Owning a Home With an ADU

Owning an Accessory Dwelling Unit (ADU) offers a unique blend of flexibility and opportunity. These small, self-contained living spaces, often located in the backyard of a primary residence, can serve multiple purposes—from providing a comfortable home for aging parents or adult children to generating rental income. ADUs can enhance property value and make efficient use of available land, all while contributing to the housing supply in urban areas. Whether you’re looking to accommodate family members, create a home office, or invest in a rental property, an ADU can be a versatile and valuable addition to your home.

What is an ADU?

What is an ADU? An ADU, or Accessory Dwelling Unit, is a secondary housing unit on a single-family residential lot. These units can be either attached to the main home or completely detached. When detached, they’re often called DADUs (Detached Accessory Dwelling Units). Some things to keep in mind are these units often need to be approved by the local government in order to be considered official ADU’s. This usually means they live completely independent of the main home which includes having separate utilities.

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Why Are ADU’s So popular?

As cities have grown they’ve run out of space to build new housing units. This has put stress on the housing market and increased prices for both buyers and renters. ADU’s are becoming increasingly desirable and easier to build as cities update zoning laws to accommodate them. One of the biggest attractions for homeowners is the potential of ADU’s to earn passive income. The extra income can be used by homeowners to invest in more properties, pay down your mortgage, or simply enjoy a bit of financial freedom. Having an ADU is sure to add value and desirability to your home.

The Power of Passive Income From An ADU

What can the passive income of ADU’s do for you? Let’s review a real-life example. Suppose the owners of a home rent out their ADU for $1,750 a month. Over five years, that adds up to over $100,000 of income! One of the wisest uses of that money would be to apply it as a down payment on a second property to either live in or as hold another investment. ADU’s give homeowners an element of financial security.

Not Interested in Owning Another Property? Reinvest Your ADU Income

If buying another property isn’t your goal, you can reinvest that rental income back into your current home. Use it for upgrades and improvements. Making smart upgrades to your home is one of the best ways to add value and put money in your pocket when it’s time to sell. The upgrades also make the home more comfortable to live in. If you don’t want or need to make upgrades you can divert the income to the principal on the mortgage. Diverting the income from the ADU to the principal on your mortgage can take years off the life of your loan, saving you tens of thousands of dollars.

Use Your ADU To Enjoy Life Or Save For The Future

Of course, you don’t always have to be responsible with your passive income. Life is meant to be lived. Some of our hobbies and life choices can be expensive. Consider using the income from the ADU for grand vacations, a boat or RV, or any other activities that you enjoy in life. You can also use the income from the ADU to pay off credit card debt, save for retirement, or fund your kid’s education. It’s your money, your choice!

Flexibility Is A Bonus With An ADU

One of the best things about having an ADU is its flexibility. You don’t have to rent out the unit if that doesn’t work for your current situation. Life can change quickly. You may find yourself in a situation that you have to care for aging parents. An ADU can allow them to live independently while keeping them close. The ADU can also be used to allow adult children a place to live while they find their bearings in life. It can also be a great space for out of town guests, a home office, or even hosting an exchange student.

ADU’s Are A Solid Investment

Homes with ADU’s are a solid investment and are becoming more common. If you’re interested in learning more, just contact me. Let’s explore how owning an ADU can work for you!