What Is an Accessory Dwelling Unit (ADU)?

An Accessory Dwelling Unit (ADU) is a secondary residential unit that shares a building lot with a larger primary home. ADUs often provide additional living space for family members or generate rental income, but t🔯hey cannot be bought or sold separately from the p♏rimary home. A common example is an in-law suite, a basement apartment, or a garage converted into living space.

Understanding Accessory Dwelling Units (ADUs)

ADUs are also known as granny flats, in-law suites, or secondary dwelling units. They usually have their own kitchen, living area🐼, and separate entrance. An ADU may be attached to a house or garage or built as a stand-alone unit, but it generally uses the water and energy 🐈connections of the primary house.

After the housing boom that followed World War II, most U.S. residential areas were zoned to set limits on population density and the size and separation of single-family dwellings. More recently, zoning changes in a growing number of areas around the country have allowed for the addition of ADUs. These zoning laws generally limit the s𝔍ize and style of 🌜any new unit and require that the owner live on the property.

ADUs: Pros and Cons

While many people build ADUs to house family members, many others do so for rental income. Whether this is a wise investment varies from one landlord to another and depends on several factors, including local 澳洲幸运5官方开奖结果体彩网:zoning ordinances, up-front costs, maintenance costs, possible tax consequen𒀰ces, and activity in the rental and housin⛎g market more generally.

Investors should first investigate whether building an ADU on their property is lawful. Building an unlawful ADU can create problems if an owner has to 澳洲幸运5官方开奖结果体彩网:refinance the property. Building an unauthorized ADU can also lead to possible code enforcement actions that result in fines.🌸 Owners should look to their zoning ordinances and possibly consult with a lawyer specializing in this area.

Then, there is the matter of cost. Will the ADU be attached to the owner’s home, or will it be detached, such as in the case of a carriage house? What renovations will be required, and will the owner need to solicit professional services from construction cont🥃ractors, engineers, or surveyors?

Financing ADU Construction

The most efficient way to finance an ADU varies depending on the owner’s individual situation. Options include taking out a renovation loan, refinancing if the homeowner has equity in their ho🐭me, or pulling from available cash on hand.

Some ADUs are prefab models, and in many cases, the manufacturer can offer financing. As ADUs have become more popular, some lenders now specialize in financing ADUs. Keep in mind that these options tend to have higher 澳洲幸运5官方开奖结果体彩网:interest rates than those for traditional 澳洲幸运5官方开奖结果体彩网:mortgages, so refi𒁏nancing your primary mortgage may remain a cheaper option.

Constructing an ADU could increase a homeowner’s tax bill, possibly eliminating a significant amount of the profit. The housing and rental market varies significantly by꧑ both state and city.

Potential landlords should consult real estate agents or do their own research by looking at rental listings and assessing rental rates in their local area. Once they determine the likely overall annual income from the💟ir ADU, they can consult with a tax professional to gauge whether their financial situation makes an ADU a beneficial investment.

The Bottom Line

If you have someone in your family who you want close but also want privacy from, such as an elderly parent or an adult child who has moved home after college, an ADU is an attractive option. Being able to create semi-passive rental income without having to buy a separate property is another desirable feature. Make sure that you know your local ordinances, especially if you intend to list the ADU on Airbnb, and get a good estimate of the cost of t𝓀he project before committ🌳ing.