The Complete Guide to Accessory Dwelling Units

The Complete Guide to Accessory Dwelling Units

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There are two things in common with most of today’s homeowners; they want more money to help pay for their lifestyle, and they want more space in their homes.

Both of these concerns can be addressed by building an ADU. ADUs, or accessory dwelling units, are growing in popularity across the US. These are essentially smaller homes, usually under 1,000 square feet, built on the same property as your primary residence.

With an ADU, you can add more square footage to your property and have an asset that you can rent out. No wonder more and more people are building them.

Want to learn more about accessory dwelling units? Wondering how to decide what the best accessory dwelling units are for your situation? Keep reading to find out now.

What are Accessory Dwelling Units

So what is an ADU? An accessory dwelling unit is another independent dwelling unit, or house, that fits on your property. Oftentimes, it’s connected to your current home. If not connected, it is typically built right next to it, or in the backyard.

It has everything it needs to be an independent living space, including plumbing, a bathroom, a kitchen, and space for furniture. It can be a studio layout, housing one or two people, or it can be large enough to have one or even two bedrooms. Typically, ADUs are under 1,000 square feet and are most often between 600 and 800 square feet.

Many people confuse ADUs with tiny homes. While they can be similar, they are not the same thing. Click here to learn the difference between the two and to see which is right for you.

Types of ADUs

There are different types of ADUs you can build. An attached ADU is one that becomes an extension of your primary residence. Usually, these are built up as a small apartment on top of your garage, or built onto the other side of your garage.

Since they are connected to your home, they need to match the design of your existing residence. From the street, most people won’t notice that it’s a separate unit.

Detached ADUs are those not connected to your home. These are most likely going to be in the backyard, often as far as they can be. They don’t have to match the design of your current home but typically do anyway. Detached ADUs are similar to that of a poolhouse.

Those who live in areas where basements are common can also build out an ADU downstairs. You’ll need the basement to have its own exterior door in order to make it a proper ADU.

Basement ADUs are the cheapest to build since the structure is already there. You just need to build out the rooms, kitchen, and bathroom if not already constructed.

Why Build an ADU?

So why should you build an ADU? There are two common reasons people invest in them.

Some families will build an ADU so that other family members can move in, live in a cheaper house, and be close to relatives. Usually, this is aging parents who may need some help on a regular basis but still wants to have their own space.

Other people construct ADUs in order to rent them out. This is an excellent strategy to increase the equity of your home while at the same time earning monthly rent. It’s essentially passive income.

And since rents rise over time, you can expect to earn more as time passes. It’s perfect for those who live in their forever homes but want to earn extra money so they can either work less or save up for retirement.

Building an ADU for rent also helps alleviate the affordable housing crisis found in most major cities today. Because of this, many municipalities have favorable rules for building and renting an ADU.

How to Build an ADU

So how can you get in on the action and build an ADU? It’s quite the process and it all starts with hiring the right contractor. They will be able to walk you through every step.

First, you’ll need to decide if it’s legal in your area. Contact your city planning department to learn what it takes to build an ADU in your neighborhood.

Then, you’ll need architectural plans and a quote from your contractor. Once you’ve received the green light from the city, you can begin construction.

How to Finance an ADU

There are many ways you can finance the construction of an ADU. If you don’t have the cash saved up, you can refinance your current mortgage to pull money out or get a home equity line of credit to put your current equity to work.

Otherwise, you can get a personal loan. If you plan to rent the unit out, make sure that rents are high enough in your neighborhood to cover the cost of any loans you take out.

Rules for Building an ADU

Every city will have rules concerning the building and use of ADUs. Since they are a relatively new phenomenon, rules are still inconsistent across the country and even across a state.

You’ll need to find out which neighborhoods allow the use of ADUs. If they are allowed in your area, there’s going to be a size limit, which is normally under 1,000 square feet.

Some areas will only allow attached ADUs. You may need to designate one parking space in your driveway to the ADU tenant so that your street isn’t overloaded with parked cars.

And in many areas, ADUs can only be rented to long-term tenants and cannot be used for short-term, vacation rentals. This is because the city wants residents to build ADUs to solve the affordable housing crises for other residents, not attract additional tourists.

Making the Most of Your Property

So are accessory dwelling units worth it? They certainly can be, if you can construct one affordably, following the laws and regulations of the city.

If it boosts the value of your home and earns you rent each month, then you definitely have a winner. Looking for other articles like this? Be sure to visit our blog today to keep reading.

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