Is an Accessory Dwelling Unit Right for You? Here’s What To Know

Are you having a hard time finding the right home in your budget? Or maybe you already own a home but could use some extra income or a designated space for aging loved ones. Either way, accessory dwelling units (ADUs) could be the smart solution you’ve been looking for in today’s market.

What Is an ADU?

According to Fannie Mae, an ADU is a small, separate living space that’s on the same lot as a single-family home. It must include its own areas for living, sleeping, cooking, and bathrooms independent of the main house. And they can take shape in a few different ways. Fannie Mae adds, an ADU can be:

• Within a main home, such as a basement apartment
• Attached to a main home, such as a living area over a garage
• Detached from the home entirely; it could even be a manufactured home

ADUs can take various forms, including:

• Detached ADU – A separate structure, like a backyard cottage.
• Attached ADU – Connected to the main home, often as an addition.
• Garage Conversion – Transforming an existing garage into a livable space.
• Basement or Interior Conversion – Repurposing part of the main home for a separate living area.

ADUs provide independent living spaces with a kitchen, bathroom, and sleeping area, making them ideal for renters, family members, or personal use.

The Benefits of ADUs

ADUs are growing in popularity as more people discover why they’re so practical. In fact, a recent survey shows that 24% of agents say an ADU, such as a mother-in-law house, is one of the most desired features buyers are looking for right now.

The growing appeal makes sense. With rising costs all around you, an ADU can help supplement your income and ease some of the strain on your wallet. Whether you buy a home that has one already or you add one on, it gives you the option to rent out that portion of your home to help pay your mortgage.

Here are some of the other top benefits of ADUs, according to Freddie Mac and the AARP:

• Living Close, But Still Separate: You get the best of both worlds — more quality time together, plus privacy when you want it. If that sounds like a win, it might be worth looking for a home with an ADU or adding one to your home.
• Aging in Place: Similarly, ADUs allow older people to be close to loved ones who can help them if they need it as they age. It’s a sweet spot that offers independence and support from loved ones. For example, if your parents are getting older and you want them nearby, this could be a great option for you.
• Built-In Childcare: If your family’s living in the ADU, you may be able to use them for childcare, which can also be a big cost savings. Plus, it gives your kids more time with their grandparents.

• Rental Income Potential: One of the biggest advantages of an ADU is the ability to generate rental income. Whether used as a long-term rental or a short-term vacation rental (where regulations allow), an ADU can help offset mortgage costs or provide extra financial security.

• Housing for Family Members: ADUs are an excellent option for multi-generational living. They offer a private space for aging parents, adult children, or extended family while keeping loved ones close.

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  Increased Property Value: A well-designed ADU can boost property value by providing additional livable space and increasing potential rental income. This can make your home more attractive to future buyers.

• Flexible Use Over Time: An ADU can serve multiple purposes, from a guesthouse to a home office, or even a future retirement residence. This flexibility makes it a smart long-term investment.

Challenges and Considerations

1. Local Zoning and Permitting

ADU regulations vary by location. Some areas have strict zoning laws, setback requirements, and size limits, while others actively encourage ADU development. Research your local rules to understand what’s allowed on your property.

2. Construction Costs

Building an ADU requires an upfront investment. Costs depend on size, design, and existing infrastructure, ranging from $50,000 to over $200,000. Consider financing options like home equity loans or ADU-specific grants in some states.

3. Utility and Maintenance Responsibilities

An ADU will require additional utilities, maintenance, and possibly separate metering for water, gas, and electricity. Factor these ongoing expenses into your decision.

4. Tenant and Property Management

If you plan to rent out your ADU, be prepared for the responsibilities of being a landlord, including tenant screening, lease agreements, and property upkeep.

Is an ADU Right for You?

An ADU can be a great investment, but it’s important to evaluate your goals, budget, and local regulations before moving forward. If you’re looking for extra income, space for family, or increased property value, an ADU could be a smart move.

Bottom Line

In today’s market, buying a home with an ADU or adding one to your current house could be worth considering. Just be sure to talk with a real estate agent who can explain local codes and regulations for this type of housing and what’s available in your area.

What’s your motivation for exploring ADUs?

Before starting, consult with a real estate expert, contractor, or local planning office to ensure you’re making an informed decision.

Would you like guidance on building or managing an ADU? Contact us today for expert advice!

Book your appointment and let’s talk to take the next step in your real estate journey. Schedule a real estate consultation with one of our team members.