Got unused space taking up prime real estate on your property? Like a room over the garage, a basement, or a backyard building? Consider putting that wasted square footage to use with an accessory dwelling unit (ADU).
ADUs are totally having a moment right now as more homeowners realize their benefits. Turning unused areas into a small second home opens up new income streams while increasing your property value. A win-win!
Whether you Airbnb it out to travelers, rent to college students, offer affordable housing for family members, or use for multigenerational living arrangements, ADUs provide flexibility and financial gain.
Extra Income Source
The main incentive homeowners have for adding an ADU comes down to two little words: rental income.
Whether building new or converting existing space, a fully-functioning mini home lets you collect monthly rent from tenants. We’re talking a steady flow of several hundred to a thousand+ dollars per month into your bank account.
Who couldn’t use some extra cash to pay down their mortgage faster, build that college fund, or maybe finally take the dream vacation you’ve been putting off?
Just make sure your rental complies with all local zoning ordinances and building codes to avoid any headaches. Reach out to professionals like https://pb-sandiego.com/services/accessory-dwelling-unit/ who specialize in ADUs to ensure it’s all good to go legally.
Adds Value to Your Property
Investing in an ADU not only pays off with rental income month-to-month but also significantly bumps up your home’s overall value long term.
Having a livable second unit on the property gives it a huge value boost when it comes time to sell because it expands options for buyers. Families may use it as a quarters for a nanny or in-laws. It offers rental history proof. Or provides flexible space for multi-gen households.
In popular areas like LA, San Francisco, and Seattle, properties with an ADU tack on between $75K-150K+ compared to homes without! Not a bad ROI for having to put up with the occasional rowdy tenant, right?
Just having the option in place makes your asset much more desirable. And ADUs generally cost far less to construct than adding a whole separate structure like a guest house. More bang for your buck by going the ADU route.
Housing for Family
Beyond rental income, ADUs offer the very heartwarming opportunity to house family under the same roof with privacy still intact.
Maybe you have aging parents who require extra care but aren’t ready for assisted living. Or boomerang kids returning back home after college to save up money.
Rather than converting basements or spare rooms to accommodate their stay long term, an ADU lets them live independently but right in your backyard. No need to completely blend often messy households.
Multigen living has become increasingly popular given economic uncertainties and skyrocketing senior population growth. ADUs provide flexibility to adjust support as needed while still allowing space.
Smart Space Usage
Chances are you have underutilized areas already built into your home just waiting for a fresh purpose. Like that dusty basement you mostly use for storage. An attic gathering cobwebs. Or a garage housing your Oldsmobile that you never drive.
Converting existing yet neglected interior spaces into an ADU takes advantage of infrastructure already in place. Same goes for adding onto garages or building above them if zoning allows.
Way less effort than constructing an entirely separate guest house! Maximize what you already have available on the property before starting 100% from scratch.
Even turning a tiny studio-sized footprint of 500 square feet or less into an ADU pays off big time. Tiny home living isn’t for everyone but works fantastic as a rental. Great built-in tenant pool!
On top of financial incentives, ADUs also offer feel-good environmental perks. Adding a small second housing within existing properties means less urban sprawl.
Easy to Finance
Historically, ADUs have been financed by HELOCs or cash since traditional construction loans weren’t available.
But within the last few years policy changes opened access to lending specifically for ADUs both for construction financing as well as longer term mortgages.
That means qualified borrowers can now tap into low fixed rate products for 10-30 years. This helps spread out payments over time rather than paying 100% upfront. Much more accessible!
There’s also been an emergence of hybrid loan options offering flexibility to pay down principal directly when rental income starts flowing in. Lots of choices catered to ADU building peculiarities.
Be sure to disclose ADU plans with your homeowners insurance so you’re fully covered. Some restrictions may apply but extras can usually be added pretty affordably.
Wrap-up
Sold yet on how an ADU unlocks an unused space’s potential? Get those creative wheels spinning on what underutilized areas you have that could house a small second unit.
