New Energy Performance Incentive Available for New ADUs

In a previous post, I described an awesome building incentive that was made available for my ADU from the Energy Trust of Oregon (ETO). My ADU project was the first case in which an ADU was allowed into ETO's New Homes program because, unlike most ADUs, my ADU was going to be my primary residence (and the ADU was separately metered).

By following the building guidelines laid out by the ETO, which basically meant building to Northwest Energy Star standards, the ADU was eligible for an amount that was in part commensurate with the relatively tight and efficient building techniques that I used. The $1,750 rebate that I received was basically inversely proportional to my low energy performance score of 35. 

Anyhow, due to some forward thinking decision-making at ETO (incidentally, I've had great experiences with ETO's programs so far), they've altered their program to allow most new detached ADUs to be eligible for these New Home incentives (regardless of who is going to be living in the ADU). Previously, most ADUs had not been eligible because the ADU wasn't intended to be the homeowner's primary residence.

The great thing about this program is that it 1) results in a better building product for the homeowner and 2) can give money back to the builder/homeowner in the process. The 3rd party certification that is part of the certification process essentially guarantees that the project is meeting higher quality design and building standards. And if that reasoning isn't compelling enough, 3rd party home certifications have been shown to have a significant positive impact on resale value.

Here's the new rules of the program. Contact ETO if you have more questions about your eligibility for this incentive.

2012 Accessory Dwelling Unit                                                                                 

The New Homes program will pay incentives on Accessory Dwelling Units that fit into two categories: 1) ADU built at the same time as the main residence 2) ADU built after the main residence was constructed. Our definition of an ADU refers to a structure that is permitted as an accessory dwelling unit by the local jurisdiction and is intended to be used as living quarters i.e. bedroom, kitchen, and bathroom, plus has its own USPS mailing address.

Requirements for ADU incentives:

·         ADU must have its own USPS mailing address separate from main residence

·         ADU must receive an Energy Performance Score (full incentive available through EPS)

·         ADU must receive its own third party verification

·         ADU must be detached from the main residence

·         ADU must be intended to be used as a residence

·         Detached structure must be permitted as an ADU

             ·         Builder or owner builder must be a trade ally with New Homes program

Landscaping

I'm kicking around some ideas for the landscaping around the ADU and main house. Meanwhile, with heavy rains coming, I've felt compelled to build some solid pathways to allow for easy movement around the house and ADU.

My father, formerly a landscape architect, helped by putting together some simple drawings that I used to inform the shape of the pathways and patios. Using these schematics, I worked with several people to lay out a wood frame to hold in the gravel and pavers. We had to excavate some soil along the way.

Landscape plan around ADU

Here are four short videos that show the hardscape construction process. I ordered the landscape materials from several sources---Craigslist, Wood Waste Management, and Home Depot. The gravels, sand, pavers, and natural stone ran me $2,000, the labor I hired ran another $700 plus 25 worktrade hours. I spent probably 20 hours on the project myself.









Later that same week, I finished laying out the pathway on the house of the house. Now that the hardscape is complete, it's time to work out a planting plan. I am balancing out the the merits of grass, stone walls, art work, shrubbery, groundcover, walls, and various forms of vegetative cover. It's fun to flip through garden and landscape books to figure out what ideas make sense for the property. Hopefully, appropriate ideas that are practical and beautiful will come to mind.

Another ADU Class and a New ADU Website

I held the 2nd 'Building an Accessory Dwelling Unit on Your Property in Portland' class at the ADU last weekend. There were 11 participants, which was a great class size. I had fun and the participants did too.

I've just posted registration for a class on Saturday, January 21st. If you're thinking about building an ADU, considering attending. From the feedback forms, every participant in the two classes I've held have found the class to be very useful and have enjoyed it. I'm limiting future classes to 13 participants, as the smaller class works better at the ADU. Last class, we visited a couple ADUs that are being constructed and I plan to do that in the next class as well.

As readers of this blog, you may agree that another critical piece to learning information about ADUs is finding a place online where you can find out information about other ADUs. Till now, there has been no such central place on the world wide web. Given the vast scope of content on the web, this surprised me and a few others who work on ADU issues. So, we have decided to fill that void and are proud to announce it: http://accessorydwellings.org/

Accessorydwellings.org is intended to be the one stop shop for information about ADUs. On it, you can find information about ADUs that have been built, information about building one yourself, and references to other sources of information. The site is  authored and administered by Martin John Brown, Eli Spevak, and myself, all ADU aficionados in the Portland area. Each of us have built permitted ADUs, have a strong personal and professional interest in them, and have our own websites about our own ADUs. Collectively, we are joining forces and launching this new site as a mechanism to promote ADUs.

In association with this site, I've also set up an Accessory Dwelling Unit Yahoo Group where people can connect to share information about ADUs. If you're interested in sharing links, asking questions, and connecting with other homeowners or builders that work on ADUs, join this group: http://groups.yahoo.com/group/Accessory_Dwelling_Unit/

Now that I've had a couple months living and relaxing in the ADU, I'm going to complete a couple more projects that need to be finished before I can consider the ADU property fully complete. Currently, I am working on the landscaping around the main house and the ADU. In the next couple weeks, I'll post an update about the landscaping, particularly as it relates to the ADU design. And, there's a couple more artistic projects that I'll post about in the next two months.

This blog will remain an archive of my ADU project related information. However, with the launch of Accessorydwellings.org, I expect to post to this blog less often and to be more active in managing and posting to Accessorydwellings.org.

Data from Homeowners in Portland Who are Planning to Build ADUs

The first ADU class was fantastic and I want to thank the class for making it such a fun experience for me.

Next, I want to share some information derived from the class questionnaires. The questions were in large part to help me figure out what to teach, but I included some other questions that would help provide some insights into the minds of homeowners who are likely to build ADUs.

When asked "What is your motivation to build?", here are the responses. Respondents could check up to three choices.

The most common response for the "biggest barrier to building an ADU" from the respondents was cost/financing (which is not really a surprise). Incidentally, I'm proud to say that every respondent said that the class helped them figure out useful approaches to address their biggest personal barrier, which ranged from permits, cost, financing, lack of knowledge, "taking the leap", city rules, neighbors, to finding the right designer and builder. 

Every respondent said that they would use a general contractor instead of trying to general contract it themselves. This uniform response was probably due in part to the information that they learned in the class, but I was still surprised to see a consensus since I did not specifically advise people not to general contract it themselves. 

50% are planning detached new construction. 25% are planning conversion of an existing garage, and 25% are planning on attached new construction.

Over half of class participants were in the 40-50 age bracket.  The other ages ranged evenly in a bell curve from 20-70. 

Here's a picture of the class during the walk-through tour of the ADU.

Walk-through Tour of the ADU

And, here's the last slideshow from the class, which shows the ADU construction process, step by step. 

ADU Construction Process (in pictures)

View more presentations from Kol Peterson

For those who were unable to make the first class, I'm offering the ADU class again on Sunday, November 6th.

Final ADU Project Costs and Living Free

Cost is a big issue for homeowners who want to build ADUs and I am committed to being transparent about the costs of my project. So, now that the project is "done", this post deals with the total project cost. In the end, my total costs ended up being $96,238, which is $120/sq. ft.

The total cost for designing, permitting, and building the ADU was $96,293.

I had initially aimed to complete the project at $100/sq ft, but I suppose that my cost overrun was somewhat expected. As I wrote in my first 'time and cost' blog post, it is a rule-of-thumb that a project will end up costing 20% more than what was expected, and that it will take twice as long as expected.  Well, the project came in on time, and it came out qualitatively great, but it cost 20% more than I had anticipated, confirming the Project Management Triangle adage. 

You can build a high quality project at low cost, if you have lots of time. 

You can build a high quality project in little time if you have lots of money. 

You can build quickly and cheaply if you do not expect great quality.

On the bright side, due to the excellent thermal performance of the building (it is projected to use 1/3rd the amount of the energy of an average Oregon home), the Energy Trust of Oregon gives me $1,750 rebate-- no chump change. I anticipate that I'll get another $1,000 back in energy incentives for the appliances that I purchased from the Oregon Department of Energy via tax credits.

I will go into greater depth on this cost and rebates in my upcoming ADU class. My other posts about financing, the permit costs, and the financial payback may be helpful to others as well. 

Using the approach that I am using (moving into the ADU and renting out the the main house) means that I will likely live the rest of my life without any rental/mortgage expenses. What an amazing feeling of freedom to have at my age.

Assuming that it would cost me $1,000/month to rent an equivalent space, the payback period on the ADU is 8 years. My main house rents out at a rate higher than the mortgage payment, so in addition to paying for its own mortgage, it's providing some additional income.

Of course, this ADU model is not going to work for everyone who builds an ADU, but it is certainly a compelling option for some people with access to the upfront capital, who are excited about living in a smaller space and renting out their main house. 

I do not mean to pitch ADUs solely as a vehicle for financial freedom, but my story proves that this financial model to live at no cost is totally attainable with an ADU. There are many reasons to build ADUs: boosting the local building sector, providing green jobs, providing urban infill housing, reducing municipal infrastructural demands, building community, creating more comfortable multi-generational housing options for families, affordable housing, building smaller spaces for energy efficiency, and reducing climate impacts. 

Personally, what I like about ADU's best is that they are a significant way that an individual can make a difference in terms of growing and developing smarter urban spaces. Typically, smart growth is "done" by developers, financiers, and municipalities- big actors in the land development world. With ADUs, smart growth can be promoted at the block level by an individual. An ADU can be a grass roots, contextualized, organic, hyperlocal form of development, providing a better residential development alternative to sprawl.

But, if none of the ethical or academic justifications are compelling enough, it doesn't hurt that ADU's are almost definitely going to be a source additional income or residential flexibility for anyone who is able to build one.

Tankless Water Heater for Radiant Heat

Thanks to everyone who came out to the ADU on the Build It Green tour. It was fun to be able to show off the place to so many people, and I hope that it left some of you all inspired to see more ADUs.

This post will deal with the tankless water heater and radiant heating, which I've mentioned in other posts, but never fully described.

An ADU water line splits off the water main in the main house basement, and comes to the ADU underground. Some of that (cold) water is directed to the water heater, which heats the water to ~120 degrees whenever we turn the hot water (for a shower, sink, dishwasher). The water heater is "tankless", which means that it heats up water "on demand", only when needed. A tankless, on-demand water heater is inherently is more energy efficient than a conventional 60-gallon holding tank water heater, which keeps 60 gallons of water heated constantly, even when there is no need for hot water.

Meanwhile, a heat exchange heats up more water in the heater in a separate "closed loop" to a lower heated temperature (~70-80 degrees) that runs through the Pex tubing throughout the first and second floors, providing in-floor radiant heat. Radiant in-floor, hydronic heat is the heat source, along with some passive solar heating.

There are three forms of heating: radiant, convective, and conductive heat. Most of us group these three forms together in our head as "heating", but they function totally differently from one another. 

Forced air is convective, and although it is the dominant mechanism used for residential heating in this country, it is not a good way to heat most residences. Radiant heat is generally the most comfortable and effective way to experience and manage heat. 

Radiant heats works totally differently than forced air heat.  Radiant floor heating will heat the surfaces in the house to a particular temperature (~70 degrees), and those surfaces will then radiate that heat outwards towards the occupants, reducing our body's heat loss towards those surfaces.

Radiant in-floor heating is a comfortable way to experience heat evenly throughout a home. Interestingly, with radiant surfaces everywhere, air temperature in a house can actually be lower than what you think is comfortable, and you will still feel warm. This is akin to when you're standing outside on a cold night, with your front side is facing a campfire. That's radiant heat gain working its magic on your front side, and radiant heat loss working on your back side.

Conversely, forced air heat does not heat up surfaces; it only heats the air that is then blown throughout the space, and air a poor heat conductor. That heat is quickly dissipated because air does not have the thermal mass to retain that heat. That energy that was used to heat that air is quickly dissipated and lost. The surfaces of the house will remain cool to the touch. Even if the air is warmed in a space, cold surfaces can still make you feel cold. Cooler surfaces draw heat from your body.

Houses heated by forced air tend to have spots that feel cold- areas far from the vents, or areas near cold surfaces like windows. While in the US, homes ares primarily heated using forced air (a form of convective heat), we are alone in this approach globally. Europe, for example, uses a far greater percentage of other heat types--primarily forms of radiant heat.

My water heater is a Navien condensing combi tankless water heater. It's gas powered, which is a more efficient way to heat water than heating with electricity, but both power sources are available as options for the tankless water heaters. Here's a video of the gas line from the street to the ADU, which is the gas supply that is used for both the water heater and for the gas powered cooking range.



Here's a video of the water heater. As you can see, the water heater plumbing and mechanics are a bit complicated. We'll use the radiant heating in the concrete slab on the first floor to heat the house. There are  radiant loops running through the second floor as well, but we will rarely use them. The concrete, once warmed, will easily heat the whole ADU in the winter. Once warm, it would take days for the concrete (and ADU) to cool back down. The heat demand load on this ADU will be very low, due the ADU's small size, the high R-values in the walls, ceilings, and floors, and the lack of thermal bridging. I'm looking forward to experiencing how the heat system works, and to comparing the gas bills from the ADU and the main house.

Come on the Build It Green Tour

Here was a little piece that KATU TV put on their local news program last night. It's a short and complimentary piece.

I tried several times to explain in pithy soundbites that what made this house green was the walkable, bikeable location, the small size, the air sealing, and insulation.

Instead, they showed close-ups of my kitchen sink and bathroom tiles while describing the "accessible dwelling unit". I find this funny because there is nothing really qualitatively "green" about the sink or tiles, other than being salvaged.

Oh well...this piece isn't really intended to truly convey what a "green" house is, but rather, to get more people to come on the tour. So, come on the tour this weekend and come check out the ADU and other great projects around Portland in person.

Sprinting to the Finish

We've moved in fully, so I wanted to give a tour of the finished product. There's some miscellaneous projects left to do, but for all intents and purposes, the interior of the ADU is complete. We've moved our stuff in, including furniture, decorations, and tons of other stuff.

Each time I move residences, I always groan at how much stuff I own, most of which I rarely use. This move was no exception. Except, this time, the limits of the small living space forced my partner and I to be more deliberate about deciding what items enter through these doors. Only the best of the best stuff gets through. Hopefully, we'll sell many of our remaining items this fall.

Part of the push to get fully moved in and decorated was in preparation for a news crew that used the ADU last week as their set. KATU, the local news station, came to film a short piece about the Build It Green Tour that will air on Tuesday, September 20th, at the 5 o'clock news hour. They said that they'd be posting the piece online afterwards; I'll link to it once it's posted.

KATU filmed a promotional piece for the Build It Green Tour

Here's a five minute walk through of the finished ADU. I am very happy at how everything is looking. It feels like a home now, and the most luxurious home in which I've ever dwelled. After a week, I can say that I love being in this space.



Meanwhile, I've decided to rent out the main house as a fully furnished, self-hosted, Bed and Breakfast on AirBNB. I am going to give this a try for a month or two to see whether it works better than a normal long term rental. It's a great house for groups of 4-10 who are coming to visit Portland and would prefer to stay in a sweet old house for less than staying in a hotel.

When It Rains, It Pours: Five Big Announcements

Today was a big day. Here are five announcements that I am very happy to share:

1) We passed the final inspections, which means that the ADU is now officially verified and ready for occupancy! Building the ADU has been a huge undertaking for me and I am relieved to finally have it officially completed. And a big thanks to Stephen Smith, who has served as the builder for this project.

 

Generally speaking, I've found Portland''s Bureau of Development Services, the building permitting authority, to be fair and reasonable, despite being short-staffed. It took a couple attempts for us to resolve relatively minor building issues (eg. guardrail height, smoke detector type) before we were able to passing the final inspection.

Meanwhile, there's still some more finish work to do in the ADU and throughout the site, and I'll continue to post updates on those projects (look for upcoming posts on the water heater, stairs, and the final budget numbers).

2) The ADU has been selected to be on Portland's Build It Green Tour, a self-guided tour of twenty-two of the premier 'green' new construction and renovation projects around the City of Portland, on Saturday, September 24th.

The ADU will be one of several smaller homes on the tour. I visited 15 homes on the Build It Green tour last year, and found some of the projects, particularly the Passivehauses, to be inspiring from an energy use perspective. There are interesting homes on the tour this year; if you're in the Portland area, I encourage you to check it out.

Portland's Build It Green Tour: Saturday, September 24th, 2011, 11 a.m. to 5 p.m.

3) The ADU has been selected to be featured on KATU, a local TV news station, to help promote the Build It Green tour. They'll be filming here next week and the piece will be aired the week prior to the Build It Green Tour. I hope that they post their pieces online so I can link to it. It's an honor to have the ADU selected for this news piece from amongst all the great projects on the tour, and it has given me added motivation to get the ADU looking good.

4) Earth Advantage Institute is offering a free hour class on "Creating Not So Big Homes", which will be hosted at my ADU on the morning of the Build It Green Tour. Here's a link for registration information.

5) On Saturday, October 15th, I'll be offering a day-long class for homeowners in the Portland Metro area, entitled 'Building an Accessory Dwelling Unit on Your Property in Portland'

With my personal ADU project nearing completion, I am ready to help others who hope to build an ADU in Portland. This class is intended for homeowners interested in building an ADU on their property. Readers of this blog know that the process of building an ADU can be complex, overwhelming and expensive.

The goal for this class is to help homeowners create a more beautiful and functional ADU space that will augment their property, maximize small space, and lower short and long term design, build, and maintenance costs for the ADU. It will cover the essential ADU design/build elements from start to finish, which will result in a more beautiful space and will hopefully help them save significant time and money.

Here's a link to more information about the class and the registration. http://pdxadu.eventbrite.com/ 

Saturday, October 15th, 9am-5pm. 

$95 (or 8 hours work/trade)

I plan to hold the class at my ADU 

Artistic Images of the Finished Interior

Over the weekend, we put many finishing touches the ADU. It's now "move in" ready. We expect for it to pass the final inspection this week. Here are some images of the ADU. I got carried away.

Heat Recovery Ventilator

Heat Recovery Ventilators are mechanical building components that serve several important functions for newly constructed, tight buildings.

As a quick attempt to summarize HRVs in writing, in air tight houses, it's important to have sufficient fresh air to breath. If there is not sufficient fresh air, the indoor air will eventually become stale, and increasingly full of carbon dioxide from human expiration and from residual toxins that are embedded in building materials that are used in the construction.

Air leaking through walls is an expression of the second law of thermodynamics

Mechanical ventilation is used to promote circulation of fresh air around the house. An HRV not only circulates fresh air, but balances air and vapor pressure inside and outside the house, mitigating the tendency for air or moisture to drive through a wall assembly.

This tendency is due to entropy (aka. the second law of thermodynamics), or the fact that high pressure systems migrate pressure towards low pressure systems. By reducing the difference between the air pressure inside the house and outside the house, there's less incentive for air to leak through the walls to equilibrate on either side of the wall assembly. When air and moisture pressure is equal on either side of a wall, less air will leak through the wall. This leak reduction, in turn, creates a more durable wall assembly over time. In addition to balancing pressure, HRV's also "recover heat" by passing the incoming and outgoing air through an aluminum core heat exchange where the conditioned air's heat is transferred to the incoming, unconditioned air.

My verbal explanations for the HRV in the attached videos are convoluted. The 2nd video explanation is a little better, but it's still a little bit technical. Anyhow, here's a video of the Fantech 1405R HRV upon its initial installation.



Here's a video of it now that the HRV has been fully installed.

Mosaics and Tiling in the Bathroom

Tiling the bathroom has been Deb's main focus in the ADU for the last month. All her work has paid off; the bathroom is one of the loveliest looking spaces in the ADU now that its wall have been designed so skillfully. Deb chose an Oregon mountain scene as her inspiration: one wall in night, and one wall in daylight.

Here's time sequence pictures of the wonderful mosaic being installed. 


We used a double-sided self adhesive tape product called Simplemat to stick the actual tiles to the wall. Historically, a cement product called "thinset" has been used to adhere the tiles to the bathroom wall, but this sticky product makes the mosaic process much easier.

Once Deb has laid out the mosaic tiles, she covered the tiles in grout. Then, she cleaned and scrubbed the grout. Once the grout has fully dried (after 72 hours), we'll put a sealant on the walls and then they'll be complete. Here's a video that shows the grouting process in action.



I showed off the tiling for the bathroom floor in earlier posts. Here's a picture of the finished bathroom floor, now that the toilet has been installed.

We have a couple more tiling projects left to do in the bathroom and kitchen. And, because we like the look of the look of tile so much, we've decided to use it on the stair risers as well. Here are some pictures of tiles being used on stair risers, so you can see this approach in action.

The Home Stretch and More Miscellaneous Fun Finish Work Projects

There's so many finish projects happening all at once. We're expecting to have our final plumbing on Monday, and then have our certificate of occupancy inspection later this week.

This video is showing off some more finish details; it features a custom made blue pine door, the finish lighting work, the water heater, and the gas meter hookup.

Granite Countertops and More Miscellaneous Fun Finish Work Projects

Last week, the granite fabricator came and templated the kitchen countertop space above the empty kitchen cabinets so that they could cut and shape a granite slab at their facility. They used the template to cut a piece of tan-brown granite to size. When the granite arrived, the still had to cut out a piece of granite for the sink, which they did on-site.





With the granite installed and the appliances here, we're ready for the finish plumbing, which will start on Monday. Finish plumbing involves installing the kitchen appliances, sinks, and the water heater.

Here's a few other projects that we've been working on in the last couple days, including another Blue Pine ceiling installation. Blue Pine is actually Ponderosa Pine that has had a fungus do some damage to it, which results in a blueish tint. We've also been working on the stair treads, tiling, and much more. Here's a quick video update.

Miscellaneous Fun Finish Work Projects

The "finish work" is all the stuff you actually see when the buidling project is done. For the last few weeks, and until we finish, everything we do is "finish work". This five minute video showcases some of the projects that we're currently working on. 

Installing the Cabinets

I'm pulling some very long days right now in the ADU to get the job done before my September 1st (hopeful) move-in date.

Last week, I was working primarily on cabinet installation. My builder has been finishing up the siding work, installing reclaimed doors, working on exterior trim, and building stair treads.

I'll have a post dedicated to the stairs, which along with the bannister/guardrail, will be a prominent design element. The stairs are turning out very nicely, and I'm excited to see what we come up in the end for both the main stairs as well alternating tread stairs to the attic. 

Here are some videos of this cabinet installation process, starting with a quick video during their arrival.



We started by installing the wall cabinets. We installed the upper cabinets first- they take more time than installing the base cabinets.



Here's a video of the appliances arriving. I installed the base cabinets before the appliances arrived.



Then, the granite fabricator's templater arrived and took measurements for a granite countertop that they'll install next week.

Here's a video of the current status of the cabinets, including a surprise cabinet installation in the bedroom.

Staining the Concrete Floor

I had read about staining a concrete floor, and learned that cleaning it was the important step before staining it.

Accordingly, I swept it, scraped the concrete with a knife, and then vaccuumed up the piles of dirt that were left behind from framing, drywalling and painting.

I mopped once, and the floor looked dirtier than it did before I started. After seeing how dirty the floor was, I figured that I had better do a much better job the second time. I mopped it again a second time. It looked cleaner, but there were still massive mop streaks and arcs of of dirt left behind.

Earlier that day, I had inquired about having the concrete company return to plug in the divits that are left behind by the blossoms from the cherry trees. They were able to come the next day, but said that the concrete would take a week to cure. Unfortunately, the project schedule demanded that I have the concrete stained right away---we can't install cabinets until the concrete floors are stained. And we can't have the final plumbing done until the cabinets are installed and the counter-tops put into place to hold the sink.

So, after mopping a second time, I got down on my knees and carefully scraped the floor with a razor blade, un-caking minute layers of dust and grime. Then, I mopped it again and vacuumed up the water with a shop-vac.

Then, I got on my hands and knees with a sponge and scrubbed every inch of the concrete.

In the morning, cleaned once again, and the proceeded with the staining. Here's a video the staining process.



After two layers of stain throughout the day, on the following day, I sealed the floor, and now will let it dry and cure for 72 hours. I think it's going to turn out very well.

Update: Here's a few pictures of the floor after the sealing.

Flooring and Tiling (Continued)

The flooring has taken about 30 man hours to do so far, and we're about 3 hours from being done. We used reused flooring, so it was slightly harder than using new flooring. We have laid approximately 500 sq ft.

I've been doing this with my father, who has been cutting the wood pieces to length. Meanwhile, I've been installing the pieces.

Deb has been doing the tiling. She says that the process so far has taken about 24 hours. But, as you can see, she's included a lot of artistic flare, using many smaller tiles, which takes much longer than a conventional tile job.

Flooring and Tiling

This is an update on the ADU progress.

First, I shot a quick video of the new electric service being added. The ADU will be separately metered, which is apparently a new City of Portland regulation. Bummer, since it cost me $2,000. But, by adding new service, there is ample power for both units and both units will not experience power outages as frequently.



But, mostly, we've been flooring, tiling, and siding. These three processes are time intensive, but the products are all beautiful in their own right.

The Beginning of the Long Haul

Over the last couple weeks, we've been painting the interior walls like mad and working on the siding. The electrical was installed so now there's ample lights to work at night as well as during the day.

The work that happens after the foundation, framing and drywall, seems to go a lot slower than the first phase. Since my overall project funds are now pretty low, I will be doing more of the work myself. We're gunning for a September 1st move-in date.


This video is a status update of where things are in the project.

Adding Some Color To Our Lives

I thought that I was going to have the house painted by others, but I ended up painting it myself over the weekend. It's taken me about 20 hours so far--I probably have about 4 hours to go still. I've been listening to lots of podcasts and painting late into the evening.

I needed to do the painting before proceeding to the installation of the wood flooring, or staining the concrete, in order to prevent possible paint spill mishaps on finished floors.

The first step after completing the drywall was to prime the walls. After priming, I had pros paint the 20ft high ceilings white with a paint gun.


Once that layer had time to dry, we selected colors for the walls. We made the colors ourselves using whites with an eggshell glean as the base, and adding purples and reds and greens. When I had to buy more white paint, I purchased "mistints" at the paint store (paints that were returned for some reason) which was a less expensive way to buy paint since I wasn't picky about the white base color.

We eventually created a nice palette of colors to use. We chose a purple, green, and a salmon color for most of the surfaces. I am a little bit color blind, so I left the color selection mostly to my girlfriend.



I spent the whole weekend painting and have almost finished. It looks great.

Financing Your ADU

There are two main barriers for homeowners who wish to build an accessory dwelling unit. One barrier is zoning and building codes. In many municipalities, due to existing building, planning, or zoning ordinances, ADUs simply aren’t allowed. 

The other barrier, which is equally formidable to those who live in places that DO allow ADUs, is the capital cost required to build an ADU. Many homeowners are intrigued by the idea of building an ADU, but financing an ADU in real life is daunting. This post is a detailed exploration of costs, funding approaches, and other options that you can consider in order to fund ADU construction. 

As I’ve written about in a previous post, my personal top priority for this project was to create a financially sustainable living situation. I see ADU’s as a very sustainable way to reduce living expenses, and even a way to generate significant income. However, the initial expense was a formidable barrier for me, as it is for everyone. Case in point: I estimate that my project will end up costing about $92K; you can read more about that cost breakdown.

How much does it cost to build a custom ADU?

Design/build cost for new construction ranges between $100-175/sq ft for a small, fully livable dwelling unit. For an 800 sq ft ADU, one should count on spending $80-140K, depending on the style of construction.  

For the purpose of this blog post, let’s say that we plan to build a 400 sq ft ADU. At $100/sq ft, we'd only spend have to spend $40K. However, smaller structures tend to cost more per square foot. For a 400 sq ft ADU, you should count on paying closer to $125-$200 per sq ft (aka. $50K-80K).

This increased cost is due in part to fixed costs. For example, no matter how small the structure that you’re building, you’re probably going to have to pay at least ~$5K just for plumbing, $5K for electrical and $3-5K for a permit. For a 400 sq ft ADU, you man end up spending almost as much on plumbing, electrical, and permit as one would spend designing/building a 2000 sq ft house.  My point is that you'll save money on most of your costs by building smaller, but there is a diminishing return on building smaller in terms of savings. 

Major Design Considerations that Significantly Reduce Design/Build Cost: 

• The cost for pre-fabricated houses is considerably less than custom new construction. Here’s an example of very pretty prefabricated cottages that start at $14K. I don’t know how to permit a prefabricated cottage as an ADU, but this seems to be a viable ADU design option to pursue if you’re on a very tight budget. Also, consider “tiny houses” or trailers if your budget is limited to about $10K.
• You can save big dollars if you build a “detached bedroom” or structure under 200 sq ft that does not require its own plumbing or kitchen. If you are just looking to expand the livable space of your property to build a guestroom or office, you can dramatically reduce your projects costs by simply not constructing an "Accessory Dwelling Unit". In Portland, structures under 200 sq ft don't even need to be permitted. However, such structures also not supposed to have basic building services that do require permits, such electrical, plumbing, or heat. Plenty of people reside in such structures though.
• Obviously, the more labor that you do not pay others to do for you, the lower your total design/build costs will be. I’ll cover this in much more depth below.
• According to one builder and an article that I have read on the matter, the costs for converting an existing garage are approximately the same cost per square foot as new construction (depending on the condition of the foundation and structure). Building an ADU from an interior carve out or bump out from an existing house, basement, or attic, are considerably less expensive than a standalone detached ADU. 
  

Building a Non-Permitted ADU:

In Portland, you can count on paying between $3-6K for an ADU permit. Nationally, where ADUs are allowed, permit fees will vary greatly by municipal and county jurisdiction. Portland has conventionally required System Development Charges for ADUs, which typically cost about $10K. However, through June 30th, 2013, Portland has waived System Development Charges for ADUs as a regulatory incentive to promote ADUs. You can read the City of Portland’s full stately and elegant policy statement about this issue here (I think it’s a great read, actually).

Read the full ADU system development charge waiver policy here

Non-permitted ADUs are cheaper to build. There are major drawbacks to building without permits,  but I understand why people would choose this option. A single conversation with a city planning officer, who tells you that you can not build where you would like to build, or that you would need to replace what you thought was a perfectly solid foundation in order to build a permit-able ADU, may be enough to spur you to bypass the permitting process altogether. 

In fact, one local study of MLS listing descriptions indicated that only 38% of ADUs in Portland were actually permitted -- most of the ADUs in Portland have not been built to code nor permitted. So, if you choose to go this route, you're not alone. And, where ADU's aren't allowed by code, you may feel that building without permits is the only option available to you. Interestingly, Tiny Houses were born as a smaller dwelling option that exploited a regulatory loophole that allows smaller, accessory houses---as long as they're on wheels.

Financing Options

1) Savings and Liquid Assets

The easiest and best way to finance an ADU is with pre-existing savings, but most of us don’t have $50-200K cash to spare. But, think it over. Maybe you have a retirement savings 401K plan against which you can borrow cash. Others may consider selling stocks other property to generate sufficient capital. And, some people may have family or relatives who are willing to loan you money at a low interest rate. 

Remember that even a 3% interest “family-loan” rate is a better rate that most retirees can reliably get for their retirement savings in this sluggish market, so this investment loan may be more appealing to your endowed elders than you would think.

2) 203(K) Loan

For those who are purchasing a new home, consider wrapping an ADU construction loan into your mortgage. FHA 203(k) loans are intended for people who are buying a home and want to make repairs and renovations to the property.  The program is supposed to help revitalize/rejuvenate the country's existing housing stock.

The rules for 203(k) loan projects that can qualify are a bit vague.  The rules do say that you must rehab an "existing dwelling" but they also say that you can buy a house, raze it and use the program to build a new house as long as you use some of the existing foundation.  So it's not really written with ADU's in mind, but it seems you can get an ADU project to qualify if you have an existing structure like a garage that you're going to "convert".  

Some banks who want to sell these loans have decided to read the FHA rules in a way that makes ADU projects possible, and then they ask an FHA underwriter to review site plans on a case by case basis.  Some loan officers at some banks that will tell you that you can't build an ADU using the 203(k) program.  Some loan officers are  on the opposite side, actively trying to sell the loans to people who want to build ADU's.

203(k) loans take a lot of planning and work up front. The bank tells you that from the day you have an accepted offer on the house, you have 30 days to submit to them all of the paperwork necessary for them to order an appraisal for the whole (house plus ADU) property. That means, in those 30 days, you need to be able to submit a full bid for the construction, down to some fairly detailed items like what  type of flooring, countertops, appliances, paint, windows, doors, etc.  Basically, they want to know everything about the ADU so they can value it accurately.  Once you submit all of the required forms you're required to work with an FHA Consultant, who has FHA forms to fill out with all of the specifications and expected costs on a line item basis), the bank orders the appraisal, and then your loan processing starts and will be complete in another 30 days.  So it's a total 60 day closing period (minimum).  So you need to have a seller that's okay with that time frame.   

This loan could potentially work if you could use part of an existing structure to make an ADU.  So, this low interest federal loan option is great to consider if you are buying a new house, are already eligible for a 203(k) loan (check with your loan officer), and are interesting in converting part of your house or converting your garage to an ADU.

3) Refinancing An Existing House

Refinancing a home to help you finance an ADU may be a good option to consider if you already have substantial equity in an existing house and the payback calculations for an ADU work out in your favor. And, refinancing has fewer strings attached to it than construction loans.

4) Remodel Construction Loan

Very few banks have taken this step, but according to this article in the Daily Journal of Commerce, at least Washington Federal has made the logical leap to giving out remodel loans for ADU construction. Here’s Washington Federal guidance about their “All in One” loans. 

In general, the difficulty with construction loans is that their rules are more strict, the interest rates are higher, and banks don’t know how to accurately evaluate the value of ADUs yet, so banks are reluctant to give a loan out that assumes a particular dollar value for them.  

5) Live-Work Trade

This next idea is a great option for younger homeowners with relatively little financial capital, and who have talented builder friends. There’s plenty of ways that a live work trade could be structured. If you’re planning on using the ADU as a income generating guest house, you may be able to figure out a fair way to split the costs with relative or friend, making them an business partner in your micro-venture. Here’s one example of a work-trade arrangement: 

Someone I know built a beautiful detached living space in Portland. Simultaneously, he also built a new bathroom and kitchen attached to an existing garage. The detatched bedroom has close, convenient, and private access to both amenities, although it is not physically connected. This detached bedroom structure is approximately 200sq ft, and the materials for the kitchen, bathroom, and detatched structure cost about $15K. He worked with a builder on this project for a year, and rather than paying the builder with cash, the builder had free rent in the bedroom for a three year period, which they valued at $30K. $30K is the amount that he would have paid the builder if he paid the builder with cash instead of free rent for three years. 

This project is about 320sq ft, and cost about $45K (~$140 sq ft). However, because of the live work trade arrangement, and the lack of permit fees beause it isn’t considered an ADU, the whole project only cost him $15K in cash.

This kind of bartering arrangement is wonderful, and indeed, can work out to be very favorably for all parties financially, personally, and professionally. One drawback is that the ADU is not going to generate any income for the homeowner for three years. And, the builder is going to living on their property, which may not be an option for many homeowners. But, if you don’t have access to a lot of capital, a live/work trade option may be the be right option for you.  

As another benefit, since both the homeowner and the builder were very personally invested in how the project came out, the structure came out looking gorgeous.

How to Lower the Design/Build Cost of Your ADU through Time, Labor, and Materials

The amount of work that the homeowner does in designing/building an ADU will vary from none of the work, to all of the work. I suspect that most homeowners who are designing/building a custom ADU are going to want to be at least a little bit involved in the design process, if not the building process. 

Personally, after much debate, I contracted out the majority of the work up to the final stage of construction. Initially, I wanted to do the work myself, but I realized that most of the work beyond my capacity. I could have helped as a laborer if I had more free time, but I could not have constructed the project on my own. However, I will be doing the ‘finish work’, including the hardwood flooring, the kitchen and bathroom, and the painting.

I spent roughly 33% on purely material costs (such as wood, siding, concrete, paint, and appliances) and about 66% purely on labor costs. Labor for new construction in the United States is not simple nor cheap. But, if one had the know-how to do all of this work themself (including electrical and plumbing), and a year of time to put into it, one could have do this job on their own for just the material costs (ie. $30K, as opposed to my projected cost of $92K). 

Furthermore, with enough time and building knowledge, it would be conceivable to source many of the materials that were needed through Craigslist and other building material resellers and design the project partially around those materials. 

For example, I paid $3K for 15 new windows. I think it is possible to acquire 15 wonderful, unused windows for as little as $1000. However, it would be impossible to get a particular kind of window, with say, specific height and widths, or Energy Star specifications. But, if the homeowner is VERY flexible about what materials they use, has ample time to source and collect those building materials, they could cut material costs by possibly 30-50%. It is conceivable that with sufficient time and flexibility, I could have acquired usable building materials for as little as $15-20K (as opposed to $30K, a $10-15K savings). 

The most practical way to source used materials for an ADU would be to collect building materials over time, and design a house using those materials. Some of the building materials would necessarily have to purchased new. For example, if you need to pour a concrete foundation, you would have purchase new concrete. If your project will be inspected, you would need to use many new materials. For example, due to inspections, I need to have new light fixtures with the UL stickers still on them, instead of reusing light fixtures as I had originally planning. And just inexpensive light fixtures, I had to pay nearly $700. 

In summary, if I did all of the work myself, including all of the highly skilled trades of architecture, plumbing, and electrical; and had the patience and determination to build a structure over a very laborious year-long period, I believe it would be conceivable to design and build a comparable structure from mostly salvaged materials for $20K + a working year of my time.  

For me, and the vast majority of the population, this type of DIY scenario is highly unrealistic. But, for an highly skilled homeowner with a year of time at their disposal, this approach may be an option to consider. Given our nation's cultural self-reliant mentality, I am sure that this DIY approach has been used a countless number of times.  

Here's an article about "Re-Creation" house renovation project that a friend of mine built using 90% salvaged materials. As a point of reference, the mostly-used material expenses for this 640 sq ft project amounted to ~$20,500.

Calculating Payback on the ADU Capital Investment 

In my case, to fund the project, I borrowed money from my future self by borrowing against my retirement savings via my 401K. I calculated that the benefit of living mortgage-free after this project made it worth the trade-off of using my retirement funds.  

Generally speaking, financial advisers would not recommend taking money out of a retirement account. While I am paying my future back over the next 15 years, this retirement money is not going to invested in the market. It's an open question as to whether the value of real estate in Portland will increase at quicker rate than the a 401K (which mirrors the S+P 500), but the ADU investment has other financial paybacks that seem more reliable to me the S+P 500.

Upon completion of construction, I will be relatively cash poor and relatively equity rich. The primary house on the property is going to 'cash flow' as soon as I move into the ADU. This means that I anticipate that the rental income from the main house will fully cover the cost of the mortgage, interest, and taxes on the total property. If this assumption is accurate, though I won't have much money left in my bank account, I'll be in a position of relative financial freedom in the sense that I will not have to pay monthly living expenses. 

In terms of resale value, my Realtor described it to me this way. If I spent $100k on my project and assume a conservative number of $50k increased property value, the property would need to earn $50,000 before I'd break even. Conservatively assuming I rented out the ADU at $1000/month, it would take 4.2 yrs to "break-even" on the project. 

I'm guessing that, in reality, the ADU will add $100K to the assessed value of the property. If I resold the property (house and ADU) immediately upon completion this fall, I would not make much profit from this venture. However, if I were to hold onto the ADU for 10 years as a $1000/month rental property, it would generate $120,000 in rental income. The longer that I hold onto the property, the better it will work for me financially.

Personally, I don't intend to sell the property anytime soon, so at $1000/month, the payback period for $92K is 7.6 years. After 7.6 years, the investment will have paid itself back. Since I will be living in the ADU, this equation isn't actually this simple. But, for the purpose of this blog post, we can safely say that the investment pays for itself in 7.6 years or less and then generates income thereafter.

Conclusion 

To me, ADUs represent a very compelling financing investment for homeowners. But, they aren’t possible for many homeowners due to the cost barrier. There’s many factors to consider if you’re starting to get intrigued about the idea of building an ADU, but I’ll suggest that the most important factor to consider is whether/how the ADU will work out for you as a financial sustainable investment, and whether you can figure out some creative financial mechanism to overcome their formidable up front costs. Hopefully, if you're toying with the idea of building an ADU, one of the ideas listed in this blog post will help you overcome that first capital hurdle.