Is an ADU Right for You?
A practical guide to adding flexibility, independence and possibility to your home
Since the start of San Francisco's pilot program in 2013 to recent changes in state laws, ADUs are creating more housing and opportunities for homeowners to expand options to increase property value, create multigenerational housing, age in place scenarios and generate passive income.
WHAT COUNTS AS an ADU
ADU or Accessory Dwelling Unit, is a modern twist on the granny flat or in-law unit. An ADU can either be built as a separate, detached building or developed within the envelope of your existing home as a Junior ADU - whether a basement or room located at the back of a garage or build out the entire garage. Long term financial and occupancy goals influence what type of ADU to develop.
DETACHED NEW BUILD
Separate structure offering the most privacy yet highest cost per square foot and longer build time.
GARAGE CONVERSION
Develop within the existing envelope, but drainage and ceiling height often challenge - faster build time.
INTERIOR OR BASEMENT
A basement or interior room with separate exterior access, efficiency kitchen and private bath offers a lower cost, faster timeline to complete.
ADDITION OR ATTACHED
Adding onto the existing structure requires planning review, longer build time and potentially higher costs but also could offer unique flexibility.
FIVE QUESTIONS TO START WITH
Who is the unit for: family member, tenant, caregiver?
How much of the yard are you willing to give up?
Can the property's utilities and sewer carry?
How will you fund it, and over what term?
Do you plan to sell within five years?
FINANCING OPTIONS TO CONSIDER
CASH-OUT REFINANCE
HELOC, HEI, HECM or HOME EQUITY LOAN
Replace an existing mortgage with a new mortgage to pull cash out.
HELOC Home Equity Line of Credit, variable interest rate
HEI Home Equity Investment, lump sum payout in
exchange for equity share of your home’s future value
HECM Home Equity Conversion Mortgage, aka Reverse Mortgage
ADU Specific Loans are also available from select lenders. Borrowing limits are based on future appraised value after build and not on your home’s current equity.
These types of loans vary significantly impacting monthly fees, taxes and equity share. In today’s higher interest rate environment, take the time to explore all financing options and scenarios with qualified lenders, financial advisors and tax professionals.
KEEP THIS FACT IN MIND
Potential savings of $50K to $112K by keeping the ADU’s square footage at 750 or under. Lowers construction costs (smaller footprint) + impact and development fees are exempt.
Potential Benefits of an ADU
FAMILY HOUSING
Create a family compound; live together yet independently in order to stay in the home you know and love!
PASSIVE INCOME
Build additional value and equity along with passive income and possible additional tax benefits.
RIGHTSIZING IN PLACE
Minimize your living footprint with a new home at the same address.
THE DWELL DILIGENCE REPORT
Is your long time home meeting your current lifestyle? Should you remodel or move? Replace guess work with conrete options based on your goals and vision for your next chapter. Schedule a Dwell Diligence Report walk-through with me! No pressure – just professional recommendations to help bring clarity to your options.
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