Accessory Dwelling Unit (ADU)
An accessory dwelling unit (ADU) is a separate home or living space that exists on the same property as your primary residence. Adding an ADU can increase the value of your property, provide a source of rental income, or create living space for family members.
If you’re considering building an accessory dwelling unit on your property, let CrossCountry Mortgage provide the guidance and support you need to make your project a success.
What is an ADU?
Accessory dwelling units are additional living spaces that occupy your primary residence or property. Common examples of ADUs can include:
- A basement apartment
- An apartment over the garage, or “granny flats”
- Guest house
- Tiny house
Our customers often use an ADU as a rental property for extra income, but remember that the structure cannot legally be sold apart from the main house.
Main types of ADUs
Accessory dwelling units come in several different varieties. CrossCountry Mortgage can help you with each of these three main types:
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Detached ADU
A detached ADU refers to a structure that’s completely separate from the primary residence. For example, a guest house in your backyard or side yard would be classified as a detached unit.
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Attached ADU
An attached ADU shares at least one wall with your primary residence. Entrances can be shared or separated from the entrance to your main house. The attached ADUs can create an apartment connected to your primary residence.
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Conversion
In a conversion ADU, property owners can convert a portion of their home, garage, or attic into a residential living space. For instance, converting the area above your garage into an apartment would be considered an ADU conversion, as would renovating your attic into a separate living space.
Pros and cons of an accessory dwelling unit
Before you build an accessory dwelling unit on your property, it’s essential to understand the costs and benefits. Here’s a rundown of what to expect when adding an ADU to your property.
ADU pros
Building an accessory dwelling unit can come with notable advantages, including:
- Providing a source of additional income
- Creating affordable housing for your community
- Offering housing options for multi-generational households
- Increasing the value of your property
You can also use an accessory dwelling unit for your own purposes, such as a studio or home office. Additionally, an accessory dwelling unit requires less heating and cooling energy, which means you can add one without compromising your commitment to sustainability.
ADU cons
On the other hand, an accessory dwelling unit features certain drawbacks, such as:
- Initial building costs
- Local zoning regulations and restrictions
- Decreased privacy, especially if they are attached
- Additional maintenance and utility bills for detached ADUs
It’s also important to note that, while an accessory dwelling unit can serve as a source of rental income, you’ll have to find and screen tenants to keep your unit occupied.
Requirements for building an ADU
To build an accessory dwelling unit, you’ll typically need to obtain a building permit. This also means you’ll need to submit detailed plans and specifications before your build is approved.
Specific zoning and building code requirements vary by state and local governments. Depending on these requirements, you may be required to:
- Limit the structure to a particular size
- Place it a specified distance from your property lines
- Use separate utility meters for the ADU
- Ensure that the ADU has access to utilities
- Provide adequate heating, cooling, and ventilation
- Install exterior doors for accessibility
- Provide a separate bathroom and living space within the property
- Add a kitchen and separate entrance from the primary dwelling
You may wonder if an accessory dwelling unit requires a kitchen. Most jurisdictions require that an ADU be a completely independent living space, complete with its own bathroom, kitchen, and bedroom. However, check with your local housing and community development administration for exact specifications for an accessory structure.
How to finance an ADU
No matter what type of unit you build, you’ll need to secure financing. CrossCountry Mortgage offers several renovation loan options, including:
An FHA 203(k) Standard loan can be used exclusively for an attached ADU, while the other renovation loans can be used for either an attached or detached ADU.
To qualify, you must:
- Build an accessory dwelling unit smaller than your primary residence
- Occupy the primary residence
- Build only one accessory dwelling unit on your property
Ready to explore financing options for your accessory dwelling unit? The expert team at CrossCountry Mortgage can help you find the best option for your project — with your needs as our highest priority.
Accessory dwelling unit FAQs
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An accessory dwelling unit is a separate living space built on your property. These units can be rented out to tenants or used for additional housing for family members.
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Many states allow you to build permitted structures on your property in residential areas. However, check with your local housing and community development office to determine the restrictions/requirements for your area.
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It can be an addition, in which case it’s classified as an attached ADU. However, it’s also possible to have a detached ADU, such as a guest house or outbuilding.
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By definition, an ADU is an accessory to your main house. However, some states may allow you to use the ADU as your primary residence so that they can double as a single-family home.
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