What does ADU Mean?
Accessory dwelling units (ADUs) are secondary residential buildings that share the lot of a primary residence. They can come in a variety of forms, like guest houses, detached garages with an apartment above, or even a converted basement. ADUs go by many different names such as in-law or mother-in-law units, secondary dwelling units, granny flats, or carriage houses. ADUs can serve a variety of purposes, from providing additional income through rent to housing aging family members who want to avoid moving to an assisted living facility.
Zoning rules and regulations are one of the first obstacles to face when thinking about building an ADU. Fortunately, a lot of places have loosened their zoning regulations to allow for ADUs in recent years. The rules will vary depending on your area, if it allows them at all. Before investing in an ADU, do regionally-specific research to see if an ADU is even an option. Local zoning laws may also include limits and requirements that must be met, such as maximum size and style of the unit, and owner occupancy.
Building an ADU comes with a variety of financial concerns, including construction costs, monthly utility bills, and potential tax consequences. The possible rental income is one of the most common reasons to build an ADU, but that doesn't come without some downsides. Apply the pros and cons of renting out an ADU to your specific circumstances, together with local zoning ordinances, up-front costs, maintenance costs, and activity in the general rental and housing markets. Another important aspect to consider when building an ADU is the legal considerations. Building an unlawful ADU can create problems if an owner has to refinance the property. Building an unauthorized ADU can also lead to possible code enforcement actions that result in fines. Owners should look to their zoning ordinances and possibly consult with a lawyer specializing in this area.
Financing ADU construction, 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 and manufacturers that now specialize in financing ADUs. However, these options tend to have higher interest rates than traditional loans. Remember to factor in the all the cost and time associated with the development of ADU, many people also opt for prefabricated models which can offer cost savings and quicker completion times.
ADUs can be a great option for those looking to create additional income through rent or provide housing for family members, exchange students, live-in nanny's, or regular guests. In the end, the benefits of an ADU are clear, granted that you've studied all the factors that come into question before taking the plunge.
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