Home Improvement Ideas: Adding an ADU Can Substantially Impact Real Estate Values

By Adding an ADU, Real Estate Values Can Be Substantially Impacted
By Adding an ADU, Real Estate Values Can Be Substantially Impacted

If you’re in the market for a new home, one feature that could greatly enhance its appeal and value is an accessory dwelling unit (ADU). ADUs, also known as bonus structures, can serve as offices, in-law suites, or rental properties. However, while the idea of having an ADU may sound promising, it’s essential to understand the complexities of maintaining and keeping it up to code. There are also specific considerations when buying a property with an existing ADU or planning to build one yourself. In this article, we will explore what ADUs are, the importance of complying with local ordinances, hidden costs associated with ADUs, and the benefits they offer.

What Is an ADU?

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Add value in your backyard with an ADU

ADU stands for “accessory dwelling unit.” The term refers to standalone additional dwelling units on a primary residential property. These units typically have all the amenities of a regular house, including a kitchen, bathroom, bedroom, or living area separate from the primary dwelling. While terms like guest house, cottage, or granny flat are often used interchangeably with ADUs, their definitions can vary depending on local regulations. ADU is the official term indicating that the unit meets specific standards set by the local municipality.

Permitting and Your ADU

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Add value in your backyard with an ADU

It’s crucial to understand that even if your ADU was built with permits, it may not be certified as ADU real estate by your city. Some areas require ADU owners to have an inspector verify that the unit meets the necessary standards and stipulations. Once approved, the property taxes will likely be reevaluated to reflect the increased value resulting from the ADU. Therefore, it’s essential to check whether the proper permits were pulled for the work when buying a property with an ADU. If you’re selling a property with an ADU, it’s important to disclose its status to potential buyers accurately.

4 Hidden Costs of Accessory Dwelling Units You Need to Know

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Add value in your backyard with an ADU

Owning a property with an ADU entails additional costs. Firstly, you’ll need separate insurance coverage for the ADU, which can typically be added to your existing policy. Additionally, some municipalities may charge a tourism tax if you rent your ADU on a short-term basis. Another potential cost is the increase in property taxes due to the higher real estate value resulting from the ADU. It’s advisable to consult your real estate agent and review local tax records to evaluate the added costs before purchasing a property with an ADU. Lastly, if your ADU is not compliant with local codes, you may need to spend money to bring it into compliance.

ADU Benefits

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Add value in your backyard with an ADU

ADUs offer several benefits that contribute to their growing popularity. They provide flexibility on the property, allowing homeowners to repurpose the unit for various needs over time. ADUs also offer affordable and low-maintenance housing options for seniors who prefer to stay in their homes rather than move to retirement communities. Additionally, they help alleviate housing shortages by providing added density without dramatically altering the neighborhood’s character. Investing in an ADU can be a wise decision, especially in cities with a shortage of rental units, as it can serve as an investment property and add value to your home.

5 Home Renovations That Raise The Value Of Your Investment Property

5 Home Renovations That Raise The Value Of Your Investment Property
5 Home Renovations That Raise The Value Of Your Investment Property

Conclusion

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Add value in your backyard with an ADU

Considering an ADU for your property can bring numerous advantages, from added value and flexibility to contributing to societal goals such as addressing the affordable housing crisis. However, it’s crucial to navigate the complexities of local ordinances, permits, and hidden costs associated with ADUs. Consulting with experienced real estate agents, understanding local regulations, and conducting thorough research will help ensure a successful ADU project. With proper planning and compliance, you can enjoy the benefits of an ADU while significantly impacting the value of your real estate investment.

This article was written by Kristine Gill, a former newspaper reporter and spokesperson for a law enforcement agency. She writes about homes and real estate for Better Homes & Gardens.

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