Introduction
Building an Accessory Dwelling Unit (ADU) is one of the smartest investments property owners can make. Whether you’re looking to boost your property’s value, generate rental income, or create housing for family members, an ADU offers tremendous potential. However, these projects often come with challenges, particularly in navigating zoning laws and managing contractors.
At HouseMax, we’ve helped countless clients through their ADU development journeys, learning valuable lessons along the way. In this comprehensive guide, we’ll explore two critical areas—due diligence and contractor management—and share insights from experienced professionals like Jeff Fechter and Christian Ballow to help you avoid costly pitfalls.
Conduct Thorough Due Diligence
The foundation of any successful ADU project lies in meticulous research and preparation. Every city has specific zoning laws, permitting requirements, and potential overlays that affect what you can build and where. Neglecting this step can result in wasted time, fines, and even legal disputes.
Christian Ballow highlights the importance of working with knowledgeable professionals to navigate these complexities:
“If you want to skip that part of the process, you’d typically go out to an architect or a draftsman. They have a ton of knowledge in the zoning, in the code, in the area. You know, find one that has experience in developing ADUs or developing some sort of ground-up projects, and they should have enough knowledge there to get you through your diligence period when you’re acquiring a property.
You’d be surprised—depending on how interested the city is in building affordable housing and pushing ADUs—that will kind of tell you how much resources you have for you.”
— Christian Ballow, Momentum Capital
What This Means for You:
- Leverage Local Expertise: Working with architects or draftsmen who specialize in ADUs can save you from costly missteps. These professionals understand local regulations, enabling you to streamline your project from the start.
- Use City Resources: Cities that prioritize affordable housing often provide tools like interactive zoning maps or consultations with city planners. These resources can help you determine feasibility and avoid zoning conflicts.
- Prepare for Overlays: Understand any neighborhood-specific overlays or restrictions that may apply to your property. This ensures your project remains compliant and avoids delays during construction.
Skipping due diligence might seem like a shortcut, but it often leads to setbacks and increased costs. A thorough understanding of your property’s potential and limitations will set your project up for success.
Manage Contractors with Clear Contracts and Accountability
Your contractor plays a pivotal role in the success of your ADU project. While the early stages of construction—such as demolition and foundation work—tend to move quickly, the final 10% of a project is often where issues arise. Finishing touches, such as inspections, fixtures, and painting, can drag on if contractors aren’t properly managed.
As Jeff Fechter explains, the final stages require a strategic approach:
“You’ve been doing this a long time. I’ve been doing this a long time. It always seems like that last 10%—that punch list, that final little bit—is the hardest part to actually get done. The first part of the project is easy; the demo goes crazy fast, and pouring the foundation happens quickly. But that last bit always seems to drag.”
— Jeff Fechter, CEO, HouseMax Funding
Christian Ballow offers practical advice for keeping contractors motivated and accountable:
“It has a lot to do with your contracts with those vendors. Really putting in timelines and understandings where you could potentially bonus your contractors if they finish early, and you could charge them fees if they finish late. So, you give and take—they want to earn that early bonus, and they want to avoid that late fee.
But beyond that, we also hold back on every piece of the contract. For example, when they finish the first phase, like the foundation, we pay them the percentage we stated, but we hold back 10%. That way, if there’s an issue later—like with inspections or rebar—we have enough leverage. After three to six months without issues, we release that holdback. It keeps everyone accountable throughout the project.”
— Christian Ballow, Momentum Capital
How to Effectively Manage Contractors:
- Draft Detailed Contracts: Ensure your contracts include timelines, payment schedules, and clear deliverables for each phase of the project. Specify any penalties for delays and bonuses for early completion to incentivize timely work.
- Implement Payment Holdbacks: Hold back a portion of payments at each phase to maintain leverage. This approach ensures accountability and provides funds for resolving potential issues.
- Monitor Progress: Regularly visit the construction site to check on progress and ensure work meets agreed-upon standards. Open communication with contractors helps address concerns before they escalate.
By proactively managing your contractors, you can avoid common delays and disputes, ensuring your project stays on track and within budget.
Conclusion
Developing an ADU is a rewarding investment, but it requires careful planning and execution. Conducting thorough due diligence and managing contractors with clear accountability measures are two of the most critical components of a successful project.
At HouseMax, we’re here to guide you through every step of the process, from financing to construction. With the right team and resources, you can turn your vision into a reality while avoiding unnecessary complications.
Let HouseMax help you make your ADU project a smooth, profitable experience. Contact us today to learn more about how we can support your journey.
