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5 Reasons to Invest in an ADU for Your Backyard

So your housing costs are increasing and you’re looking for creative ways to save money. What can you do? The first step might be right outside your front door because adding an Accessory Dwelling Unit (ADU) could be the solution you’ve been looking for! What are the benefits of an ADU, and why should you consider building one in your backyard? Here are five great reasons to invest in an ADU in your backyard.

Who can live there?

Many single-family homeowners have a guesthouse or accessory apartment (or granny flat, garage apartment, or backyard cottage) that can help generate extra income. If you’re planning on having guests stay at your place, and you want them to have their own space, it could be a smart investment to convert your garage into an additional unit. In addition to providing extra room for guests, building an ADU is one of those rare cases where what’s best for your wallet is also good for your community. Because these homes are typically small and relatively inexpensive to build, they’re often built by first-time homebuilders who might not otherwise be able to afford a home. By adding more homes to your neighborhood, you’re contributing positively to its diversity—and helping someone enter homeownership who might not otherwise have been able to do so.

What are the costs?

The cost of building a backyard guesthouse depends on how elaborate you make it. You can build a small studio-style guest house (so long as it complies with the code) that’s small enough to meet all your local zoning requirements, but still large enough to include a bathroom and kitchenette. This style of the unit will run you around $50,000 or so, but you should be able to recoup some of that money over time by renting out space in your backyard (or maybe even occupying it yourself). For example, a 500-square-foot guesthouse could rent for about $1,200 per month. If you put 20% down ($10,000), then your monthly mortgage payment would be roughly $800. Not bad! And if you rented it out every month at full price ($1,200), then your monthly income would be about $2,400—which means after three years of renting at full price (36 months), you’d have paid off your initial investment and could stop paying rent altogether.

How much time does it take?

All construction comes with a certain amount of waste, but also remember that building a back-house or guest house can be done relatively quickly and won’t take too much of your time. On average, you can plan on spending three months from design to completion – which is still nothing compared to other more conventional home constructions! Plus, once built, most adu structures can generate at least some sort of monthly income stream. This can then help pay off those loans and bills. So, if you’re looking for a smart investment that doesn’t require much time commitment, adding an ADU to your backyard might just be right up your alley.

Other benefits?

Besides being a smart investment, building a detached accessory dwelling unit is also a great way to increase monthly income. Because they are separate structures on your property, you can rent them out easily—and if you plan correctly, there’s even room for multiple tenants in these smaller homes. As long as you follow local zoning laws and don’t build too many units, it might be possible to earn up to $10,000 per year from each ADU! Not bad for a few months of work.

Final thoughts

ADUs have become increasingly popular over recent years as more and more Americans move towards denser living. These additional structures are a great way to add valuable square footage without subjecting your home to significant change or construction. Homeowners can even use their ADU for a variety of purposes such as renting it out, using it as a studio or guest house, or utilizing it as extra storage space. If you’re interested in learning more about how you can build an ADU on your property, feel free to contact us today! We’d be happy to help you get started with our easy-to-use design tools.

Check if you property is eligible for an accessory dwelling unit investment using The ADU Guide free Property Check!

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