In property listings, zoning codes and planning meetings you’ll often spot the acronym ADU. Whether you’re shopping for a new home, evaluating an investment or exploring renovation opportunities, “ADU” signals an added residential unit on a single-family lot. Understanding this term is key to unlocking hidden value.
Grasping ADUs empowers homeowners to generate rental income, accommodate multigenerational living or enhance resale appeal. Investors spot profitable opportunities. Buyers foresee future upgrades. Clarity on ADUs means informed decisions, smoother permitting and stronger returns.
An Accessory Dwelling Unit (ADU) is a secondary, self-contained residential unit on the same lot as a primary home. It includes its own kitchen, bathroom, living and sleeping spaces plus a separate entrance. Legally, an ADU stays tied to the main house and cannot be sold off independently.
Also called carriage houses or backyard cottages, these stand-alone units sit apart from the main home. Examples: converted garages, tiny homes in the yard.
Built onto an exterior wall or via breezeway, sharing a roofline or utilities. Ideal for expansions that blend with the main house.
Basement or attic conversions, mother-in-law suites created within existing square footage. Less site work, faster permits.
A JADU is under 500 sq ft, uses part of the main home’s footprint and shares an entry but has separate living quarters. Lower fees and fewer zoning hurdles.
ADUs can command $1,500–$3,000 monthly rent depending on location. Calculate ROI by comparing construction costs against projected rental revenue over 5–10 years.
Offer privacy for aging parents, adult children or caregivers while keeping family close. ADUs provide independence without long commutes.
Studies show ADUs can boost home value by 20–35%. Some jurisdictions offer tax exemptions or incentives for affordable or senior housing ADUs.
Most areas cap ADUs at 800–1,200 sq ft. Setbacks from property lines and additional parking spaces vary by municipality—check your local code.
Typical permits include building, electrical and plumbing. Approval can take 60–120 days. Variances may be needed for reduced setbacks or lot coverage.
Many states and cities waive application fees, offer low-interest loans or grants, and provide property tax abatements to encourage ADU construction.
ADU build costs range from $200 to $400 per sq ft for basic to high-end finishes. Site work, utility hookups and design fees add to the total.
Common funding sources include home-equity lines of credit (HELOC), renovation mortgages, construction loans and local ADU grants.
Estimate rent based on comparable units. Divide total project cost by annual net income to gauge payback—often 8–12 years.
Size limits vary; check your local zoning department. Many cap at 1,200 sq ft or 50% of the primary home’s size.
ADUs are fully detached or larger interior units. JADUs are under 500 sq ft, use existing walls and require fewer approvals.
Adding livable square footage often raises assessed value and insurance premiums, but some regions offer exemptions or discounts.
Utilities may be shared or separate. Parking requirements differ by jurisdiction. Privacy rules dictate window placement and fencing.
Prefabricated ADUs and design-build firms streamline design, permitting and construction—often speeding up timelines and controlling costs.
Visit your city or county planning website, review model ADU ordinances and attend workshops or info sessions.
Seek professionals with ADU portfolios. Compare bids from design-build firms and prefab vendors to find the best fit.
Outline hard costs (construction, permits) and soft costs (design, financing). Build a timeline with milestones for approvals, construction and lease-up.
