Homes with ADU for Sale: Benefits and Buying Tips

Last updated on April 15, 2024

Homes with ADUs for sale offer unique opportunities for buyers seeking versatile living spaces, and this article will provide insights into the benefits and considerations when purchasing these properties.

Key takeaways:

  • ADUs provide versatile living spaces and extra income opportunities.
  • ADUs allow for multi-generational living and work-from-home options.
  • Homes with ADUs have higher resale value and contribute to sustainability.
  • Understand local regulations and permits when buying a home with an ADU.
  • Consider financing options specific to homes with ADUs.
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Defining Accessory Dwelling Units (ADUs)

defining accessory dwelling units adus

Accessory Dwelling Units, commonly known as ADUs, are secondary housing units on a single residential lot. They can be detached, like a standalone backyard cottage, or attached, such as a basement or garage conversion, or even situated above a garage. Despite their closer proximity to the main residence, ADUs have their own living facilities, including a kitchen and bathroom, allowing for independent living.

These versatile dwellings serve multiple purposes: they can be rented out for additional income, used as a home office, or provide separate living space for family members while promoting multigenerational living. This flexibility makes homes with ADUs highly sought after in today’s real estate market. Moreover, ADUs contribute to the diversification of housing stock and offer a solution to urban housing shortages by maximizing the use of existing properties.

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Benefits of Buying Homes With ADUs

Accessory Dwelling Units offer a multifaceted approach to home ownership, bringing along various advantages that cater to diverse needs and lifestyles.

Firstly, they provide a source of passive income. Renting out an ADU can help homeowners offset their mortgage payments or provide a steady stream of additional income, which can be particularly attractive in high rental demand areas.

They also offer a solution for multi-generational living. Families can accommodate aging parents or adult children in ADUs, enabling close proximity while maintaining privacy and independence for all parties involved.

With the rise of remote work, ADUs can function as dedicated home offices or creative spaces, separated from the main living area. This separation ensures a work-life balance and increases productivity without the need for a daily commute.

For those looking into future resale value, homes with ADUs are often more appealing to a broader market. This can translate into higher property values and potential for a lucrative return on investment as demand for flexible housing options increases.

ADUs are also a stride towards sustainability. By optimizing existing land space, they reduce the need for sprawling construction, can be designed with green technologies, and contribute to denser, more efficient urban planning.

Lastly, they provide an opportunity for social and communal engagement. Homeowners can foster community connections by integrating into existing neighborhoods, rather than developing on new land, which can often lead to stronger, more resilient communities.

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Regulatory Considerations When Buying Homes With ADUs

Navigating the regulations surrounding ADUs can be complex, and it is essential for prospective buyers to be thoroughly informed. Different municipalities have specific zoning laws dictating where ADUs can be built or exist. Before purchasing a property, check local zoning ordinances to ensure the existing ADU is compliant or that there is potential to legally establish one on the property in the future.

Building codes are equally important as they influence the ADU’s structure, design, and safety features. An ADU must meet current standards, which could affect your plans for the space or necessitate renovations.

Also consider the permits associated with ADUs. A legally permitted ADU can significantly increase the value of a property, whereas unpermitted structures might present legal and financial challenges.

Lastly, be aware of the rental regulations in the area. If renting out the ADU is your goal, local laws may influence tenant’s rights, rental prices, and lease terms. Fully understanding these regulations before purchasing can help ensure that your ADU complies with all requirements and can be used as intended.

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Financing Options for Homes With ADUs

Securing funding for a property boasting an ADU can be similar to financing any other type of home, but with some distinctive considerations. Lenders may recognize the potential rental income from an ADU, which can positively affect loan qualifications. Here’s a breakdown of common financing options:

Conventional Mortgages: These loans often offer competitive interest rates and terms, and income from the ADU can sometimes be factored into your loan application to improve your debt-to-income ratio.

FHA Loans: A Federal Housing Administration loan is particularly advantageous for first-time buyers or those with lower credit scores. FHA guidelines allow for the inclusion of potential rental income from an ADU when applying for a loan, under certain conditions.

VA Loans: For veterans and active military personnel, VA loans can be used to purchase homes with ADUs, and lenders may consider the extra income from the ADU just as they would for a multi-unit property.

Home Equity Loans: If you’re buying a second property with an ADU or adding an ADU to your existing property, home equity loans or lines of credit might be viable to cover the costs, using the equity in your primary residence.

Renovation Loans: If the ADU requires upgrades or conversion, financing like the FHA 203(k) renovation loan can be used, combining the home purchase and renovation costs into a single mortgage.

It’s essential to work closely with a lender experienced in ADU financing to ensure they understand the extra value and potential income an ADU brings to your real estate investment.

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Tips for Searching for Homes With ADUs

When starting your search for properties with ADUs, utilizing online real estate platforms can be a smart move. These websites often have advanced search filters that allow you to specifically look for listings with accessory units. However, not all platforms will have a dedicated filter, so using keywords like “ADU”, “guest house”, or “in-law suite” in the search bar can help narrow down results.

Engaging a real estate agent who specializes in multifamily or investment properties can also lead to a fruitful search. An agent’s local network and knowledge about upcoming listings can give you a head start in finding the right home with an ADU.

Consider the neighborhood and zoning laws, as these can affect the legality and use of ADUs. Researching local regulations or consulting with a city planner ensures that the ADU conforms to current codes and can be used as intended, be it for rental income or as extra living space.

Lastly, think about the condition of the ADU. Move-in ready units are convenient but might come at a premium. Properties with units that need work can be less expensive upfront but require a budget for renovations. Decide what level of investment you’re comfortable with before making an offer.

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