Call us today
menu menu

ADU's Impact on Property Value

Get a FREE Consultation

Adu'S Impact On Property Value

Accessory dwelling units, also called granny flats, are known for helping to expand the existing space and create an additional small but completely independent house with its own bathroom and kitchen. Due to the fact that you create additional living space, you can rent out an ADU and thus provide yourself with a rental income.

Another thing to keep in mind is that an accessory dwelling unit can increase your property value. Although building an ADU is a solid investment since you have to cover numerous construction costs at once, it will definitely pay off later. In this article, we will look at how the construction of an ADU can affect the increase in your property value. Keep reading to find out about it in detail.


Increase in property value due to additional living space

Most homeowners already know that building an accessory dwelling unit is a great deal that will bring numerous benefits in the future. But how much value does an ADU add to your primary residence and the land plot where it is located? Building an ADU allows you to increase the value of the property by at least 20%. However, the increase can reach 30%, for example, in such popular and prestigious areas as the San Francisco Bay Area and Los Angeles.

It should also be mentioned that it doesn’t really matter which ADU type you choose to build on your land plot, as both attached and detached ADU allow you to achieve this goal. Moreover, even the transformation of the existing area into a newly furnished living space, such as a garage conversion ADU or basement apartment, also increases the investment property and resale value.

Rental income potential and its impact on property value

When adding an ADU to your primary residence, you create a private guest space that can be used by your relatives and friends for a short or long stay or rented out. The second option allows you to generate rental income each month, which is extremely appealing to each homeowner. The passive income that a rental property will bring you is determined depending on your particular case (state, particular area, value of an ADU itself, its square footage, etc.). Consequently, having an ADU on your site that brings a potential homeowner passive income inevitably increases the property and resale value.

Still Have Questions?
Ask Our Experts Directly

Increased demand for properties with ADUs leading to higher property values

Another aspect that you should keep in mind if you are still in doubt about whether it is worth investing in the construction of a granny flat on your site. In conditions of constantly increasing housing needs, plots with ADUs are particularly popular. ADU is the most affordable housing solution nowadays. Young people who have not yet accumulated enough money to buy their own full-fledged house often rent in-law suites. Hence, potential homeowners know that it is more profitable for them to purchase a plot with an additional unit that they can rent out for additional benefits.

ADUs as a way to increase property value without major renovations

One of the obvious ways to add value to your property is to carry out renovation or some interior conversions. Most homeowners think about the implementation of a repair project before reselling their home in order to get more money for it. However, sometimes remodeling projects can be extremely costly if you own a fairly old house, and the final result leaves you unsatisfied.

What we recommend doing to be sure that the value of your property will increase is building one of the ADU types. The implementation of an ADU project will definitely pay off in the nearest future, so you will not have to resort to the renovation of your main house. If you plan to rent out an additional unit, we will recommend building a detached unit in order to provide more freedom and independence to the potential tenant and attract more people.

The impact of ADUs on neighboring property values

Adding an ADU will not only provide a homeowner with an additional income but will serve as a good investment in the area of development in general. The presence of an ADU in your neighborhood attracts tenants who are usually set up for long-term rentals. These are creditworthy people, often young professionals who live with dignity and can become part of your local community.

If there are more and more ADUs in your area, it will mean that the building density is increasing. Do not worry; this usually does not lead to a decrease in the value of the real estate because, in any case, we are not talking about a fully detached and independent house but about a certain part of the property.

Potential increase in property taxes due to ADUs

Adding an accessory dwelling unit, as well as any home additions and conversions, may lead to an increase in the taxes that a homeowner pays. An important advantage that can be highlighted when comparing ADUs with room additions is that the construction of an ADU does not lead to a recalculation of interest on your main house. Thus, although you need to be prepared for an increase in taxes, it is worth understanding that this remains a fairly profitable solution.

The impact of ADUs on home appraisals and property value

We have already mentioned that an ADU will allow you to increase the property value. The percentage by which the value of your property increases may vary based on ADU types and some other factors, such as the reputation of the neighborhood, the condition of your primary home, and others. However, in any case, we are talking about an increase in the potential value of your home for future resale.

You can contact professionals in advance to ask them to assess how much the demand for your property will grow and, based on this, decide whether the construction of an additional dwelling unit will pay off and how quickly it will happen.

ADUs as a way to attract more buyers and increase property value

An accessory unit allows you to add new square footage, which means that you expand your house. Obviously, the larger the living area, the more the property is worth. This is the first reason why the demand for land plots with ADUs is growing. Consequently, you can resell your property more profitably in the future. The second reason is that an ADU (especially a detached ADU) can be used as a guest house and bring extra income every month. How can a potential buyer refuse to generate monthly income as a bonus when buying a property?

The impact of ADUs on the overall neighborhood property values

There is a common misbelief that a new livable space created by the construction of an ADU can lead to a deterioration in the quality of life in the district and county in general. This is definitely not the case. On the contrary, if your area has at least several ADUs built for vacation rental, your neighborhood may become a popular tourist destination. Attracting long-term tenants and tourists entails an increase in the income for homeowners who own ADUs and also for local entrepreneurs who can sell their goods and services to more people. Thus, the area develops and becomes more popular and prestigious, which eventually leads to an increase in the value of all local real estate.

The impact of ADUs on the resale value of a property

Adu'S Impact On Property Value

In this article, we have mentioned many times that the construction of a granny flat allows property owners to significantly increase the value of their houses. What is also worth noting is that investing a certain amount of money in creating additional space makes your property more attractive in the housing market. Even if you are not thinking of reselling your home right now, in the future, increased resale value can be a serious advantage for you.

Frequently Asked Questions — FAQ

Does an ADU decrease the property value?

There is no way that a detached or attached ADU will decrease the property value. You can be 100% sure that it will do the opposite. ADUs usually significantly increase a potential rental income and, therefore, make the property a more attractive object in the real estate market as a whole. If you plan to resell your house and plot in the future, you will also be able to get more money for it thanks to the income generated from your ADU, which potential buyers will know about.

How much value does an ADU add to home value?

You have probably heard that building an ADU is considered a great investment. Now many people are talking about this option, which allows you not only to expand the living space but also to increase the cost of your housing and even your monthly income. However, to which extent can you increase the value of your property specifically? On average, by 20-30%, which is an excellent result.

What is the drawback of ADU?

One of the disadvantages that is, in fact, just a difficulty is that before building a granny flat on your land plot, you have to carefully study the ADU ordinance and contact local municipality representatives to receive all the required ADU permits. It may take some time, but thousands of homeowners who decided to have an additional property have already gone through this process, so there is nothing impossible. Another drawback that some people mention is the relatively high cost of ADU construction services. However, an incredible return on investment outweighs all these minor disadvantages.

Does an ADU increase square footage?

The main intended purpose of building a new detached ADU or attached unit is to increase the total square footage of the house. Obviously, you will reach this goal by building any type of ADU mentioned. When talking about ADUs, some people also think about transforming existing areas into new spaces (e.g., garage conversions). This conversion does not lead to extending the square footage of your property, but it will still increase your property value.

Ready to get started?
We are here to guide you through the process, answer all of your questions and provide you with a detailed quote

    We'll send you a text to schedule an appointment and to share updates. By providing your phone number, you agree to receive text messages from ADU Builders California. Message and data rates may apply. Message frequency varies. Please reply 'STOP' to opt out. Privacy Policy & Terms.