Home & Real Estate

The Benefits of Investing in an ADU

Did you know the rising cost of rent and mortgage are a serious concern for homeowners and prospective buyers?

The average mortgage rate grew to 5.34% in 2022. Mortgage costs only continue to increase as the competition increases among lenders.

What if you could keep more of the money you save on your mortgage? Adding an Accessory Dwelling Unit (ADU) is one of the best solutions to the problem of rising housing costs. It is a small home that’s put on the same lot as a primary home.

Sounds complicated? Here’s what you should know about the benefits of investing in an ADU.


Provides Cost Savings

Investing in an ADU has numerous cost-saving benefits that make it an attractive prospect for homeowners. It is also a great way to invest in your financial future.

Gives Lower Construction Costs

ADUs, or Accessory Dwelling Units, can give lower construction costs for those wanting to invest in them. These include existing infrastructure, such as the house’s foundation, roof, and walls. This eliminates or reduces the cost of bringing in new materials and systems.

The size of an ADU is smaller than that of a traditional home. This also helps to keep the cost of materials and labor down.

Costs can vary depending on the kinds of ADUs, such as detached ADUs, attached ADUs, or even tiny ADU micro-apartments. To get the best results, find a ADU general contractor who can provide high-quality service and expertise.

A reputable contractor will provide detailed cost estimates so homeowners can make informed decisions. This will ensure the best return on their investment in an ADU.

Bring In Additional Income for Homeowners

A homeowner can generate income from a tenant or even rent out to a family member or friend in need. This can be a great tool for those looking to supplement their income with a separate living space that may provide them with monthly income.

For starters, owners of ADUs rarely need to engage with a property management company as it’s easier to manage the rental themselves. This eliminates their need to pay a third-party property management fee, which can add up to thousands of dollars.

ADUs can provide a passive income stream for owners without needing to be rented out regularly. This means owners can choose when to rent out their units and for how long. This provides them an opportunity to better manage their income.

An ADU can be rented for much shorter terms than other rental units. This provides owners with the flexibility to rent out weeks or even nights during peak times, which also increases potential rental income.

Fewer Taxes Associated With Smaller Dwellings

Benefits of an ADU can provide cost-savings with fewer taxes associated with smaller dwellings. This includes dropping housing costs for a small family. Moreover, as governments provide exemptions for small dwellings, owners can save money by avoiding large tax bills.

An ADU can be built in varied sizes, ranging from tiny houses to mobile homes and more, that qualify for the exemptions. Also, there are certain exemptions from property taxes that owners of ADUs may qualify for due to their size. This can result in a significant reduction in homeownership costs, especially in locations with high property taxes.

Consume Less Energy and Have Lower Utility Bills

The smaller size of an ADU enables homeowners to take advantage of lower energy requirements. It reduces the number of utilities used for water, gas, and electricity.

The unit acts as a buffer to the elements to aid in temperature regulation, helping to save further energy. Heating and cooling costs can also have decreased levels of energy use as ADU are energy-efficient.

Besides, the use of green energy sources, such as solar energy, can also help to further reduce energy costs with little effort, and products, such as energy-efficient appliances, and much more environmentally friendly.

Allows Additional Space

Built on existing structures like on the ground, accessory floors, or partially built structures, these can be great additional space for homeowners and renters alike. It can be used by the homeowner for extra storage, a workshop, a home office, guest suites, separate living quarters, or even to house an au pair.

Depending on the size of the ADU, it can range from a studio apartment to a three-bedroom unit, providing significant additional living space.

Extra Storage

An ADU can give you more room to store things you don’t use daily. This includes holiday decorations, extra furniture, and other things that can save room in the main house.

ADUs can be made with built-in storage spaces to make the most of their space and make life easier. Many ADUs also come with climate control units that can be used to store things that go bad quickly or are sensitive to changes in temperature, like artwork and antiques.

A Workshop

You can use your ADU as a workshop to build or repair furniture or to use it for any incentive hobbies, such as woodworking or painting. It offers additional security benefits, as it can keep your project and equipment away from the view of outsiders.

Cozy and easily accessible from the main house, an ADU Workshop can be the perfect place to retreat and work on projects in a climate-controlled environment. Whether you are making furniture for your home or fixing electronics for a hobby, an ADU workshop will provide the necessary space and freedom to do so.

A Home Office

A home office in a separate ADU provides a space for those who need to stay focused on their task and ensures less interference from family or other similar circumstances. Splitting the home office can also help separate work and daily life, allowing for a more efficient work environment.

Guest Suites

A popular use for an ADU is a guest suite which would be used for visiting family, friends, and guests. By investing in an ADU for a guest suite, homeowners can regain privacy while hosting visitors. Furthermore, you can safely accommodate visitors without sacrificing personal space. 

Separate Living Quarters

An ADU is an additional living space connected to or beside another home. Use it for several purposes, such as a rental space for supplemental income, an in-law suite, or a home for an adult child.

By providing additional living space, an ADU provides the additional benefit of living quarters separate from the main living area. This can allow for physical and psychological separation between the occupants of the two dwellings and a sense of privacy.

House an AU Pair

Many families across the country are taking advantage of these additional dwellings to house an au pair. An au pair is an international or domestic student who lives with a host family and assists with childcare.

An ADU has its separate entrance, bedroom, and bathroom, giving the house an AU Pair its own space. This allows for additional privacy for the host family and an Au Pair, which is a great advantage over an in-law apartment or shared living space.

Increases Property Value

Without a doubt, investing in ADU has the potential to increase property values. ADUs not only increase the overall livable square footage of a property but can also create additional rental income. By offering extra living space to rent out, potential buyers are also more likely to invest in the property due to increased potential returns.

Having an ADU can increase per-square-foot pricing, meaning more money from the sale. Additionally, ADUs provide a boost to local property values, which can help a homeowner when ready to sell. Ultimately, investing in an ADU provides a major longer-term payoff and is a great way to gain equity and increase the value of a property.

Brings Innovation to a Property

An ADU can bring more innovation to a property, meaning it can feature modern luxuries that otherwise wouldn’t fit in a traditional home. These modern amenities can include modern designs and components. This leads to enhanced comfort and convenience.

ADUs can include features like larger windows and walls, open-concept and loft spaces, and accented spaces. It can also include increased flooring and cabinet space, modern energy-efficient appliances and fixtures, and more.

Offer a Great Option for Elderly Family Members

An ADU can provide the elderly with a safe, secure, and comfortable unit that is still connected to the primary household’s utilities and is close to family and supportive services. It offers greater independence than an assisted living facility. It also provides the safety of living near family members in case of an emergency.

The space is self-contained and can be customized by the elderly to fit their specific needs. As the ADU is located on the property of their children or other relatives, elderly family members can take advantage of the closer proximity to home and the amenities of their surroundings.

Enjoy These Benefits of Investing in an ADU

Investing in an ADU is a great way to maximize the space of your property and increase its potential value. ADU benefits provide cost savings, allow additional space, increase property value, bring more innovation to property, and offer a great option for older people. If you’re ready to start your ADU guide project, contact a professional to get started today!

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