ADUs are small, secondary living units on your property, like a backyard cottage or garage conversion, complete with essential living spaces.
ADUs offer flexibility for rental income, housing family members, or creating a home office, all while increasing property value.
Keep in mind costs, permits, and local rules before you start building.
From backyard cottages to garage conversions, accessory dwelling units – better known as ADUs – are helping homeowners reimagine what’s possible on their property. These small spaces can have a big impact, making it possible to house aging parents, add a new source of rental income, or use your new space as a home office or studio.
Let’s dive in and discuss what ADUs are, how they’re commonly used, and what to consider if you’re thinking about building or installing one. We’ll also cover how to finance an ADU and answer some of the most common questions you may have about the pros and cons of adding an ADU to your property.
An ADU is a secondary housing unit built on the same lot as your primary residence. Think of it as a smaller, self-contained living space with its own kitchen, bathroom and sleeping area. The possibilities of an ADU go beyond just extra square footage: ADUs offer flexibility, financial opportunity and family-centered solutions all in one.
You may hear ADUs referred to as granny flats, in-law suites or additional dwelling units, but they all serve the same purpose: creating livable space that enhances both your property's value and your lifestyle options.
ADUs typically range from 400 to 1,200 square feet and can take several forms:
No matter the format, ADUs are designed to function as fully livable spaces, offering flexibility for homeowners and tenants alike.
ADU stands for accessory dwelling unit. Both terms refer to the same concept: a secondary living space on your property.
ADUs are having a moment – and for good reason. They offer a smart, scalable way to meet a variety of lifestyle and financial needs. Here are a few of the most common motivations for building one:
1. Multigenerational living
Need a place for aging parents or adult children? ADUs provide privacy and independence while keeping loved ones close. They’re a great alternative to assisted living or long commutes across town.
2. Rental income
An ADU can become a steady source of passive income. Whether you rent it out long-term or list it as a short-term vacation rental, it’s a way to make your property work harder for you.
3. Home office or studio
Working from home? An ADU can serve as a quiet, dedicated workspace – ideal for remote professionals, artists or entrepreneurs who need room to create and focus.
4. Property value boost
Adding an ADU can increase your home’s resale value. Buyers are often drawn to the flexibility and income potential these units offer.
An accessory dwelling unit (ADU) offers many advantages, making it a smart investment for homeowners. Here’s how an ADU can enhance your property:
With so many uses, an ADU helps you maximize your property’s potential while meeting your personal and financial goals.
It depends. The cost of building an ADU varies significantly based on size, location and complexity. Here are some estimates:
Budget-friendly options ($100,000 to $200,000)
Mid-range projects ($200,000 to $400,000)
Premium ADUs ($400,000+)
Remember to factor in permit fees, utility connections and landscaping costs when budgeting for your project.
In most areas, yes. However, local regulations vary significantly. Some municipalities require owner occupancy (you must live in either the main house or the ADU), while others have no such restrictions. Check with your local planning department for specific rental regulations in your area.
ADU size limits depend on local zoning laws and your lot size. Common restrictions include:
Check with your city government for more specific guidelines and regulations.
Yes. ADUs require building permits in virtually all cities and states. The permitting process typically involves:
Make sure to review your local government’s permitting process before you get started. Many cities encourage ADUs and have a streamlined process.
Timeline varies by project type:
Remember to factor in time for permitting, which can add 2 to 6 months to any project timeline.
Possibly. Adding livable square footage can raise your home’s assessed value, which may affect your property taxes. Consult a local tax advisor for details.
Most ADUs connect to your existing utilities, though electrical and plumbing upgrades may be necessary. Parking requirements vary by location – some areas require one additional parking space per ADU, while others have reduced or eliminated parking requirements near public transit.
Not necessarily. Some municipalities assign a separate address, while others treat it as part of the main property.
Did you know?
Several states, including California, New York, Vermont and Oregon, encourage ADUs as a way to combat housing shortages, offering grant programs to help homeowners pay for the construction of their ADU. Other states may offer fee waivers or other financial opportunities. Make sure to research ADU funding in your state before you begin building.
Building an ADU is an investment – and like any home improvement project, it comes with upfront costs. There are several options for financing, depending on your needs:
Home equity loan
A home equity loan provides a lump sum based on your home's equity, typically providing lower interest rates than other lending options, often making a home equity loan the go-to for financing an ADU. Plus, you'll receive fixed interest rates and predictable monthly payments throughout the loan term.
Benefits include:
Home equity line of credit (HELOC)
A HELOC offers flexibility for ADU projects with variable costs or phased construction. You can access funds as needed during construction, paying interest only on what you use.
Advantages of a HELOC include:
Personal loan
A personal loan can be a straightforward option for funding your ADU project, especially if you need quick access to funds without leveraging your home's equity. These loans typically come with fixed interest rates and repayment terms, allowing for predictable monthly payments, which can simplify budgeting.
Benefits include:
Cash-out refinance
A cash-out refinance allows you to replace your current mortgage with a new one, taking out a portion of your home's equity as cash. This option combines refinancing your mortgage with securing funds for your ADU, possibly at a lower interest rate compared to other loan types, depending on rates in your area.
Advantages of a cash-out refinance include:
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