The four most popular reasons why homeowners are choosing to add Accessory Dwelling Units to their properties.
ADUs (Accessory Dwelling Units) are essentially small homes or detached apartments that are constructed on the same lot or piece of property as a main residence, usually a single-family house. ADUs can be put to a number of creative purposes to make life easier – a separate office, a writing oasis, art studio, a guest house, and more.
ADUs are increasingly popular in the U.S. these days. Perhaps you’ve even seen a neighbor build their own ADU on their property and thought to yourself, “That’s a really smart idea.”
Here are four popular reasons why adding an ADU to your property can be a great move.
Table of Contents
- Enhance Property Value
- Add Potential New Uses
- Create an Additional Income Stream
- Provide Affordable Housing While Conserving Property
1. Enhance Property Value
Adding to your property’s value probably shouldn’t be your primary reason for placing an ADU on your lot. It might happen, but the figures vary widely depending on your specific real estate market conditions, which can be volatile and ever-evolving.
An ADU does require a significant investment. On average, an ADU costs about $77,000 to build, while the value it adds averages out to be around $66,000. Even though this looks like (and does represent) a loss of $11,000, the bottom line is that ADUs do allow the owner to recoup a large portion of that initial investment. When you couple that fact with the other financial benefits of ADUs (see the next section below), the advantage becomes clearer.
2. Add Potential New Uses
Are you planning to sell your home? Potential homebuyers usually perceive a lot of added value in an ADU because they can envision its potential uses down the road. ADUs are often put to work as guest houses for visitors, or in-law apartments that let aging parents or grandparents stay somewhat close while still letting them retain a degree of independence. (In fact, multigenerational property uses are increasingly popular as the population continues to age.)
These added uses can be an attractive features for potential purchasers. Given the volatility of the real estate market and rising interest rates, purchasers may be looking for properties that “do more,” and provide space and function for anticipated future needs.
3. Create an Additional Income Stream
Another key benefit of constructing an ADU on your property is the creation of a new stream of income. ADUs are especially well-suited to serving as short-term rentals, which can then be listed on sites such as Airbnb or VRBO. They are separate structures that contain their own facilities and kitchens, so tenants and guests won’t disturb the home’s occupants.
ADUs can be decorated in styles that vary from the main residence for a relatively small additional investment, so it’s fairly simple to create an appealing aesthetic for short-stay guests. With some smart marketing and a little effort, you can create a popular destination for visitors to your area in your backyard.
However, there’s one caveat you should keep in mind, and that’s the legality of short-term rentals and ADUs in your municipality. Many cities have laws that restrict short-term rental units, as well as the construction of separate dwelling units that are not attached to the main residence.
Check your local ordinances to find out whether an ADU is legal and can be used for income-producing purposes before you commit funds toward building one on your property.
4. Provide Affordable Housing While Conserving Property
The need for affordable housing has never been more acute. Since the pandemic began, evictions have risen and property prices (and rents) have skyrocketed in many geographic markets. Adding an ADU to your property adds a small, affordable housing option without the need for buying additional land.
The result is that the initial investment required to create a new home is minimized. The new home shares a lot with another dwelling and thus costs less overall. At the same time, you’re pursuing a more sustainable solution to the affordable housing crisis if you choose to rent the unit out to a new tenant.
ADUs: Creative Solutions to Modern Problems
Whether you’re planning to sell your home or want to hang on to your property and maximize its income potential, ADUs might be worth a look. They can lend themselves to a number of creative purposes, offering solutions to several modern problems. Remember to always check your local laws before you make any major purchases to be sure you can use your ADU the way you envision.
This article was written by Annie Sisk, a guest contributor. Annie is a freelance writer who has written extensively within the home improvement, home décor, and real estate industries.
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