Your Guide to Real Estate Financing Throughout California

Financing of Accessory Dwelling Units (ADU’s)

If you haven’t heard of ADU’s, these are Accessory Dwelling Units also referred to as “granny flats.” The most common are garages converted into living space. ADU’s are becoming popular within California due to an inventory shortage and expensive monthly rents.

Below are the benefits of converting your garage or adding a structure in the back of your home

Benefits to Homeowner, Investor and Renter

  • Rental income – Adds rental income for the homeowner
  • Demographics – Caters to high demand demographics (e.g. students, home-care patients, in-laws, young married couple etc.)
  • Inventory shortage and expensive rents – Shortage of inventory and expensive monthly rents for traditional units benefits the renter
  • Customized plans – ADU program provides homeowner customizable plans, expediting the process and reducing pre-construction fees
  • Living Space – ADUs provide as much living space as apartments and studio condos

Garage converted into an ADU

Garage converted into an ADU

2020 ADU Relaxed Laws Help Accelerate Completion

  • Number of Units – The new 2020 law allows up to 3 units on a single property
  • Investor and Developer – Investor and developer can separate their property into 3 rentals (Primary, ADU and Junior ADU)
  • Size – No more maximum or minimum size based on size of primary residence; previously, local jurisdictions could limit size based on percentage of primary residence
  • Permits – Permitting Agency must act on submittal within 60 days (previously it was 120 days)
  • Owner Occupancy – No more owner occupancy required; owner does not have to reside in primary residence or the ADU on the lot – both can be rental units
  • Agencies – Agencies cannot impose impact fees on ADUs under 750sq. ft.

LCG Private Lending funded for client construct ADU

LCG Private Lending funded for client to construct ADU


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