ADUs can be rented, providing it adheres to local residential rental codes. Building an ADU for rental purposes could trigger zoning or tax implications as you would be claiming income on the ADU. It's important to contact your local municipality to understand if any laws or ordinances prevent you from renting an ADU.

Can an ADU Have a Separate Address?

Depending on the ADU's intended use and placement on the property, an address could be assigned to the ADU as part of the building permit process.

Does an ADU require power, water, bathroom, or a kitchen?

An accessory dwelling unit is generally required to be a fully functioning living space with bathroom facilities, bedroom, and kitchen in most areas. Building codes and zoning in your local municipality will dictate the requirements, such as amenities, safety features, size, and possible property locations.

Does an ADU Increase Property Taxes?

Adding an ADU can increase your property taxes as you're adding a structure, value, and square footage to your property. You may want to contact a local property assessor to learn more about possible tax implications.

Does an ADU add value?

When built correctly, an ADU can add value to your home and your life. The Appraisal Journal study from 2012 titled Understanding and Appraising Properties with Accessory Dwelling Units surveyed 14 properties that recently added ADUs. The study found that ADUs contributed to a 25% to 35% increase in property appraised value. ADUs that add utility or income, such as a rental dwelling, often lead to a higher assessed value.

DADU stands for detached accessory dwelling unit. DADU's are freestanding ADUs that are not connected to the primary residence.

Can you finance an ADU?

There are several ways to finance and ADU. Often the best financing option depends on your ADU project. The most common financing options are home equity loans, cash-out refinancing, specialty lenders, and personal savings accounts. Many large ADU manufacturers have partnerships with preferred lenders who have experience in providing the most appropriate financing option for your situation.

In-Depth Product Guide

Prefabricated ADU

FAQs

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An Accessory Dwelling Unit (ADU) is a small, independent residential housing unit built on an existing residential property. ADUs are typically between 350 and 1,200 square feet and usually found in the backyard. They have utility connections and are separate (or have a separate entrance) from the lot's primary home. In some cases, cities may allow a homeowner to appropriate a section of their home to use as an ADU. The most common ADU's in North America are secondary suites, accessory apartments, and in-law units.

When looking to buy an ADU, there are two main types, attached and detached.

Attached ADUs can include garage conversion, second story addition, attic retrofits, basement apartment, in-law units.
Detached ADUs can include detached garage conversion, new construction, alley flat, backyard bungalow, laneway house, and granny flat. Prefabricated ADUs can be built with less construction waste and often in less time.

ADUs stand to play an increasing role in national housing needs, especially with the emerging housing crisis in major metropolitan areas. But is every property eligible or a fit for an ADU? The lot and the amount of space you have to work with is a critical component of whether an ADU is suitable for your property. Municipal codes, zoning, and bylaws also need to be considered. Municipal considerations periodically change as more cities adopt ADUs.

These details will help you to identify the type of ADU that is appropriate for your situation. It's recommended to work with an ADU designer or manufacturer familiar with the requirements and regulations in your area.

ADUs require fewer natural resources like lumber as they are much smaller in size than the main residence. For this reason, ADUs also require less energy to build and maintain.

As the big-city housing crisis continues to escalate, ADUs offer an alternative housing supply with low ongoing maintenance costs.

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