When navigating the real estate market as a seller, it’s always a good idea to know what could raise the value of your property. There are numerous ways property owners will increase their home’s worth, with one of the more common and popular choices being adding an Accessory Dwelling Unit (ADU) to the home. An ADU is a secondary housing unit built on the property, designed to accompany the primary home. ADUs go by many other common names, such as in-law units, tiny houses, or granny flats. As a seller looking to elevate the value of your home, it doesn’t hurt to explore ADU options for your property.
As an increasingly popular way of making the most out of your property sale, the additional housing could prove to be just the thing your property needs to generate interest. But that doesn’t mean you should move forward with an ADU without the proper research first. Read on to learn whether or not an ADU adds value to your home and how much value an ADU adds to determine whether or not an ADU is a good investment for you.
Does an ADU add value to your home?
An ADU can definitely add value to your home, but that isn’t to say you shouldn’t properly plan and ensure the project is a worthwhile investment. When completing any significant renovation, it’s important to consider whether or not you’ll break even when selling the property. No one wants to dump a significant portion of their savings into a home renovation project only to have it hurt their sale or not pencil out financially in the long run. But the option for secondary housing is a very desirable feature of any home, and with the versatility of different ADUs, they are a viable option for those looking to get creative when upping their home’s value.
How much value does an ADU add?
Now that we’ve covered how ADUs can increase the value of your home, let’s talk about actual figures. How much value does an ADU add exactly? While this will vary widely based on the primary home’s location, type, and the amount of work needed to complete the ADU itself, it goes without saying that an ADU can increase the final asking price for sellers. Some of the value added, however is non-numerical (i.e. adding value to your lives, to your financial stability, and ability to offer inter-generational housing).
But in terms of numbers, a study found that In the largest cities, a home with an ADU is priced 35% higher than a home without one. Some homeowners will add an ADU to rent out to interested renters, which can certainly drive personal revenue outside of a selling situation. Another study found that houses with ADUs improved their resale value by more than 50%, which is something to consider for those that know they may want to sell down the line.
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Types of ADUs
Now that we’ve covered what an ADU is, and how an ADU can add value to your home, let’s explore some of the different types of ADUs. Remember, not all ADUs are created equal, and will always vary based on the property’s location and type. While some homeowners may get creative with their ADUs, they will typically fall into one of three categories: attached, detached, and interior. Let’s look into each ADU type in more detail.
- Detached ADU: A detached ADU is one of the most high-valued ADU types for the obvious reason that it provides accommodations that are separate from the primary living space. Another reason is that a detached ADU can increase the amount of square footage on your property, which is an important factor an appraisal will assess when calculating a fair selling price. This increased square footage will directly increase the home’s value, making a detached ADU a viable method for securing considering ROI.
- Attached ADU: An attached ADU closely follows a detached ADU in terms of adding value to your home. There is inherently less privacy with an attached ADU, but it’s always possible that an appraiser could apply the square footage of the space to the asking price of the home. But keep in mind: the ADU ordinance has a limit on the square footage allotment for attached ADUs. Generally, a connected ADU can only extend the size of the property by 50%, which can provide some limitations.
- Interior Conversion: An interior conversion, like a garage conversion, is the final ADU type and is generally the one that will add the least amount of value to your home. But that isn’t to say they shouldn’t be considered. Interior conversions are some of the most affordable methods for adding an ADU to a property, but make sure that losing out on the space during construction will not create any headaches. The most common reason property owners will complete an interior conversion is to rent out the area as a rental property, which can dramatically increase revenue.
Costs of ADUs
One of the main factors to consider when planning an ADU is the cost, which impacts your bottom line and the selling price. Because ADUs will always vary based on the home type, the cost will also vary, so make sure to coordinate with a qualified contractor to plan out the design and potential turnaround. Additionally, the designing and permitting process could increase the soft costs of an ADU, so make sure to request updated information surrounding zoning regulations and permitting for your local area. Some contractors will offer all-inclusive pricing, which can help homeowners prevent any surprise costs down the line.
So is an ADU a good investment?
Short answer: Yes! An ADU is a great investment for homeowners willing to put in the time, money, and research to plan the right ADU for their home needs. Whether you’re looking to create the perfect space for rental accommodations or simply want to increase the resale value of your home, an ADU is a clever and creative way to do so.
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ADUs are a fantastic way to increase your home’s resale value, especially for those willing to put in the work on a home renovation project. However, if the long permitting and building process inherent in building ADU’s is too much of a commitment, CT Homes can offer simple as-if cash offers for your property! Contact CT Homes today to learn more!