A lot of people see the nice, quiet properties in their neighborhood and think to themselves, I’d like to have something like that, but without all the noise! If this describes you and you own your home, an Accessory Dwelling Unit (ADU) might be the perfect investment property for you. Even if you rent or are still saving up to buy a home of your own, ADU investing can be a lucrative business opportunity. Here are the top 10 things you need to know about starting an ADU business!
1) What is an ADU?
An accessory dwelling unit (ADU) is a secondary dwelling unit that is attached or detached from a primary residence. In the past, ADUs were often referred to as granny flats, in-law units, or garage apartments. Today, they are becoming increasingly popular as a way to add extra living space, income potential, and/or aging-in-place options to a home.
2) Where can I put an ADU?
You can usually build an ADU on the same lot as your single-family home, as long as there’s enough space. The rules vary by city, so check with your local planning department to find out the requirements in your area. In some cases, you may be able to build an ADU on a vacant lot or even combine multiple lots to create the required space. In other cases, you might need to go through the process of changing your zoning classification for one or more of your parcels. Once you have all the approvals from the city and county, it’s time to design and build!
3) How does an ADU get approved?
To get an ADU approved, you’ll need to submit an application to your local planning department and go through a review process. The specific requirements will vary depending on your location, but you should know some general things before getting started. First, you’ll want to find an ADU contractor in your area who can help guide the process for your project. You may also want to speak with a lawyer about the legal or financial implications of owning a property with an ADU. Finally, once the design phase is complete and you’ve received all necessary approvals from your city or county, it’s time to start construction!
4) Is it cheaper to build an ADU?
While the cost of building an ADU can vary greatly, in general, it is cheaper to build an ADU than it is to buy a comparable-sized home. This is because you are only paying for the cost of construction and not the cost of the land. Additionally, you may be able to build an ADU for less if you already have a garage on the property that can be used as part of the construction.
5) Can I have a mortgage on my ADU?
You can have a mortgage on your ADU, but you will need to check with your lender to see if they are willing to finance an accessory dwelling unit. In most cases, the answer is yes, but it may require a slightly higher interest rate depending on the type of loan. Read more about financing an ADU.
6) Do I need building permits for my ADU?
You will need to check with your local municipality to see what the requirements are, but in most cases, you will need some type of building permit. The process can be daunting, but it is worth it to have a professional help you with the paperwork and ensure that everything is up to code. If you are building an ADU on top of your current house, there will also be additional construction permits required for the work being done on the main house. Another consideration when working with an ADU contractor is how much experience they have had working on projects like yours before.
7) Can I rent out my ADU separately from my main house?
You can rent out your ADU separately from your main house, but you will need to check with your local zoning regulations to see if this is allowed. Some cities do not allow renters in an ADU, so be sure to check before you sign a lease. Additionally, you will need to make sure that your insurance policy covers both dwellings in the event that something happens. There are some benefits of renting out an ADU separate from your main house: If you live close to work or public transportation, you may want to keep the rental for yourself and rent it out when you’re not using it. Renting the ADU allows for extra income which may offset some of the mortgage payments on your primary home. Also, if there are two bedrooms in the home and two bedrooms available for rental, you might have more people living there than under standard circumstances.
8) Will putting in an ADU increase my property value?
A. Yes, an ADU will increase the value of your property.
B. Because an ADU is a separate living space, it can be used as rental income or as a place for guests and family members to stay.
C. An ADU can also provide extra space for storage, an office, or a workshop.
9) What kind of construction will be required for an ADU?
Construction for an ADU will generally be the same as any other kind of construction, with a few additional considerations. Because ADUs are usually smaller than the main house, you’ll need to be mindful of space and include storage in your design plans. In addition, you’ll need to make sure that all utilities are properly connected. Finally, if you plan on renting out the ADU while you live in the main house, make sure there is adequate soundproofing so that noise from one unit doesn’t disturb those living on either side.
10) What are some other considerations when building an ADU?
A. Check with your local municipality to see if there are any zoning restrictions or requirements in place for building an ADU.
B. Determine the purpose of the ADU. Will it be used as a rental unit, home office, in-law suite, or something else?
C. Consider the size and layout of the ADU. How many bedrooms and bathrooms will it have?
D. Will it shares a wall with your primary house? Is there enough room for two separate utility meters, or will you need to share one meter between both structures?
Check if you property is eligible for an Accessory Dwelling Unit using The ADU Guide Free Property Report!