When selling your home, boosting its value is always a smart move. One popular way to increase property worth is by adding an ADU, which is an Accessory Dwelling Unit. An ADU is a secondary housing unit on the property, often called an in-law unit, granny flat, or tiny house. These additions can make your home more appealing and valuable to buyers. If you’re a seller, exploring ADU options could be a great way to enhance your property’s market potential.
Adding an Accessory Dwelling Unit (ADU) is a growing trend to boost your property’s appeal during a sale. However, it’s important to do your research before moving forward. Keep reading to check if an ADU adds value to your home and how much it could increase your property’s worth, helping you decide if it’s a smart investment.
Can an ADU increase your home’s value?
An ADU can add value to your home, but it’s important to plan carefully. Before starting any big renovation, ask yourself if it will help you make a profit when selling. You don’t want to spend too much and not get the return you expect. That said, a secondary housing unit is a popular feature. With many ADU options, it’s a great way to increase your home’s value.
What’s the potential value boost from an ADU
The value added by an ADU depends on the home’s location, type, and the work needed to complete it. However, it’s clear that it can raise the asking price for sellers. Some of the value is non-numerical, such as the benefits it brings to your life, financial stability, and the ability to offer inter-generational housing.
In terms of numbers, a study found that in large cities, homes with ADUs are priced 35% higher than those without one. Some homeowners add ADUs to rent out, increasing personal income even if they don’t sell. Another study showed that homes with ADUs can boost resale value by over 50%, which is something to consider if you plan to sell in the future.
Different kinds of ADUs
Not all ADUs are the same; they can vary based on your property’s location and type. While homeowners may get creative, ADUs typically fall into one of three main categories:
Detached ADU
A detached ADU is one of the most valuable types because it offers separate living space from the main home. It also adds extra square footage, which appraisers consider when setting a selling price. This extra space directly boosts your home’s value, making it a great option for a strong return on investment (ROI).
Attached ADU
While an attached ADU offers less privacy, an appraiser may still add the square footage to your home’s asking price. However, there are limits. Most ADU ordinances allow attached ADUs to increase your property’s size by only 50%, which could be a limitation to consider.
Interior Conversion
An interior conversion, such as a garage conversion, usually adds the least value to your home. However, it’s still worth considering. Interior conversions are often the most affordable way to add an ADU, but be sure that losing space during construction won’t cause issues later. Many homeowners choose interior conversions to create rental units, which can significantly increase rental income.
Investment Cost
When planning an ADU, one of the most important factors to consider is the cost, as it impacts both your budget and the home’s selling price. Since ADU costs vary based on the home type, it’s essential to work with a qualified contractor to plan the design and timeline. Keep in mind that designing and permitting can add to the soft costs, so be sure to get updated information on zoning regulations and permits in your area. Some contractors offer all-inclusive pricing to help avoid unexpected costs.
So should you invest in an ADU?
Definitely! An ADU is a great investment for sellers who are willing to invest time, money, and research to plan the right addition for their property. Whether you want to create a rental space or increase your home’s resale value, an ADU is a smart and creative solution.
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