Accessory Dwelling Unit – ADU – Buying Real Estate. Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) are innovative and effective options for adding needed housing in California. ADUs have also been known by names like granny flats, in-law units, backyard cottages, secondary units, and more.
KEY TAKEAWAYS
An accessory dwelling unit (ADU) is an additional residential building that occupies the same lot as a primary residence.
Examples of an ADU could be a guest house or a detached garage with a rented apartment above.
The establishment and use of an ADU will fall under different zoning rules and regulations depending on where you live.
An ADU can provide additional income in the form of rent.
An ADU costs money to build and upkeep and will increase monthly utility bills.
The most efficient way to finance an ADU varies depending on the owner’s individual situation. Options include taking out a renovation loan, refinancing if the homeowner has equity in their home, or pulling from available cash on hand.
Some ADUs are prefab models, and in many cases, the manufacturer can offer financing. As ADUs have become more popular, there are even lenders that now specialize in financing ADUs. Keep in mind that these options tend to have higher interest rates than those for traditional mortgages, so refinancing your main mortgage may remain a cheaper option.
Accessory Dwelling Unit – ADU – Buying Real Estate
Pros of ADUs
ADUs can provide extra income in the form of rent.
ADUs may add value to your property.
ADUs add more space, such as a workshop or a guest suite.
Cons of ADUs
An ADU might take up space that otherwise would be used for another purpose (storage, garage, etc.)
An ADU that is used as a rental will require maintenance.
An ADU costs money to build and may increase property taxes, and utilities will add to monthly expenses.