Why Build an ADU on Your Property?

You know it, and  I know it. Housing and rental prices are spiraling upwards every day. It’s no wonder that Accessory Dwelling Units (ADU Homes) are becoming increasingly popular for renters and landlords alike. Getting more value out of your home is increasingly appealing to property owners. But is building an ADU home the right decision for you? We’ll explain the benefits and drawbacks of this decision here.

ADU Homes: What Qualifies This Type of Home?

We’ll give a quick overview for those out of the loop on ADU homes. An ADU is a small home built on or is part of another property. This lets the primary property owner rent out a portion of their home for a profit in a separate unit from their primary home. 

An ADU can be part of the actual house – think of basement suites or attic apartments. However, homes with an ADU for sale can have a variety of configurations. These could include a living space above a garage or even a tiny house built somewhere else on a property like a guest suite in a renovated garage. When it comes to homeowner’s insurance, ADUs generally require specialty insurance for the renter and the landlord. 

So is going through the trouble of building and renting an ADU worth it? As with most things, it depends very much on your unique situation and whether you are ready to take on this new responsibility. 

Benefits of ADU Homes

The most obvious benefit of building  ADU homes on your owned properties is the extra income. Renting an ADU home is a great way to gain an additional revenue stream, whether that is one just your main home residence or if you own multiple properties and are already in the landlord realm. Even if it’s not income you strictly need, it gives you a way to put aside a little extra cash for a rainy day or splurge on your hobbies, interests, or life goals.

Contrary to popular myth, putting an ADU on your property isn’t going to lower its value. In fact, quite the opposite – the addition of an ADU home is seen today as a way to raise property value. The following person to buy your property will have an ADU home already pre-built and can start to benefit from it immediately.

Many people also cite a desire to help out their local community or city as a reason for building an ADU home. Many American cities are becoming too expensive for many people to live in. By adding greater density to your neighborhood, you are helping to combat the housing crunch. You’re also providing a home for someone who may be in temporary financial hardship. ADU homes are particularly important for students or low-income households who need to live somewhere affordable, and within the community they are going to school or working in. 

Drawbacks of ADU Homes

One of the most obvious drawbacks of an ADU home is requiring some initial investment to create the unit or to renovate an existing space. This could be in the form of constructing a new garage or home or your property or renovating your existing space to serve as a fully contained housing unit, such as an unfinished basement. It may take more time than you anticipate to make your initial investment back. Be realistic with your goals of a landlord’s wealth.

Getting an ADU can be complicated in terms of zoning, depending on where you are. In some states, it’s a legal right to be able to build an ADU. In others, you might need to do your homework on whether it’s allowed and what restrictions are necessary. 

While not a significant downside, there’s also the fact that you will need to take on the responsibilities of a landlord. This means that maintenance is your responsibility, as is handling the specialty insurance required. Thankfully, with Covertree, getting renters’ or landlords’ insurance is easy! It’s as simple as taking three minutes to answer three questions – you can get started right away!