Prefab ADU vs Custom ADU in the Bay Area: Which Is Right for You?

Prefab ADU vs Custom ADU: Quick Comparison

If you are considering an ADU for your Bay Area property, one of the first decisions is whether to go prefab or custom-built. Both are legitimate approaches, but they differ significantly in cost, timeline, design flexibility, and long-term value.

Factor	Prefab ADU	Custom ADU
Cost	$150K-$300K installed	$250K-$500K
Cost per sqft	$250-$350/sqft	$250-$400/sqft
Timeline	3-6 months	6-12 months
Design flexibility	Limited to manufacturer options	Fully custom
Lot optimization	Standard footprints only	Designed for your specific lot
Matching architecture	Limited exterior options	Matches your home exactly
Resale value	Moderate	High
Permits required	Same as custom	Same as prefab

Both options require the same building permits in every Bay Area city. California’s ADU laws apply equally whether your unit is prefab or custom. The permit process itself does not change based on construction method.

When a Prefab ADU Makes Sense

Prefab ADUs are manufactured off-site in a factory and delivered to your property for installation. The unit arrives largely complete, and on-site work focuses on the foundation, utility connections, and final assembly.

A prefab ADU is a strong choice when:

• Your lot is flat with easy access for delivery trucks and cranes
• You have standard setbacks with no unusual constraints
• Your budget is under $250K and speed matters more than customization
• You need the unit completed in under six months
• Utility connections are straightforward (sewer, water, and electrical are accessible near the ADU site)

The biggest advantage of prefab is speed. Because the unit is built in a controlled factory environment, weather delays are eliminated for the structure itself. On-site work is limited to foundation prep, crane placement, and utility hookups.

What prefab does well: For a homeowner with a flat, standard-sized lot in a city like Sunnyvale or Santa Clara, a prefab ADU can be a smart, cost-effective solution. If the goal is a straightforward rental unit or guest house and the lot cooperates, prefab delivers a quality product faster and cheaper.

Where prefab falls short: Prefab manufacturers offer a fixed menu of floor plans, typically ranging from 400 to 1,200 square feet. You can choose finish packages and sometimes adjust interior layouts, but the exterior dimensions, roof lines, and overall design are set. If your lot has a slope, narrow access, or tight setbacks, a prefab unit may not fit at all.

When a Custom ADU Is the Better Investment

A custom ADU is designed from scratch by an architect or designer and built on-site by a contractor. Every dimension, material, and detail is tailored to your property and your needs.

A custom ADU is the better choice when:

• Your lot has slopes, irregular shapes, or tight setbacks that require a tailored footprint
• You want the ADU to match your main home’s architectural style
• You plan to use the ADU for rental income and want to maximize square footage and appeal
• Access to your backyard is restricted (narrow side yards, mature trees, no crane access)
• You want premium finishes, specific layouts, or features like vaulted ceilings or custom cabinetry

Custom ADUs shine on the kinds of lots that are common across the Bay Area: hillside properties in Los Gatos, narrow lots in Palo Alto, or older neighborhoods in San Jose where setback requirements create odd buildable areas. A custom design can work around every constraint and maximize usable space.

For homeowners focused on ADU cost in the Bay Area, custom is more expensive upfront. But the per-square-foot premium is often smaller than people expect, especially when you factor in the site work that prefab units still require.

Cost Comparison in Detail

Here is a more detailed breakdown of where the money goes for each approach.

Prefab ADU Cost Breakdown (600 sqft unit)

• Unit purchase: $100K-$180K
• Site preparation and foundation: $15K-$35K
• Utility connections (sewer, water, electrical): $15K-$40K
• Crane and delivery: $5K-$15K
• Permits and fees: $5K-$15K
• Landscaping and exterior finish: $5K-$15K
• Total installed: $145K-$300K

Custom ADU Cost Breakdown (600 sqft unit)

• Design and engineering: $15K-$30K
• Permits and fees: $5K-$15K
• Foundation and site work: $20K-$50K
• Framing, roofing, exterior: $50K-$90K
• Plumbing, electrical, HVAC: $30K-$60K
• Interior finishes (kitchen, bath, flooring): $40K-$80K
• Utility connections: $15K-$40K
• Landscaping: $5K-$15K
• Total: $180K-$380K

The gap narrows significantly when site conditions are difficult. If a prefab ADU requires extensive grading, retaining walls, or complex utility routing, those costs can push the total above $300K, which is well into custom territory.

Timeline Comparison

Phase	Prefab ADU	Custom ADU
Design/selection	2-4 weeks	4-8 weeks
Permitting	4-12 weeks	4-12 weeks
Factory build / Construction	8-12 weeks (off-site)	12-24 weeks (on-site)
Site prep and installation	2-4 weeks	Included above
Final inspections	1-2 weeks	1-2 weeks
Total	3-6 months	6-12 months

Permitting takes the same amount of time for both. California’s streamlined ADU laws set 60-day review deadlines for most cities, though some jurisdictions take longer in practice. The real time difference is in construction: prefab happens in a factory while your site is being prepared, while custom builds happen sequentially on your property.

Bay Area Lot Challenges That Favor Custom

The Bay Area is full of properties that make prefab installation difficult or impossible. Here are the most common scenarios we encounter.

Hillside lots. Many homes in Los Gatos, Saratoga, and the hills of San Jose sit on sloped lots. Prefab units require a flat pad, and creating one on a hillside adds significant cost. A custom ADU can be designed with a stepped foundation or built into the slope, making better use of the terrain.

Narrow side access. Prefab ADUs are delivered by truck and placed by crane. If your side yard is too narrow for a crane to reach the backyard, or if overhead power lines block the delivery path, a prefab unit simply cannot be installed. Custom ADUs are built piece by piece on-site, requiring only standard material deliveries.

Tight setbacks. Bay Area lots, especially in older neighborhoods, often have limited buildable area once setback requirements are applied. A prefab unit with fixed dimensions may not fit the available space. A custom design starts with the buildable envelope and designs the ADU to fill it efficiently.

Mature trees and landscaping. Crane delivery requires a clear path. If your property has heritage oaks or mature redwoods that you want to preserve, the delivery logistics for a prefab unit can be a dealbreaker. Custom construction works around existing trees.

Architectural review districts. Some Bay Area cities and neighborhoods have design review boards that require new structures to match the existing architectural character. Prefab units with limited exterior options may not pass review. Custom ADUs can be designed to satisfy even the most particular review boards.

How Custom Home Builds Custom ADUs

At Custom Home Design and Build, we specialize in custom ADUs designed specifically for Bay Area properties. Our two-phase process separates design from construction so you know exactly what you are getting before building begins.

Phase 1: Design. We start with a site assessment to understand your lot’s constraints, including setbacks, slopes, access, utilities, and soil conditions. Our design team creates a custom floor plan and 3D renderings that maximize your buildable area. You see every detail before committing to construction. Phase 1 also includes engineering, permit-ready drawings, and a locked-in construction budget.

Phase 2: Construction. Once you approve the design and budget, we build. Because the design was shaped by our construction team from day one, there are no surprises. The plan is buildable, the budget is accurate, and the timeline is realistic.

This approach gives you the design flexibility of a custom ADU with the budget certainty that homeowners want. Whether you are building a garage conversion or a detached unit, the process is the same.

Making Your Decision

The right choice depends on your specific situation. If your lot is flat, access is easy, and speed matters most, a prefab ADU can be a smart, cost-effective solution. If your property has any of the challenges common across the Bay Area, or if you want an ADU that looks like it was always part of your home, custom is almost always the better long-term investment.

Start by understanding your lot’s constraints. That single step will often make the decision clear. If you are unsure, talk to a builder who does both. An honest assessment of your property will tell you which path makes the most sense for your goals and your budget.