3 Reasons to Consider an ADU as an Investment

3 Reasons to Consider an ADU as an Investment – In an effort to help balance the extreme demand for housing in California, it has become easier to add an accessory dwelling unit (ADU) – ADU as an Investment, to your property. If you are considering what types of renovations will transform your home into something that is more functional and enjoyable for your household, consider these 3 solutions an ADU can provide.

What is an ADU?3 Reasons to Consider an ADU as an Investment

An accessory dwelling unit (ADU) is defined as a separate living space that meets the same safety regulations and codes as the primary home, with its own entrance. It can be a standalone structure or an addition to the home, including a garage conversion. ADUs must be used as a dwelling place, not a place of business, and the owner must occupy either the ADU or the primary home on the property.

3 Reasons to Consider an ADU

1. Welcome aging parents while preserving independence

If you are preparing to become caretakers for an aging parent or two, finding a way to welcome them into your home is a great way to make caring for them more efficient. With an ADU, you can design a home that is entirely separate from the primary house and provides independence and privacy to your parents, while still being close enough to provide daily care and be immediately available in case of emergency.

ADUs can be designed with aging in place in mind, making sure the entire design prioritizes accessibility. We can work with you to plan for the future, making a separate dwelling that is comfortable for your parents in their current condition and has the flexibility to easily transition if they reach a phase that requires additional accommodations. Consider adding smart home features that make it easy for you to check in on your parents and for them to contact you from anywhere in the home in case of a fall, or think ahead and add a bedroom for an overnight medical provider to stay.

2. Income potential

An ADU can be used as an income property, either as a long term lease or a short term vacation rental. This is a great way to reinvest some equity into your home, increasing its value while offsetting the cost through rental revenue.

Living in Southern California means demand for both housing and vacation rentals will remain strong. You can expect a steady demand from tenants that will allow you to bring in substantial supplemental income from your ADU.

ADUs do not have to be tiny studios, either. You can design something as large as a 3 bedroom, 2 bathroom home, even making it two stories with its own porch or patio.

3. Provide a home for adult children without sacrificing privacy

Many parents of adult children would love to offer support as they transition to independence, starting a career that may not support the cost of living in Southern California yet. On the other hand, both you and your adult child may prefer not to share the home again.

Adding an ADU to the property allows both of you to preserve your privacy and independence while providing a roof over their heads. Whether you decide to charge rent or not is up to you, but the ADU will be an asset that increases your property value either way.

If you are interested in learning more about designing an ADU that uniquely suits your property, we can help.

Is an ADU a Good Investment?

ADU as an Investment – An Accessory Dwelling Unit (ADU) is a detached living space that can increase the number of bedrooms and bathrooms on your property to meet a wide range of needs. Whether you are looking to expand your home to welcome in relatives or want to maximize the income potential of your home, an ADU can be a great way to transform your property.

There are many ways to design an ADU to fit your unique property, household, budget, and preferences. Contact us any time to learn more about how we can help you design your ideal ADU to reach your goals.

If you are considering whether an ADU is going to be a good investment, keep reading.

How much does an ADU cost?

The cost of adding an ADU will be unique to each home, based on a variety of factors. Some of these details include:

  • How flat your current property is and whether you will need to factor in the cost of preparing the land for the ADU’s foundation.
  • The size of your ADU
  • The finishes and features you choose to incorporate

Funding the addition of and ADU can be done in a variety of ways. Because it will add to your home’s value, many people choose to leverage the current equity they have in their home by choosing a HEL, HELOC, or cash out refinancing to fund the ADU. This means immediately reinvesting the equity you have in your home into it, which is generally considered one of the safest uses for home equity.

Will an ADU increase my home’s resale value?

While it will vary based on the ADU you design, many people find that the addition of an ADU can add as much as $200,000 to $500,000 to their home’s value. This makes sense, as it will substantially increase the livable square footage, bedrooms, and bathrooms of your property.

ADUs are also a great way to make your home more appealing when you eventually decide to sell it. Future owners will be drawn to the potential an ADU offers, whether they are looking for a detached mother-in-law’s quarters, a guest house, or an income property.

Can I rent out my ADU?

As long as your current neighborhood and HOA allow it, your ADU can be leveraged as an income property. Either listed for long term tenants or as a short term vacation rental, this ADU can provide rental revenue that often more than covers the cost to build the ADU.

If you take out a second mortgage, line or credit, or other loan to pay for the ADU, in many cases the income from renting it out will cover that monthly payment and then some. This is a great way to increase your property value without cash-flowing the renovation yourself.

Ready to learn more about adding an ADU to your property or more about an ADU as an Investment? We can help you design the ADU that makes the most sense for your budget, your plans for the unit, and your personal preferences. Using advanced 3D technology, you will get to see a realistic rendering of the plans to make sure it’s everything you are dreaming of. Contact us any time to get started.

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