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Transformation Advisory, LLC
DFWREAdvisors Group Blog

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What Are Accessory Dwelling Units and How Can They Benefit You?

What Is an ADU?

As AARP says:

“An ADU is a small residence that shares a single-family lot with a larger, primary dwelling.”

“An ADU is an independent, self-contained living space with a kitchen or kitchenette, bathroom and sleeping area.”

“An ADU can be located within, attached to, or detached from the main residence. It can be created out of an existing structure (such as a garage) or built anew.”

The Benefits of ADUs

Freddie Mac and the AARP identify some of the best features of ADUs for both buyers and homeowners:

Living Close by, But Still Separate: ADUs allow loved ones to live together while having separate spaces. That means you can enjoy each other’s company and help each other out with things like childcare, but also have privacy when needed. If this appeals to you, you may want to consider buying a home with an ADU or adding an ADU onto your house.

According to Freddie Mac:

“Having an accessory dwelling unit on an existing property has become a popular way for homeowners to offer independent living space to family members.”

Accessory Dwelling Units (ADUs) can be a valuable solution for both potential homebuyers and homeowners with evolving needs. These small, self-contained living spaces are typically built on the same property as a primary residence and can serve a variety of purposes.

Here are some of the benefits and considerations for homebuyers and homeowners:

For Potential Homebuyers:

Affordability: ADUs can provide an affordable option for homeownership, as they offer the potential to generate rental income that can help offset your mortgage or other expenses.

Flexible Living: ADUs can be used as a private living space for a family member, a rental unit, or even a home office, depending on your needs.

Property Value: The presence of an ADU can potentially increase the overall value of your property, making it a good long-term investment.

For Homeowners:

Rental Income: If you are already a homeowner, you can build an ADU to generate rental income, helping you cover mortgage payments and property expenses.

Aging in Place: ADUs can be used to accommodate aging family members while allowing them to maintain their independence and privacy.

Increased Property Value: Adding an ADU can enhance your property's resale value, especially in areas with a high demand for housing.

These are a few of the reasons why many people who benefit from ADUs think they are a good idea. As Scott Wild, SVP of Consulting at John Burns Research, says:

“It’s gone from a small niche in the market to really a much more impactful part of new housing.”

Here are some steps to consider if you are thinking about ADUs:

Check Local Regulations: Research your local zoning and building codes to ensure that ADUs are allowed in your area and to understand any specific requirements.

Design and Financing: Work with an architect or builder to design your ADU and secure the necessary financing. You may need a construction loan or home equity line of credit.

Permits and Inspections: Obtain the required permits and ensure that your ADU meets all local building codes. This often includes inspections at various stages of construction.

Property Management: If you plan to rent out the ADU, consider how you'll manage tenants, leases, and property maintenance.

Legal and Financial Considerations: Consult with a lawyer and financial advisor to address legal issues and financial implications, including rental income reporting and property tax considerations.

Bottom Line

ADUs can be a versatile and beneficial addition to your property, but it is important to do thorough research and planning to ensure a successful outcome. Consult with local experts and authorities to make sure your ADU project complies with all regulations and is in line with your goals.

ADUs have some great advantages for buyers and homeowners alike. If you are interested, reach out to us, your local real estate professionals, we can help you understand local codes and regulations for this type of housing and what is available in the local market.


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