cash near 16.4%. Return on cost stays fixed at 11.3% regardless of financing; cash-on-cash moves with the loan — they answer different questions, and a build clearing one can still look thin on the other.
Methodology
The worked example uses this calculator's own $200/sq ft garage-conversion typical rate and its own return-on-cost and cash-on-cash formulas. The financed payment uses standard fixed-rate amortization at the Freddie Mac PMMS 30-year benchmark for the week ending September 3, 2026, offered as a conventional-mortgage reference point only — actual ADU financing (HELOC, cash-out refinance, construction loan) is commonly priced differently and no such rate is sourced here.
Sources
- Freddie Mac — Primary Mortgage Market Survey (PMMS) — accessed 2026-09-07
Frequently asked questions
How much does it cost to build an ADU?
Type drives the cost more than anything else. A detached new build runs roughly $250 to $500 per finished square foot because it needs its own foundation, roof and utility trenching. An attached addition runs about $200 to $425. Conversions are far cheaper — a garage conversion around $130 to $300 and a basement conversion around $120 to $300 — because the shell already exists. On top of the build, budget soft costs for permits, plans, utility connections and site work, which frequently reach five figures.
Is building an ADU a good investment?
Judge it on return on cost — net operating income divided by total project cost — because that ignores how you finance it and is directly comparable to a cap rate. Above 8% is genuinely good, often better than buying a rental at market in the same area, because you are not paying for the land twice. Below about 4% the rental case does not stand on its own, though housing a family member or gaining flexible space can still justify the project on other grounds.
How much value does an ADU add to a home?
Less than it costs, in most markets — plan on recovering 50% to 70% of build cost in appraised value. The constraint is that appraisers need comparable sales with ADUs to credit the value, and where ADUs are still uncommon those comps do not exist, so the appraised gain lands well below what was spent. Treat the rental income as the dependable return and resale value-add as a bonus that needs local comparable sales to back it up, not a builder's brochure.
Which type of ADU gives the best return?
Garage and basement conversions usually give the best return on cost, because the foundation, roof and shell already exist. The caveat is that conversion budgets blow up when the existing space is not already suitable — raising a slab for moisture, adding egress windows, underpinning for ceiling height, or waterproofing can each add tens of thousands. Detached units cost the most but command the highest rent and add the most resale value, because they read as a genuinely separate dwelling.
What size should an ADU be?
Most land between 400 and 800 square feet, and smaller often returns better. Cost scales with size but rent does not scale as steeply — a 700 square foot two-bedroom rarely rents for twice what a 350 square foot studio does — so the return on cost frequently falls as the unit grows. Many jurisdictions also cap ADU size, commonly at 800 to 1,200 square feet or a proportion of the main house, so check the local ordinance before settling on a footprint.