ADU Homes are a new and increasingly popular option for investors, especially as the cost of living is increasing every single day. But what even is an ADU? Accessory Dwelling Units are something that more and more people are considering as investment properties and as a way to accommodate their family as home values are increasing. However, there are a lot of questions that come up with ADU homes. What are they when it comes to real estate? How much do they cost to build? Is it worth the investment?
Read on as we discuss everything you need to know about ADU Homes.
The Ultimate Guide To ADU Homes
We will start by defining ADU Homes and then discuss the types, the costs, and the benefits that come with them.
What Is An ADU?
An accessory dwelling unit (ADU), is an additional living space that is typically located on the same lot as an existing single-family home. It can be attached or detached, and their purpose is to provide tenants an independent living situation on a smaller scale than traditional homes.
In terms of real estate, for a space to be classified as an official ADU, the living area must include permanent solutions for living, sleeping, eating, cooking, and cleaning. It is a self-sufficient home that is on the same plot as a residential home. Zoning laws and criteria that go with ADU homes can vary in different locations, so make sure to check with the proper authorities in your area before diving headfirst into this investment.
Types of ADUs
There are three primary types of ADUs that people install. The first is a detached structure that is completely independent of the primary residence, which we at Adore Homes specialize in. Second, people will often build attached external apartments with their own entrances. Lastly, ADUs also include attached internal units with communal or separate entrances.
We’ll focus on detached ADUs, as they are the most popular form of ADU home, and definitely the best investment. Detached ADU homes are built separately from the primary living space. They don’t share any walls with a residential structure and they must have their own utilities. Though they are often more costly to build, they provide the most privacy, which is exactly what landlords and investors want for their tenants.
Pros and Cons of ADU Homes
Let’s discuss some of the benefits and drawbacks of investing in ADU homes.
Pros
Oftentimes, building an ADU was simply to accommodate close family members or friends, especially when the economy isn’t forgiving in terms of mortgage rates. As the economy improves, so does the usage of ADU real estate. There are a plethora of benefits of ADUs besides the obvious use of affordable living for generational families. ADUs can be great income-producing real estate assets for people looking for short term and long term living solutions.
Additionally, an ADU house may increase the property and resale value of your home. It can also help you generate monthly rental income and also gives you some recession protection. ADU homes can also provide housing for adult children or as a retirement solution for an aging family member. Now that most of us are forced to work from home, our units can also be used as a home office or business space for small business or private practices.
Cons
We love how ADU real estate has grown in popularity, especially as the opportunity to generate passive income on your own property is almost too good to pass up. However, there are a couple of drawbacks that all homeowners and investors should consider. First, though it is much smaller than traditional homes, these dwelling units require just as much attention and care as other single-family homes.
Another thing to consider is that zoning laws vary from city to city, which can be really tough to navigate if you’ve never gone through this process before. Oftentimes, an ADU can be really expensive, even the same as buying a brand new home – and with the increase of livable square footage on your property also increases property taxes. Lastly, building an ADU on your land will decrease the amount of usable outdoor space.
Costs Of ADU Homes
There are several factors that go into determining the cost of ADU homes. First, is your unit attached or detached? Detached accessory dwelling units cost quite a bit more than attached, but they are much more attractive to prospective tenants. In the San Francisco Bay Area, the cost of building a detached unit can be as low as $109k. The location will play a part in the cost, as well as amenities needed, the design work, and of course the permits.
Though at first, the upfront costs can seem high, the amount of financing options is increasing exponentially. Capitalize on today’s hot rental market, and let Adore Homes help you calculate the cost of the investment vs the cost of new monthly income.
Bottom Line With ADU Homes
Whether or not buying an ADU is a good investment really depends on your market conditions – but at the end of the day, real estate investments are almost never a mistake. The cost to build can seem like a lot, but when you weigh the pros and cons of how you can earn your money back plus more over time, it just might be worth your while. Take the time to look into different investment strategies, and let us help you crunch the numbers to see how you can recoup your investment quickly. ADU homes are definitely built for long term commitments.
When you’re looking to invest and start increasing your monthly income, then ADU homes might be the best way for homeowners to go. Increase your property value and your rental portfolio with a well built ADU that any tenant would love to live in, be it your family or potential renters. At Adore Homes, we take the stress and the hard work out of this process, and we’ll even help you find the perfect tenant so that you can start earning money right away. Contact us today and let us crunch the numbers with you and see if one of our homes is the right next step for you.