Everything You Need to Know About Accessory Dwelling Units

Accessory dwelling units (ADUs) are a great option for extended families who need a little more space (and privacy) to keep things comfortable and those interested in making a little extra cash by setting up a short-term rental. Whether you're primarily interested in adding an apartment for your in-laws, a rental unit that's proximity makes it easy to manage, or a stand-alone office or studio where you can achieve the peace and quiet you need to work effectively, it's important to know the difference between ADU types and how your municipality governs them. Read on to learn more about ADUs, their benefits, and the cost of building one.  

What is an Accessory Dwelling Unit (ADU)?

Accessory dwelling unit (ADU) is a term used in real estate for a secondary apartment or house located on the same lot as the primary home. These spaces range from 600 to 1,200 square feet and can be a basement apartment, in-law suite, or a second suite. It can also take the form of a separate structure, such as a guest house or rental property.

The owner of the ADU is always the owner of the main home. An ADU cannot be bought or sold separately regardless of its physical form.

What Are the Different Types of Accessory Dwelling Units?

The type of ADU depends on the size and location of the property. For example, larger properties have more room to accommodate a detached unit, while homes on smaller lots might only allow an interior ADU. Here are the main types of ADUs and their features:

Detached ADU

A detached ADU is a stand-alone unit, separate from the main house. This structure must sit on foundations or a platform and have utility hook-ups and mechanical appliances (e.g., furnace, water heater, etc.).

Attached ADU

An attached ADU is an addition that is connected to the main house. Typically, these units have a separate entrance on the side or back of the house.

Attached External Unit

An attached external unit shares at least one wall with the primary home. It typically has a separate entrance and no internal connections with the main unit. Although connecting them is less expensive, they have utility hook-ups. However, they may share mechanical appliances like a furnace or water heater with the primary home.

Attached Internal Unit

An internal ADU is entirely inside the primary residence. These units are often built into basements, attics, or garages that have been converted into living spaces. Attached internal units are different from attached external or detached units because they often do not have their own external entrances. Most of these units are connected to the primary residence via doors from an interior room such as a hallway or a foyer. Because attached internal units often share appliances and utilities with the primary unit, they are usually the most affordable type of ADU to construct and maintain. 

What Are the Requirements for Building ADUs?

While the ADU is a secondary and significantly smaller unit adjacent to a primary housing unit, they have distinguishing characteristics that legally define them from other housing types. The requirements change based on local city or regulations, so check with your local municipality. Generally, an ADU must meet the following criteria: 

• Same lot as the main residence

• Private entrance

• Space for living and sleeping 

• Bathroom

• Full kitchen with counters, cabinets, sink, running water, and a stove or stove hook-up 

It is also good to consult with a local contractor who knows the local zoning rules and requirements for ADUs.

How Much Does an ADU Cost?

Much like the costs associated with building a primary residence, the costs of building an ADU depend on a variety of factors, including the unit size, location, and if you plan to convert an existing space or build from scratch. Materials costs for flooring, appliances, and cabinetry range widely based on whether you use high-end materials or more affordable builder-grade materials. 

The average costs for various ADUs:

• Converting a garage: $20,000 to $60,000

• Building a detached ADU: $40,000 to $125,000 or more

• Converting a basement or attic (attached ADU): $10,000 to $100,000

Accessory Dwelling Units (ADUs) Pros and Cons

Some people build ADUs for adult family members, while others do it for rental income. If you're considering an ADU, here's a line-up of some benefits and drawbacks.

Pros of ADUs

Generate Passive Income

Depending on local regulations, ADUs can be used as either short-term or long-term rentals. The income you can make from rentals can help offset building costs and help pay your property mortgage. It also gives a family the option to occupy the ADU and rent out the primary home on a short-term basis for extra income.

Add Value to Your Property

Even if you’re not interested in renting out an ADU, you may still want to consider building one to increase the value of your property. Adding livable square footage is one of the top ROI considerations for homeowners.

Provide Affordable Housing

The cost of building and maintaining an ADU is generally lower than building a primary unit because there is no land acquisition involved, and they tend to be smaller than primary residences. This lower cost to build and maintain means that owners can offer them at a more affordable rate than other property types. When homeowners plan to provide housing to extended family members—like in the case of aging parents—ADUs offer a more budget-friendly option than renting or purchasing an additional primary residence.  

Create More Living Space

The extra space can be used as an office, workshop, or a home for aging family members. Granny flats allow older family members to maintain their independence while being close to those who can provide daily hands-on support and companionship.

Cons of ADUs

Significant Upfront and Ongoing Investments

An ADU costs money to build and may increase property taxes; utilities will also add to monthly expenses. While upfront costs may seem daunting to some homeowners, many of these costs can be offset by renting the ADU to long- or short-term tenants. 

Required Maintenance

An ADU will cost money and time for maintenance and upkeep. Much like a primary residence, you'll need to plan for routine maintenance, such as air duct cleaning, gutter cleaning, appliance maintenance, and handling the minor and major repairs that come with any living space.  

Things to Know Before Building an ADU

If you're thinking of building an ADU, consider all the following questions and details before investing time and money.

Follow Regulations and Code

While ADUs are common in states like California, Oregon, Washington, and Florida and have been growing across the country, ADUs cannot be built on just any property by any interested homeowner. 

Every state, city, and neighborhood is different when it comes to what you can and can't build. For example, some areas may have square footage restrictions, only approve certain types of ADUs, or have parking restrictions. Some cities even provide incentives to build ADUs, which can help defray the cost. 

Research the regulations of ADU in your area, the process, occupancy rules, and how many people can live in an ADU.

Obtain the Proper Permits

You need a permit from your local building department to build a living space on your property, even if you're building an ADU with a pre-existing structure.

Consult the Right Professionals

Before building an ADU, find professionals with ADU experience to help plan your project and the space needed. A pro will be familiar with zoning and building codes and recognize any construction-related challenges or opportunities.