Inside the ADU Process Part 1: The Feasibility Study (Oakland, CA)

Have you been dreaming of increasing your property’s value, or generating additional rental income? Building an accessory dwelling unit (ADU) on your property could be the answer. With recent state changes designed to spur construction, these versatile units have recently seen a huge uptick in popularity throughout California, turning unused backyard space into a valuable asset. 

If you’ve been curious about what actually goes into an ADU project, you’re in luck. Edrington and Associates, a leading provider of ADU services and feasibility studies in the Bay Area, is ready to pull back the curtain on the ADU process with a four part inside look at building an ADU. 

Throughout this series, we’ll be using a real-world property currently undergoing a remodel and ADU construction at 4431 Pampas Ave, Oakland, CA. 

In part one, we kick things off by examining one of the most crucial parts of ADU projects – the feasibility study.

What is a Feasibility Study?

At Edrington and Associates, we firmly believe that commissioning a feasibility study (also known as a feasibility analysis, or feasibility report) is key to answering one essential question: Does adding an ADU make sense?

A feasibility study is an essential cost-benefit analysis tool, designed to evaluate what’s possible on your property. Think of a feasibility report as your project’s compass. It’s a comprehensive and systematic evaluation of your property designed to point your ADU project in the right direction

But what exactly is a feasibility study and how does it help? This essential tool will help you:

• Uncover Challenges – There are many potential roadblocks to ADU construction, including utility access, site conditions, and potential zoning conflicts. A feasibility uncovers these potential issues before ground is ever broken.
• Identify Opportunities – A feasibility study will not only uncover the right ADU type for your property, but determine the ideal placement and configuration as well.
• Assess Financial Viability – A feasibility study is a vital cost benefit analysis tool, giving you a realistic picture of what the project will require from a financial perspective. It will also identify potential rental income opportunities, so you can determine if the project makes financial sense for you.
• Streamline the ADU Process – Undergoing a feasibility study gives you crucial information that will be used to inform your decision making throughout the ADU process, including utility, permit and construction planning.

All these important benefits make a feasibility study in California an essential investment in assessing your property’s viability for an ADU. 

The Project: 4431 Pampas Ave, Oakland, CA

Now that we understand what a feasibility study is, we can look closely at a real world example of the feasibility study process in Oakland. 

Recently, Edrington and Associates, acquired the property at 4431 Pampas Ave in Oakland, CA. 

This early 20th century property, while in need of a major renovation, is fully capable of being remodeled into a 3-bedroom, 2 bath primary residence, with a monthly rental potential of $4,700. 

However its ample backyard also provides an excellent opportunity to build an ADU on site. 

With such substantial space, a feasibility analysis is the key to uncovering the best options for the property.

The Feasibility Report Key Findings

Edrington and Associates had our senior building inspector conduct a thorough feasibility analysis of the property. His findings included:

• The backyard has a large foot print, measuring at 50 feet wide by 45 feet deep to the property line. With 5’ side and rear setbacks, as well as a 10’ setback from the home, the backyard can accommodate a detached ADU up to 1200 square feet. 
• However, a 749 square foot detached ADU is ultimately recommended to minimize impact and other potential fees.
• Using free plans from the city of Oakland, a 749 square feet, 2 bedroom ADU would fit perfectly in this space. 
• Average rental prices for 2 bedroom units exceed $2500 per month. 
• The property is not located in a flood or wildfire zone, which offers a safety advantage and potentially lower insurance rates. 

The feasibility report did also identify an attached ADU connecting directly to the main home as a possibility, but ultimately recommended a detached ADU as the best usage of the space, including maximum privacy and higher rental income potential. 

Feasibility Study Process Oakland: Navigating Utilities and Property Concerns

Beyond the key findings, the feasibility analysis for 4431 Pampas was critical in uncovering specific details about the property that are essential to address when adding a detached ADU. 

The feasibility study confirmed that property, as purchased, had fallen into a significant state of disrepair, and will require significant remodeling.

It was also uncovered that due to the age of the primary dwelling, there is a need to work with the utilities as well. Here are the most important findings with regards to the utilities:

• Water Utilities

The existing water service at 4431 Pampas has a ⅝” EBMUD meter, with a galvanized ¾” line to the house. Its age means that it is likely not functioning at its original capacity, and will need to be upgraded to support an ADU. This presents several options: 

• The meter itself can be upgraded, 
• The line can upgraded, 
• Or a second meter for the ADU can be added. 

While adding a separate meter isn’t specifically required to build an ADU in Oakland, the cost of installation may be offset over time by allowing for accurate tenant water billing. An EBMUD assessment will likely be required for the additional fixtures in the ADU.

• Electrical Power

The electrical power at the property is provided by PG&E and rated at 100amps, with 6 circuits and no sub-panel. This means that there is not currently enough power to ensure that both the house and the new ADU receive enough energy. A standalone 100amp electrical panel will be the minimum requirement for the ADU. PG&E requires separation between the gas meter and electrical meter, which will require moving the gas meter to a new location as well.

• Egress

Ensuring safe access is a key area of concern. The city of Oakland requires a minimum of 36” between the property line and the main structure for egress (exit) from the street to the ADU. This vital safety requirement guarantees fire department access in an emergency. Currently, a staircase addition is constraining the egress to less than the minimum 36” requirement. The feasibility analysis confirmed that the existing stairs and deck will need to be demolished and relocated so that egress can be expanded, a relatively simple, but critical, fix.

• Sewer

The primary property’s existing sewer line is original, dating back to the early 1900s, and likely requires replacement. If the ADU is attached to the main home, it will be possible to tap into the existing line. However since the preferred option is a detached ADU, this will require rooting the sewer drain outside the primary home’s underfloor footprint. An ejector pump will also be required to remove the waste, due to the downhill slope where the ADU will be located. This will require the help of a plumber and will need to be integrated into any pre-approved plans.

• Heating

The feasibility analysis strongly recommends all-electric units for the new ADU construction. Not only does this align with Oakland’s green building requirements, but it simplifies coordination with PG&E. Heating and cooling needs can be satisfied by a heat pump/mini-split mechanical system, while water heating can be handled by a condensing water heater that uses similar heat pump technology. These all-electric systems are energy efficient and provide comfort with a modest amount of equipment.

Feasibility Study Cost Benefit Analysis (Oakland)

Ultimately, the core benefit of any ADU feasibility analysis is to determine if the investment makes sound financial sense. That makes the cost benefit analysis perhaps the most important part of the entire feasibility report. 

The financial feasibility study (Oakland) compared two potential ADU configurations:

Detached One-Bedroom, One-Bath Unit (625 sq. ft.)

• Estimated Market Rent: $1,789 per month.
• With 100% financing, the annual cash flow showed a deficit of ($9,743).
• The payback period based on market rent was estimated at 20.6 years.
• Conclusion: This option was deemed “not a highly viable investment option” given the negative cash flow.

Detached Two-Bedroom, One-Bath Unit (746 sq. ft.)

• Estimated Market Rent: $2,536 per month.
• With 100% financing, the annual cash flow showed a smaller deficit of ($4,394).
• The payback period based on market rent significantly improved to 14.9 years.
• Conclusion: This option was deemed a “long-term investment option,” offering a much stronger financial outlook compared to the one-bedroom.

The feasibility study cost benefit analysis shows the Oakland property at 4431 Pampas to be best suited for the detached 2 bedroom 749 square feet option to be the ideal configuration, with stronger return on investment and shorter payback period. 

While these numbers are estimates, and not construction bids, they provide a crucial reference point for decision making.

Conclusion:

Ultimately, the quick feasibility study timeline for this Oakland property, completed in less than 2 weeks, enabled quick decision making, providing significant insight into the property’s conditions and potential. The feasibility also was key in identifying potential investment returns, ensuring that moving forward with the project is a wise investment. 

In the next part of our series Inside the ADU Process, we’ll take a deep dive into the design process, and the many options that Edrington and Associates offers for building a custom ADU that seamlessly integrates with your existing property. 

And in the meantime, if you are in need of feasibility study services in Oakland or anywhere in the Bay Area, contact Edrington and Associates. Whether you’re looking to add a prefab ADU, convert existing space in a single family home, or build one or more ADUs on existing multi-family properties, our feasibility studies are cost effective and designed to maximize your investment. 

Edrington and Associates today, and let us guide you through the ADU process.