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What Is an Accessory Dwelling Unit (Granny Flat) – ADU Costs & Benefits

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How’s your appetite for a major home improvement project? What if that project could build equity, significantly boost your property’s value, and generate income?

Most home improvement initiatives can’t do that. In fact, the list of home improvement projects that decrease resale value and drain homeowners’ personal savings is far too long. Accessory dwelling unit (ADU) additions are different. Whether you’re looking to renovate an older house or build equity in a new construction home, an accessory dwelling unit is highly likely to add value, versatility, and verve to your little patch of ground.

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Adding an ADU is a major investment. According to the Oregon Department of Environmental Quality, the median cost to build a detached ADU in Portland, Oregon, is approximately $90,000. The median cost to build an attached ADU is cheaper-between $40,000 and $50,000. Still, that’s surely more than almost any other common home improvement project, save high-end kitchen or bathroom remodels.

ADUs may be easier for rank-and-file homeowners to finance than some other big-ticket purchases, too. If you have sufficient equity in your home, a cash-out refinance is a low-cost, reliable option. If not, consider a home renovation loan or unsecured personal loan.

No matter how its proponents choose to pay, the ADU movement is gaining momentum. Every year, thousands of homeowners across the United States calculate that the long-term benefits of accessory units, including substantial rental income potential and the flexibility to cheaply house aging parents or adult children, outweigh their steep upfront costs and ongoing maintenance requirements.

Read on to learn more about accessory dwelling units: their types, common uses, costs, procedures to build, financing options, general benefits, and potential drawbacks.

What Is an Accessory Dwelling Unit?

An accessory dwelling unit is a secondary housing unit that occupies the same structure or lot as a primary residential structure – usually a single-family home or duplex.

Unlike condominiums and mobile homes, accessory dwelling units generally cannot be purchased separately from the main home. Moreover, the construction of an accessory dwelling unit does not require or result in the subdivision of the main home’s lot.

ADUs’ fortunes are therefore closely linked with those of their “parent” homes. In fact, many municipalities enforce restrictive covenants that require properties with ADUs to remain owner-occupied in perpetuity.

Where such covenants are enforced, you can’t move off the property and rent out both the main house and ADU, nor can you sell the property to an absentee landlord who intends to do the same. You must remain on the property, living in either the ADU or main house, until you sell to another individual or family with the same plans.

Accessory Dwelling Unit Synonyms

Despite their novelty, accessory dwelling units are known by many names. Terms depend largely on geography and personal preference. Common synonyms include:

  • Accessory apartment
  • Granny flat
  • Second suite
  • Live-in garage
  • Mother-in-law suite/apartment
  • In-law suite/apartment
  • Secondary unit
  • Family unit
  • Guest unit/apartment
  • Carriage house
  • Basement unit
  • Attic unit

Types of Accessory Dwelling Units

Accessory dwelling units come in three basic configurations: detached structures (habitable outbuildings), attached external apartments with entrances separate from the main dwelling, and attached internal apartments with shared or separate entrances.

Let’s take a closer look at each.

1. Detached Structures
The quintessential accessory unit is a detached structure located in the main home’s back or side yard.

Detached ADUs are often miniature carriage houses or tiny houses that serve no purpose other than providing additional habitable space. They can also have dual purposes, such as a second-floor apartment above a garage or unfinished storage area. They must rest on foundations – a requirement that excludes mobile dwellings such as RVs and wheeled tiny houses.

The main advantage of a detached ADU is independence. Because the entrance is separate and physically removed from the main house, occupants can come and go as they please with minimal disruption. This is useful for unrelated ADU tenants who want privacy from their landlords, for main house occupants who don’t want to be woken up when their tenants arrive home late at night, and for older ADU tenants who want to remain active for longer.

The main drawback of a detached ADU is building and maintenance costs. Since the unit is entirely detached, it needs its own utility hookups and mechanical appliances (furnace, water heater), and likely requires more raw material to construct.

Minnesota architect Christopher Strom, who helped the city of Minneapolis draft its ADU ordinance in 2014, says it comes down to who’s going to live in the ADU (if anyone) and what they value most. “[Homeowners] need to consider the level of independence needed for the occupant of the ADU,” he says. “The cost of a detached ADU is higher, but it also offers much more independence.”

2. Attached External Apartments
Attached external apartments share at least one wall with the main house. However, they have separate entrances and share no internal connections with the main unit. They generally have separate utility hookups, though the cost to connect them to city services is manageable due to the small distances involved. They may or may not share mechanical appliances with the main unit, depending on the existing appliances’ capacity.

3. Attached Internal Apartments
Attached internal apartments are fully integrated into the existing structure of the main house. To outside observers, it’s not immediately obvious that the property contains two separate housing units.

They’re most often located in a finished basement or attic. They may or may not have separate external entrances, though they invariably have separate, secured doors accessible from an internal foyer or hallway. In most cases, they share utility service and mechanical appliances with the main unit. Since they require little in the way of raw construction materials and fewer big-ticket appliance purchases, they’re the cheapest of the three ADU options.

Potential Uses for Accessory Dwelling Units

Architect Christopher Strom says that most homeowners who build ADUs do so to accommodate elderly family members at a reasonable cost or earn extra income from short-term rentals.

“For the most part, [ADU owners] have elderly family members that want to live independently but nearby,” he says. “The next [most common use is earning] extra money through Airbnb.”

However, there are plenty of other uses for detached or attached accessory units. Here’s a look at some common options, none of which are mutually exclusive:

  • Housing Grandparents and Older Parents Independently, but Nearby. For many families, ADUs are affordable, humane alternatives to nursing homes and assisted-living facilities. According to the U.S. Department of Health and Human Services, the cost of a semiprivate nursing home room approaches $7,000 per month. An entirely private nursing home room costs nearly $8,000 per month. Even assisted-living facilities, with their more hands-off approach to care, cost more than $3,500 per unit, per month. By contrast, median rents for attached and detached ADUs in Portland, Oregon, range from roughly $750 to $1,000 per month, per the Oregon Department of Environmental Quality – and that assumes you’d charge your elderly parent or grandparent market-rate rent to live on your property.
  • Long-Term Rental Income. Another common use for ADUs is long-term rental income from tenants on monthly or yearly leases. Income potential obviously varies greatly by ADU size, amenities, location, and other factors, but this is a legitimate passive income opportunity for any homeowner who builds or buys into an accessory dwelling unit.
  • Short-Term Rental Income. If you don’t want to give your accessory unit over to a single renter or couple for months or years at a time, turn it into a short-term rental instead. Whether you live in a big city or popular vacation town, you can market your ADU to travelers on Airbnb, Vrbo, HomeAway, and other vacation rental sites. Keep in mind that short-term rental laws vary by jurisdiction, so make sure you’re allowed to go this route before creating a listing – and pay all applicable lodging taxes once you’re up and running.
  • Bonus Space for Older Kids. As a parent, you’re probably leery about letting your adolescent or teen hang out with his or her friends (and potential love interests) in a separate apartment. That’s totally understandable. But, with proper ground rules and supervision, an ADU can be a great place for older kids to create some distance from their parents without venturing into completely unstructured environments.
  • Low-Cost Housing for Adult Children. In high-cost areas, ADUs can serve as safety nets for low- and middle-income young people who can’t afford decent housing near work or school. They’re also useful for adult children who are capable of productive work, but have chronic health or developmental issues that prevent them from living independently.
  • Space for a Home Office or Studio. If you’re an artist, craftsperson, or individual professional, adding an ADU is a great way to carve out space for your passion (or profit) without cluttering your main house or driving the rest of your family crazy. With a kitchen, bathroom, bed, and other housing necessities, you can toil indefinitely as you strive to meet deadlines or put the finishing touches on your next masterpiece.
  • Separate, Specialized Space. Your property is unique. Depending on its amenities and configuration, your ADU could accentuate an existing function or create an entirely new one. For instance, if you have a backyard pool, your ADU can serve as a pool house, complete with equipment storage, private changing areas, and a shower. If you’re a frequent host, it could house party overflow or divert traffic from the main building. Or it could serve as the proverbial man (or woman) cave. The sky’s the limit.
  • Private Accommodations for Guests. If you regularly host friends and family overnight, your ADU can serve as a super-private spare bedroom. That’s a win-win for you and your guests, especially in older, smaller houses where every sticky door and creaky floorboard sounds like a cannon.
  • Efficient Quarters for Single and Empty Nester Homeowners. If you’re a younger, single individual with the means to purchase a house, consider buying one with an existing ADU or adding an ADU yourself. By living in your ADU and renting the main house to a larger family or group of roommates, you can maximize your investment’s income potential without taking up more space than you need. The same principle applies for empty nesters: Once the kids are off on their own, why not move out of the main house and rent it to a group that can take full advantage of the space?

Life Cycle of an Accessory Dwelling Unit

Like any permanent housing unit, ADUs are designed to last for many decades. Given their longevity, they’re likely to fill multiple roles during their lifespans, as the needs of their original and future owners change.

What you do with your accessory dwelling unit is ultimately up to you. You can use it as a home office, give it over entirely to short-term rentals via Airbnb or Vrbo, or simply maintain it as a bonus space that you can escape to when the main house gets claustrophobic.

However, many ADUs’ life cycles follow a pattern that echoes their owners’ changing needs over time. This is a summary of one possible life cycle, courtesy of Second Suite:

  1. Year 0: Homeowners purchase a home with an existing ADU or build one themselves. The homeowners then start a family.
  2. Year 1 – 18: The ADU serves as extra living space for the growing family – a home office, pool house, play room, spare bedroom, or all of the above.
  3. Year 18 – 25: When their oldest child graduates from high school, the homeowners convert the ADU into a rental space. If the child attends college or works close to the family home, the homeowners rent the ADU to him or her. Otherwise, they rent it to unrelated tenants to earn income (and subsidize their kids’ education).
  4. Year 25 – 30: Once the homeowners’ kids have all left the house, they rent the ADU to their parents. This avoids the potentially exorbitant cost of assisted living or nursing home care while maintaining proximity and family connections.
  5. Year 30 – 35: The homeowners downsize and move into the ADU. They rent the main house to their grown kids or an unrelated family.
  6. Year 35 and Beyond: The original homeowners sell the property to one of their grown kids, who by this time has started a family. The original homeowners then remain in the ADU, paying rent to their kid.

This sequence makes a lot of assumptions – for instance, that one of the original homeowners’ kids will want to raise his or her own family in his or her childhood home. Still, it’s a useful illustration of ADUs’ versatility over time.

Accessory Dwelling Unit Life Cycle

How to Add an Accessory Dwelling Unit to Your Property

Building a habitable structure, attachment, or internal unit is a complicated, potentially costly proposition that can’t be done overnight. “Building an ADU requires creativity in design, technical, and building code compliance,” says architect Christopher Strom. That means careful planning, disciplined budgeting, and professional help.

Let’s take a closer look at what it takes to add an ADU to your property without breaking your budget or running afoul of local regulations.

Construction Timeline and Financing Options

Before you can break ground, you need to figure out:

  • How much your ADU is going to cost
  • When to build it
  • How to pay for it

How Much Do ADUs Cost to Build?
According to Brown and Palmieri’s report, the median cost to build an attached ADU in Portland is just over $75 per square foot. That’s $37,500 for a 500-square-foot space and $75,000 for a 1,000-square-foot unit. Costs for detached ADUs are roughly double: just under $150 per square foot, or approximately $150,000 for a 1,000-square-foot unit.

Portland is a relatively expensive housing market, so it’s certainly possible that costs are marginally lower elsewhere, but the fact remains that building a habitable, up-to-code structure is a costly proposition anywhere. Geography aside, ADU construction costs may vary over time due to macroeconomic forces that affect input costs, chiefly raw materials and labor.

When Should You Build Your ADU
The precise timing of your ADU’s construction will depend on your financial situation and family dynamics. For instance, if money is tight and you don’t want to serve as a landlord or Airbnb host to people you don’t know, you might wait to build your ADU until your kids are old enough to live in it.

Alternatively, if you’re buying a house instead of renting, with the goal of turning it into a passive income stream, you’ll want to get started as soon as possible.

Assuming you’re building your ADU from scratch, you can either build it simultaneously with or after your main house. For financing purposes, this is an important distinction.

How to Finance Your ADU
Most middle-class homeowners aren’t in the position shell out tens or hundreds of thousands of dollars on a whim. Fortunately, those who can’t afford to cover construction costs with cash on hand have a slew of legitimate financing options at their disposal. Some are appropriate for ADUs built simultaneously with the main house; others work for ADUs added after the fact.

  • Fannie Mae HomeStyle Rehabilitation Mortgage: Designed to finance major home improvement work, this popular mortgage product lets you put as little as 5% down, though you’ll need to pay private mortgage insurance (PMI) until you reach 80% LTV. However, unlike FHA mortgage loans, there’s no upfront mortgage insurance requirement – a potentially massive money-saver. Underwriting requirements can be strict – lenders like to see FICO scores north of 650.
  • FHA 203(k) Renovation Loan: FHA 203(k) renovation loans are specifically designed for homebuyers looking to roll the cost of major home improvement projects into their purchase loans. With lax underwriting criteria, they’re ideal for first-time homebuyers with less than perfect credit. The major drawback is a big upfront mortgage insurance hit: 1.75% of the loan value.
  • Construction-to-Permanent Loan (All-in-One Loan): This is a turnkey loan that finances every step of the home construction process, from land acquisition to the finishing touches, and then converts into a long-term (or “permanent”) mortgage with a term of up to 30 years. Just one closing is required.
  • Short-Term Construction Loan: Short-term construction loans are meant to finance costs associated with new home construction – including, if necessary, ADU construction. They usually have one-year terms and variable interest rates that tend to be higher than longer-term mortgage loans. Once construction is completed, you’ll need to convert to a permanent mortgage, which requires a second closing.
  • Cash-Out Refinancing Loan: If you’re adding an ADU to an existing property in which you’ve built significant equity, you can use a cash-out refinancing loan to extract cash and finance construction. If rates have fallen since you took out your original mortgage, your new loan may have a lower interest rate as well.
  • Home Equity Line of Credit: This is a revolving credit line secured by your home equity – often up to 90%. Since HELOCs are relatively low-risk for lenders, they typically have very low interest rates.
  • Unsecured Personal Loan: If you lack sufficient equity in your home and prize flexibility, an unsecured personal loan may be your best bet. Unsecured personal loans generally have shorter terms than refinancing, renovation, and rehabilitation loans, so they’re ideal for homeowners who expect to sell their homes soon after completing their ADUs.

For reference, the Oregon Department of Environmental Quality has a comprehensive guide with a representative lineup of Oregon-specific financing options. The loan types described in this guide are available nationwide, but the lenders mentioned in it may or may not operate outside Oregon. For more information about options that make the most sense for your situation, consult your local housing authority.

Construction Process

Just as every accessory dwelling unit is different, so too is every ADU construction process. That said, it’s possible to break the ordeal into a logical, step-by-step process. Here’s the sequence of events you’ll need to follow to get your ADU up and running:

  1. Determine Whether Your Property can Support an ADU. Before you can build, you need to determine whether your property is suitable for an accessory unit. First, make sure ADUs are legal in your municipality. If so, consult your ADU ordinance, which should spell out permitted square footage limits, height restrictions, floor area ratios, setbacks, and other metrics. If your property sits on a small lot, you may not have enough room to construct an ADU that meets minimum size and setback requirements.
  2. Determine the ADU’s Intended Purpose. Figure out how you intend to use your ADU after it’s built. Try to look as far as possible into the future and anticipate potential life changes that could alter your ADU’s purpose. For instance, while your children are young, you might use the space as a studio or short-term rental, then rent it to one of your adult children as they age out of the main home.
  3. Find an Architect or Designer Who Specializes in ADU Construction. Find an architect or designer with ADU construction experience. (Or, better yet, an ADU specialist.) Though designing an ADU seems like a small, straightforward job, it’s a different animal than large-scale residential projects. “The design of a very small living space is actually more difficult than a large living space. It’s a game of inches,” says Strom. “So you need to hire an architect that can maximize the opportunities for space.”
  4. Evaluate General Contractors With ADU Experience. Once you have a finalized design, look for general contractors capable of managing your project. Bigger contractors may turn up their noses at ADU-only projects, but that won’t be a problem if you’re building the main house simultaneously. Smaller outfits will have no problem taking ADU-only jobs. In any case, thoroughly check provided references. Try to find and speak with non-provided references as well. Many homeowners are surprisingly happy to talk about their experiences.
  5. Solicit Bids From Multiple Contractors. Narrow down your contractor options to a few top choices, then solicit bids from each. Your choice is up to you: You can go with the lowest or quickest bid, or choose the contractor that seems the most confident and capable. Keep in mind that if you’re confident in your management skills, you can probably forgo a general contractor and work directly with your subcontractors. That saves money while substantially increasing the amount of time and effort you need to devote to the project. (Not to mention your direct responsibility for the project itself.)
  6. Secure Financing. Next, evaluate your financing options and choose the loan that best fits your needs. Depending on your loan type, this may necessitate a lengthy underwriting period. If time is of the essence and you’re confident that you’re going to build your ADU no matter what obstacles you encounter in steps 2 through 5, you can begin soliciting financing as soon as you complete step 1.
  7. Secure the Appropriate Building Permits. You’ll almost certainly need to pull permits for your project. Many general contractors handle this part of the process, or at least walk clients through them. If you’re managing subs on your own, you’ll likely need to handle permitting yourself. That road usually leads through your municipal or county planning and zoning department. Check with your local permitting authority, and don’t be shy about calling for hands-on guidance. It’s important to do this part of the process correctly, as permitting problems can be expensive to correct.
  8. Remain Attentive and Compliant Throughout the Construction Process. Even if you’ve retained a general contractor, you’ll need to remain attentive throughout the construction process – and unafraid to step in if it looks like things aren’t progressing as anticipated. You’ll also need to comply with city or county inspection requests, which can occur periodically throughout the process. At minimum, you’ll need to submit to a thorough inspection before your ADU can be certified for occupancy.

Different Construction Process

Benefits of Accessory Dwelling Units

ADUs have many benefits. Some are self-evident; others are less obvious. These are among the most commonly cited by homeowners, city planners, and ADU advocates:

  1. Additive to the Local Housing Supply. When they’re used as dwellings, as opposed to studios or bonus rooms, ADUs add to the local housing supply. This is critical in older cities, where the housing stock’s average age is invariably older and therefore more prone to health and safety hazards, such as radon, lead, and substandard electrical wiring.
  2. Lower Median Rents in High-Cost Neighborhoods. By the law of supply and demand, more housing very often means lower rents. In high-cost neighborhoods, modestly sized ADUs provide low-cost alternatives to studio or one-bedroom apartments while reducing overall competition for housing. That’s great news for low- and middle-income renters, who very often find themselves priced out of desirable neighborhoods. Over the years, I’ve been acquainted with several individuals or couples who’ve lived in affordable rented ADUs (usually carriage houses) in ritzy neighborhoods they’d otherwise be unable to afford.
  3. Passive Income Opportunities for Homeowners. This is obviously a huge argument in favor of ADUs, particularly for budget-conscious homeowners keen on reducing their housing costs and reaching financial independence faster. If you live in a lively neighborhood popular with out-of-town visitors, your best financial bet might be soliciting short-term renters via Airbnb, Vrbo, or another platform – provided short-term rentals are legal in your area. In quieter parts of town, long-term rentals might make more sense. Either way, you can earn hundreds or even thousands of dollars per month this way, depending on prevailing rents in your area. That could be enough to offset, or at least deeply discount your monthly mortgage.
  4. More Housing Opportunities for One- and Two-Person Households. ADUs present attractive, private housing opportunities for single individuals and couples who don’t want to live with roommates in rented houses or cram into cramped studio apartments in multi-unit buildings. This is especially important if you prefer quiet residential neighborhoods, where single- and couple-friendly housing tends to be scarce. And, if you’re a single person or childless couple fortunate enough to own your own home, you can avoid the “too much house” problem by living in the ADU and renting the main house to a larger family or group of roommates.
  5. Opportunities for Multi-Generational Housing. ADUs create opportunities for flexible, long-term multi-generational housing arrangements. For instance, a nuclear family with small children might live in the main house, while the physically able parents (or aunts, uncles, or cousins) live in an attached or detached ADU. Or an older couple might live in the main house while their grown adult child lives in a space of his or her own. These arrangements are especially helpful in costly housing markets like Seattle and the San Francisco Bay Area, where median rents are all but out of reach for most young people. They’re also useful in cultures that prize close connections among extended family members and accordingly seek arrangements that allow cousins, grandparents, aunts, uncles, and others to live under the same roof (or two roofs).
  6. Opportunities for Aging in Place. As Christopher Strom notes, one of the most common use cases for ADUs is also one of the most cost-effective: “granny flats,” “mother-in-law apartments,” whatever you want to call them. Inviting an elderly family member to live independently on your property is a great way to keep them active, healthy, happy, and busy for longer. ADU living stretches elderly relatives’ retirement savings further too, even if they require part-time in-home care. Paying a part-time home health aide is almost always cheaper than springing for round-the-clock nursing home care.
  7. Accommodation for Domestic Help. An ADU is a great place to put up a live-in housekeeper or au pair. With their own separate living space, rather than a spare bedroom, household employees are likely to feel less constrained by and less dependent on the family that employs them. That’s important for both sides of the relationship.
  8. Potential for Multi-Use Spaces. Few if any ADUs fulfill the same function forever. As their owners’ needs change, most change their uses accordingly. At various times, your ADU could be an art studio, a bonus room, an Airbnb, a granny flat, and a long-term rental for an unrelated tenant. It could even fulfill multiple functions simultaneously – for instance, a studio that doubles as a man cave and moonlights as an Airbnb.
  9. Reduced Development Pressure. ADUs can simultaneously reduce local development pressure and preserve neighborhood character – two imperatives that are frequently at odds. By increasing the number of housing units per acre and boosting property values, ADUs raise the political cost of large-scale development (by increasing the number of residents to be displaced) while increasing land acquisition and construction costs for developers. In rapidly gentrifying neighborhoods, ADUs alone aren’t sufficient to curtail disruptive development. In marginal cases, permissive accessory unit regulations can make a real difference – not necessarily by halting development entirely, but by encouraging developers to invest in smaller-scale, people-friendly projects that add density without compromising neighborhood character.
  10. Denser, Smarter, More Efficient Development. Just as they can’t single-handedly neutralize development pressure in desirable neighborhoods, ADUs can’t by themselves transform inefficient, car-oriented neighborhoods into paragons of smart growth. However, by reducing the average size of housing units and adding population density, ADUs empower people – and, by extension, neighborhoods and cities – to use resources more efficiently. Smaller housing units require less energy to operate and fewer raw materials to construct and maintain. Denser neighborhoods encourage more walking and bike commuting, and fewer car trips. The result: lower per-capita carbon footprints.

Drawbacks of Accessory Dwelling Units

For many smart development advocates, the case for ADUs is truly open-and-shut. Alas, the granny flat movement isn’t without controversy, particularly in suburban communities where orderly development and property value preservation are overriding concerns.

Here’s a look at some common arguments against ADUs in general and pesky drawbacks for homeowners considering adding ADUs where permitted:

  1. Significant Upfront and Ongoing Cost. A detached ADU can easily cost more than $100,000 to build and outfit. An attached ADU is liable to cost upwards of $40,000. Sure, it’s possible to finance these costs with a secured loan, but that requires you to shell out several hundred extra dollars per month – on top of your existing mortgage, most likely. If you don’t have the cash to pay for your ADU’s construction upfront, or even to cover your construction loan’s closing costs (if they can’t be rolled into the loan), you may need to save for a while before getting started. Likewise, if you’re not planning to rent out your ADU or sell your property soon after construction is complete, your household’s cash flow needs to be sufficient to absorb your monthly payment.
  2. Potential Covenants and Restrictions on Sale. In some jurisdictions, ADU-endowed properties must be owner-occupied. This restriction is typically written into the property’s deed, so you can’t just pretend that your garage apartment isn’t an accessory unit. It can be a deal-breaker. Here in Minneapolis, the otherwise permissive ADU ordinance’s owner-occupancy requirement is pretty much the only thing stopping us from turning our backyard shed into a carriage house. That’s a shame because we have plenty of friends who’d pay good money to live behind us.
  3. Higher Property Taxes. Building equity is usually couched as a good thing, but there’s a downside for homeowners on tight budgets: higher property taxes. When you construct an ADU on your property, you implicitly assent to a steep rise in the property’s assessed value. Depending on the type of ADU, its amenities, your property’s location, and other factors, that increase could equal or even exceed the cost to construct the unit – potentially adding a high-three or low-four-figure sum to your annual property tax bill. Detached ADUs are particularly vulnerable. According to Oregon Live, quirks in Multnomah County’s tax code produced serious sticker shock for thousands of homeowners back in the early to mid-2010s. A “granny flat depression” endured until Oregon’s state government stepped in with a fix, per Miller Nash Graham & Dunn.
  4. Regulatory Red Tape. Like most building and zoning codes, ordinances governing accessory dwelling units are long, dense, and dry. Sure, you can probably condense the important points – square footage limits, floor area, setbacks, permitting requirements – into a single-sided page, but you’ll likely need professional help to avoid any devils in the details. “[ADU] codes are very complicated, so make sure you know that your design complies with building code before spending a lot of money,” says Christopher Strom.
  5. Greater Maintenance Load. Every homeowner knows that more square footage means more maintenance. That’s true even if you don’t truly occupy that extra square footage. Whether you rent out your ADU to a long-term tenant, list it on Airbnb or HomeAway, or keep it as a studio or bonus space, it’s your property. And that means you’re responsible for keeping it in good (or at least acceptable) shape. Home maintenance costs vary significantly depending on a home’s age, size, configuration, location, and other factors, and it’s true that newly constructed accessory units are likely to be cheaper to maintain than sprawling older homes. Still, maintenance costs can add up over time: The Balance estimates that over long periods, homeowners should budget roughly 1% of the value of their home for maintenance and upkeep. That’s $1,000 for a $100,000 ADU.
  6. Potential for Vandalism. In some neighborhoods, ADUs are easy targets for vandalism. Detached AUDs that sit vacant for long periods are particularly vulnerable. At minimum, you’ll want to install motion-activated floodlights. External cameras aren’t a bad idea either. For true peace of mind, a proper security system is probably essential. That can cost anywhere from $15 to $60 per month, depending on its features and whether your main house already has a security setup.
  7. Potential for Less Usable Outdoor Space. On modestly sized lots, ADUs can eat into usable outdoor space. Again, detached ADUs are especially problematic on this point. Though the restrictive covenant is the biggest issue for us, my wife and I are also concerned about a detached ADU chewing up much of our small backyard, which we use heavily when the weather is nice, and eating into our garden plots.
  8. Potential for Conflict With Neighbors. ADUs can upset neighborly relations, especially in smaller towns and quieter neighborhoods where they’re more likely to be a novelty. Case in point: this Greenfield (Massachusetts) Recorder story about the conflict provoked by that town’s first approved accessory dwelling unit. Even if you’re not required to do so by law, it’s not a bad idea to keep your neighbors looped into your ADU plans before and during the construction process.

Final Word

In this guide, we’ve examined at length the upfront costs of building an ADU. If you’re still reeling from sticker shock, but intrigued by the income potential of an attached or detached accessory unit, you might be moving away from building one yourself and toward buying a property with an existing ADU.

That could be a good thing for your sanity. Buying an existing ADU eliminates all the headaches associated with overseeing a complicated construction project – a job for which most already-busy homeowners have little appetite.

Just don’t expect it to reduce the upfront cost of your ADU. Building an accessory dwelling is a near-certain way to boost resale value, sometimes by an amount greater than the builder’s total initial investment. Whether you build or buy, you’ll pay for your ADU one way or another.

Does your property have an accessory dwelling unit on it? Are you thinking about adding one?

Brian Martucci
Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

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