ADU vs Room Addition: Cost, Permits & Resale Value Compared

Need more space on your Los Angeles property? You’re facing a common decision: build an ADU (Accessory Dwelling Unit) or add a room addition to your main house. Both options increase your living space and property value, but they serve different purposes, have different costs, and follow different rules. This comprehensive comparison will help you choose the right option for your needs and budget.

Quick Comparison Overview

Factor	ADU	Room Addition
Typical Cost (LA)	$150,000 – $300,000	$80,000 – $250,000
Cost per Sq Ft	$200 – $350/sq ft	$150 – $300/sq ft
Rental Income	$1,800 – $3,500/mo	None (part of main house)
ROI Potential	10-15% annually (rental)	50-80% at resale
Permitting	Streamlined/ministerial	Standard process
Timeline	6-12 months	4-10 months
FAR Impact	Exempt (doesn’t count)	Counts toward FAR limit
Separate Kitchen	Required	Not allowed (unless ADU)
Privacy	High (separate unit)	Low (part of main house)
Resale Appeal	High (income property)	Moderate (more space)

What is an ADU?

An ADU is a complete, independent dwelling unit with its own:

• Kitchen facilities
• Bathroom
• Sleeping area
• Separate entrance
• Utilities (may share meters)

ADUs are governed by special California laws (Government Code 65852.2) that provide streamlined permitting and exemptions from many standard zoning requirements.

What is a Room Addition?

A room addition expands your existing home by adding:

• Bedrooms
• Bathrooms
• Living spaces
• Family rooms
• Home offices
• Extended kitchens or dining areas

Room additions are part of your primary residence and follow standard Los Angeles building codes and zoning rules.

Detailed Cost Breakdown

ADU Costs (800 sq ft example)

Component	Cost Range	Notes
Design & Plans	$8,000 – $20,000	Separate building requires full architectural plans
Permits & Fees	$5,000 – $15,000	Under 750 sq ft exempt from impact fees
Foundation	$20,000 – $35,000	New foundation required
Structure/Framing	$40,000 – $70,000	Complete new building envelope
Utilities	$15,000 – $30,000	Trenching, connections, possible new service
Kitchen	$15,000 – $35,000	Full kitchen with appliances required
Bathroom	$12,000 – $25,000	Complete bathroom with shower/tub
Interior Finishes	$20,000 – $40,000	Flooring, drywall, paint, trim
Exterior	$10,000 – $20,000	Siding, roofing, windows, doors
Total	$160,000 – $280,000	~$200-$350/sq ft

Room Addition Costs (800 sq ft example)

Component	Cost Range	Notes
Design & Plans	$5,000 – $12,000	Simpler plans (addition to existing structure)
Permits & Fees	$3,000 – $10,000	Standard permit fees
Foundation	$15,000 – $30,000	Ties into existing; may be less extensive
Structure/Framing	$30,000 – $55,000	Shares walls; integrates with existing roof
Utilities	$8,000 – $18,000	Extensions from existing systems
Kitchen Expansion (optional)	$10,000 – $25,000	Only if expanding existing kitchen
Bathroom Addition	$12,000 – $25,000	If adding new bathroom
Interior Finishes	$15,000 – $35,000	Must match existing home style
Exterior/Roofing	$12,000 – $25,000	Roof integration can be complex
Total	$120,000 – $220,000	~$150-$275/sq ft

Cost Advantage: Room Addition– Typically 15-25% less expensive per square foot than an ADU

Permitting & Approval Process

ADU Permitting Advantages

Benefit	Explanation
Ministerial Approval	Must be approved if meets objective standards (no discretionary review)
60-Day Approval Timeline	Cities must approve or deny within 60 days
FAR Exemption	ADUs don’t count toward Floor Area Ratio limits
Setback Reductions	Can build with 4-foot setbacks (vs 5-15 feet standard)
Parking Exemption	No parking required in most cases
Impact Fee Exemptions	ADUs under 750 sq ft exempt from impact fees
Owner-Occupancy	No longer required (as of 2020)

Room Addition Permitting Constraints

Requirement	Impact
FAR Limits	Must comply with lot’s maximum Floor Area Ratio (often limiting)
Standard Setbacks	Typically 5-15 feet from property lines
Lot Coverage	May be restricted by maximum lot coverage percentage
Architectural Review	May require design review in some neighborhoods
Longer Approval	90-120+ days typical for plan review
Parking Requirements	May trigger additional parking requirements
CEQA Review	Large additions may require environmental review

Permitting Example: 800 sq ft Project

Scenario: R1-zoned 6,000 sq ft lot with 1,800 sq ft house (30% FAR)

ADU Option:

• Can build 800 sq ft ADU without FAR concerns
• ADU exempt from FAR calculation
• Total living space: 2,600 sq ft
• Ministerial approval
• Result: APPROVED

Room Addition Option:

• Maximum FAR for lot: 50% = 3,000 sq ft
• Existing house: 1,800 sq ft
• Maximum addition: 1,200 sq ft possible
• 800 sq ft addition: APPROVED
• But subject to standard setbacks and lot coverage

What if FAR was already maxed?

• ADU: Still allowed (FAR exempt)
• Addition: Not allowed without variance or FAR relief

Income Generation Potential

ADU Rental Income

ADU Size	Avg Monthly Rent (LA)	Annual Income	30-Year Income
500 sq ft studio	$1,700	$20,400	$612,000
700 sq ft 1-bedroom	$2,200	$26,400	$792,000
900 sq ft 2-bedroom	$2,800	$33,600	$1,008,000

Assumes 3% annual rent increases

Room Addition Income

Direct rental income: $0

Room additions are part of your primary residence and cannot be rented separately. However, they can:

• Allow you to rent entire house for more (if you move out)
• Generate income if used as home office (business deduction)
• Create Airbnb opportunity for whole house (if permitted)

Income Advantage: ADU– Can generate $20,000-$40,000+ annually in passive income

Calculate your specific rental income potential with our ADU Cost Calculator.

Property Value Impact

ADU Value Addition

Property Value Before	ADU Investment	Estimated Value After	Value Increase
$800,000	$200,000	$1,050,000 – $1,100,000	+$250,000 – $300,000
$1,200,000	$250,000	$1,550,000 – $1,620,000	+$350,000 – $420,000
$1,600,000	$280,000	$2,050,000 – $2,140,000	+$450,000 – $540,000

Typical ADU value addition: 125-150% of construction cost

Room Addition Value Addition

Addition Type	Investment	Typical Return at Sale	ROI %
Master Suite Addition	$150,000	$105,000 – $120,000	70-80%
Bathroom Addition	$75,000	$45,000 – $56,000	60-75%
Family Room Addition	$120,000	$72,000 – $84,000	60-70%
Second Story Addition	$200,000	$140,000 – $160,000	70-80%

Typical room addition value: 60-80% of construction cost at resale

Value Advantage: ADU– Higher return on investment, plus generates income while you own the property

Use Cases: When to Choose Each Option

Choose an ADU if:

• You want rental income– Passive income of $20,000-$40,000/year
• Multi-generational living with privacy– Aging parents or adult children need independence
• You’re at FAR limit– Can’t expand main house further
• Investment focus– Maximizing property value and ROI
• Future flexibility– May sell separately under AB 1033
• You have lot space– Adequate yard for separate structure
• Guest house need– Frequent visitors or rental opportunity

Choose a Room Addition if:

• You need more space in main house– Growing family, home office, playroom
• Budget is tighter– Additions typically cost 20% less
• You want integrated space– Prefer everything under one roof
• Faster timeline– Additions can be quicker (4-8 months)
• Climate control efficiency– Single HVAC system cheaper to operate
• No rental intent– Just want more square footage
• Limited lot space– Not enough yard for separate structure
• Architectural cohesion– Want seamless expansion of existing home

Zoning & Code Considerations

FAR (Floor Area Ratio) Impact

Example: 7,500 sq ft lot in R1 zone (50% max FAR = 3,750 sq ft max house size)

Scenario	ADU Option	Room Addition Option
Existing house is 2,000 sq ft	Can add 1,200 sq ft ADU + up to 1,750 sq ft addition = 4,950 sq ft total	Can add 1,750 sq ft addition (FAR limit) = 3,750 sq ft total
Existing house is 3,500 sq ft	Can add 1,200 sq ft ADU + maybe 250 sq ft addition = 4,950 sq ft total	Can add only 250 sq ft addition (FAR limit) = 3,750 sq ft total
Existing house is already at FAR limit (3,750 sq ft)	Can still add 1,200 sq ft ADU (exempt) = 4,950 sq ft total	CANNOT add any addition without variance

Key Insight:If you’re near or at your FAR limit, an ADU may be your ONLY option to add square footage.

Setback Requirements

Setback Type	Standard (Room Addition)	ADU Exception
Rear Setback	15 feet typical	4 feet minimum
Side Setback	5-8 feet typical	4 feet minimum
Front Setback	15-25 feet typical	Same as main house (ADU usually in back)

This means ADUs can be built on lots where standard additions wouldn’t fit within setback requirements.

Financing Options

ADU Financing

• Home Equity Loan: 6-9% interest, up to 85% LTV
• Home Equity Line of Credit (HELOC): Variable rate, flexible draw
• Cash-Out Refinance: May get lower rate if timing is right
• Construction Loan: Short-term, higher rate, converts to permanent
• Specialized ADU Loans: Some lenders offer ADU-specific products
• CalHFA ADU Grant Program: Up to $40,000 for low/moderate income

Room Addition Financing

• Home Equity Loan: 6-9% interest
• HELOC: Variable rate
• Cash-Out Refinance: Depends on market rates
• Personal Loan: Smaller additions, higher rates (9-12%)
• Credit Cards: Very small projects only (not recommended)

Financing Advantage: ADU– More specialized loan products available, rental income can qualify you for larger loans

Construction Timeline Comparison

Typical ADU Timeline

• Design & Planning: 4-8 weeks
• Permit Submission: 1 week
• Permit Approval: 6-12 weeks (ministerial, but varies)
• Site Prep: 2-3 weeks
• Foundation: 3-4 weeks
• Framing: 6-8 weeks
• Mechanicals/Utilities: 4-6 weeks
• Interior Finishes: 6-8 weeks
• Final Inspection: 2-3 weeks

Total: 6-12 months

Typical Room Addition Timeline

• Design & Planning: 3-6 weeks
• Permit Submission: 1 week
• Permit Approval: 8-16 weeks
• Site Prep: 1-2 weeks
• Foundation: 2-3 weeks
• Framing: 4-6 weeks
• Roof Integration: 2-3 weeks
• Mechanicals: 3-5 weeks
• Interior Finishes: 5-7 weeks
• Final Inspection: 2-3 weeks

Total: 5-10 months

Timeline Advantage: Room Addition– Typically 1-2 months faster

Living Disruption During Construction

ADU Construction Impact

• Noise: Construction noise, but in backyard
• Access: Contractors need yard access daily
• Utilities: Temporary shutoffs for connections (hours, not days)
• Dust: Minimal impact to main house interior
• Bathroom/Kitchen: Main house facilities unaffected
• Livability: Generally can stay in main house throughout

Room Addition Impact

• Noise: Inside main house, more disruptive
• Access: Contractors working inside/outside your home
• Utilities: May affect main house systems
• Dust: Difficult to contain; affects whole house
• Bathroom/Kitchen: May be out of service if remodeling
• Livability: May need to move out temporarily

Disruption Advantage: ADU– Less impact on daily living

Long-Term Maintenance & Operating Costs

ADU Annual Costs

Expense	Annual Cost
Property Tax Increase (proportional)	$2,000 – $3,500
Insurance (landlord policy add-on)	$400 – $800
Maintenance Reserve	$1,200 – $1,800
Utilities (if owner-paid)	$1,200 – $2,400
Landscaping (if separate)	$300 – $600
Total Annual	$5,100 – $9,100

Offset by $20,000-$40,000 annual rental income

Room Addition Annual Costs

Expense	Annual Cost
Property Tax Increase	$1,200 – $2,500
Insurance Increase	$200 – $400
Utilities Increase	$600 – $1,200
Maintenance Reserve	$600 – $1,000
Total Annual	$2,600 – $5,100

No offsetting income

Operating Cost Advantage: Room Addition– Lower ongoing costs, but no income to offset them

Tax Implications

ADU Tax Benefits

• Rental Income Tax: Taxable, but many deductions available
• Depreciation: Deduct 1/27.5 of ADU value annually (~$7,000/year for $200k ADU)
• Operating Expenses: Deduct maintenance, insurance, utilities, management
• Mortgage Interest: Deductible on rental property
• Property Tax: Deductible portion for ADU
• Potential for Tax Loss: Depreciation can create “paper loss” while generating cash flow

Room Addition Tax Treatment

• Property Tax: Standard deduction (up to $10k SALT limit)
• Mortgage Interest: Deductible if primary residence
• Capital Gains at Sale: May increase basis, reducing capital gains tax
• Home Office Deduction: If used for business (limited)

Tax Advantage: ADU– More deductions available, especially if renting

Resale Considerations

Buyer Appeal: ADU

• Income property: Appeals to investors
• Multi-generational buyers: Large and growing market segment
• Flexibility: Use as rental, guest house, office, or family housing
• Mortgage helper: Rental income can qualify buyer for larger loan
• Higher price point justified: Income stream supports higher asking price

Buyer Appeal: Room Addition

• More space: Appeals to families needing bedrooms
• Functionality: Home office, playroom, etc.
• Simpler: No landlord responsibilities
• No roommates needed: Appeals to buyers who don’t want to rent
• Better for primary residence buyers: Just want more house

Can You Do Both?

Yes! Many homeowners choose to do both an ADU AND a room addition, since ADUs don’t count toward FAR:

Example Strategy:

• Build 1,200 sq ft ADU in backyard (rental income)
• Add 600 sq ft master suite to main house (personal use)
• Total added space: 1,800 sq ft
• ADU generates income to help pay for both projects

Check your property’s potential with our ADU Eligibility Check tool.

Decision Matrix

Your Priority	Recommendation
Maximum ROI and income generation	ADU
Lowest construction cost	Room Addition
Working around FAR limits	ADU
Fastest timeline	Room Addition
Privacy for multi-generational living	ADU
Integrated family space	Room Addition
Investment/rental property	ADU
Growing family needs more bedrooms	Room Addition
Passive income	ADU
Home office/personal use	Room Addition
Maximum property value increase	ADU
Minimal living disruption	ADU

Get Expert Guidance

Choosing between an ADU and room addition depends on your goals, budget, property constraints, and long-term plans. Both options can significantly improve your property, but in different ways.

As experienced Los Angeles contractors specializing in both ADUs and room additions, we can help you:

• Evaluate your property’s potential for each option
• Calculate accurate costs and ROI for both scenarios
• Navigate permitting for either project type
• Resolve any existing code violations before starting
• Design and build your project from concept to completion

Use our Cost Calculator to compare both options for your specific property, or contact us for a comprehensive consultation on which choice makes the most sense for your situation.