What is an Accessory Dwelling Unit?
Have you ever heard of an Accessory Dwelling Unit (ADU)? ADUs are secondary dwellings on personal property. Many families are taking advantage of the flexibility ADUs offer when affordable housing is hard to find.
Accessory Dwelling Units have taken on multiple meanings in the present real estate market. Commonly referred to as the granny flat or tiny home, the ADU is a more robust flexible alternative.
What is an ADU?
ADUs can vary in size but are typically smaller dwellings that fit on the property it is located on. Owners enjoy matching their ADU to their original home in terms of color and design. Since the home is smaller you can invest in quality products and make it pop.
Smaller modern houses make the best of the space, from vaulted ceilings to eliminating hallways. Some ADUs are converted detached garages, providing plenty of storage space below and a comfortable loft-like living above.
What can you do with an ADU?
There are numerous possibilities with an ADU. It can provide you with rental income by renting it out long-term. Or you can embrace the short-term rental space by listing it on AirBnB or VRBO.
Your ADU could operate as a guest house for out-of-town family or a transition zone for your graduates trying to figure out how to adult. And yes, you can always save it for your aging parents to move into.
Some families embrace the smaller newer home and rent out their larger older home for a quick cash flow. It’s a great choice for empty nesters who want to stay in the neighborhood but want to downsize.
Rules and regulations
Before you start growing your vast real estate empire most municipalities have unique restrictions. You should do research in your own area to see what is allowed.
For example, most cities do not let you rent out both dwellings, only one can be rented. Most require a percentage of the property to remain yard, as well as rules for how close the second dwelling can be to the property line. You might need to get special zoning permission and/or neighbor approval.
Permits, insurance, fees, and construction can all add up quickly, so consider the costs before moving forward. If you are thinking of financing you can always try a home-equity loan to get you started.
Some models exist where the company will build the secondary dwelling for free, but insist on getting a majority of the rent as compensation. These deals typically have a buy-out option if you ever want to own the rental rights fully.
Making the Jump
If the idea of an ADU excites you be sure and check out a company that provides families with ADU options. First Day Cottage has been providing small house kits for years and will work with you to help make your own unique space. Best of all you can build them yourself, saving you thousands on contractor costs.
As you consider moving forward here are a few reminders:
Construction projects often have delays, so plan accordingly.
Costs tend to rise during construction, so make sure you leave some room in your budget for unexpected costs.
Make sure your water, electric, and septic system can support an additional dwelling.
ADUs are a very exciting option for many people! As space gets harder to find people are getting more creative with what they already have. It is a great way to create passive income and connect growing families. You might lose some yard space, but the gains are more than worth it.
