In the world of real estate, ADU stands for “accessory dwelling unit.” These structural add-ons have become popular for individuals in need of extra living space, but who do not desire to move to a different home or invest in a separate property. They encompass a wide variety of additions to the home’s architecture or lot. Read our article to find out more about ADUs and if they are a good option for you.
What Are Some Examples of ADUs?
In Denver, a dwelling unit is defined as “one or more rooms constituting a unit for permanent occupancy, having but one kitchen together with facilities for sleeping, bathing, and which unit occupies a structure or a portion of a structure.” A dwelling unit is considered “accessory” or “ADU” when it is secondary to the primary dwelling unit and located on the same zone lot.
ADUs can be attached to the main residence or exist as a separate structure on the lot.
Examples of attached ADUs include:
- Basement apartments
- Attic apartments
- Above garage unit
- Converted attached garage suite
Examples of detached ADUs include:
- Backyard cottages (“Granny Flats,” “She Sheds”)
- Detached garage studios
What Are ADUs Used For?
Accessory dwelling units can serve a variety of purposes. Many homeowners opt to construct ADUs to accommodate additional family members, such as parents moving in or adult children coming to stay during summers. A backyard cottage is also a popular option for a mother-in-law suite.
More recently, ADUs have gained prominence as a source of income for homeowners that don’t necessarily want to invest in a separate property. Having a full living space that is somewhat separate from the home but on the same grounds is a fantastic option for subletting. For example, you may earn revenue through rent from yearly tenants, or by listing the ADU as a vacation rental unit.
In many cases, an ADU may act as both a guest living space and revenue source: if you have a basement apartment for when the kids visit for the summer, you can plan to rent it out for the rest of the year as an AirBnB.
Do ADUs Add Value to a Home?
The upfront cost of constructing an ADU will depend on many factors, including the type and location of the structure. A stand alone backyard dwelling will require water and electricity, which will need to be run from the main structure. Attached ADUs have plenty of considerations, too. You will need to work with an experienced architect to maintain the home’s structural integrity while adhering to local zoning and coding laws. Expenses can quickly tally up, and you may be wondering if the ROI is worth it.
Generally speaking, an ADU is likely to add value to your home. After all, the selling price of a home is largely dependent on location and square footage, and an ADU will increase the latter. That being said, there are certain types of ADUs that are more valuable than others and, therefore, more worth the upfront cost. Detached cottage dwellings tend to add the most value to a home, since they are private but also add square footage.
There are, however, certain instances where you will want to reconsider an ADU if your goal is to add value to the sale price. One of these is a converted garage. Having a usable garage is a major selling point in most instances. If resale value is your sole concern, sacrificing the garage for extra square footage is a gamble you probably don’t want to take. A converted garage is a better option if you are looking for a source of rental income or need additional living space for growing families.
Buying a House with an ADU
If you are looking at buying a home with an ADU, remember that it will require additional maintenance and supplies. You will also need to check frequently with local guidelines regarding vacation rentals, as these guidelines are subject to change. Furthermore, if you intend to use the ADU as a rental property, prepare to sacrifice some of your privacy and personal time. Your tenant will require access to the main property and will likely have questions and needs. If you don’t want the responsibility of a landlord and do not require the extra square footage an ADU provides, it may not be right for you.
An experienced Realtor is a great place to start when considering a home with an ADU. If you are weighing the pros and cons of this option in Colorado, contact Brenda Kellogg Meyer with Exit Realty. Brenda is a highly experienced real estate professional who can help find the perfect home for your needs, goals, and budget. Call or go online today to get started.