Should you consider adding an ADU to your property?
It seems like everyone is talking about ADU’s. But is an ADU be the right investment for you and your property? Let’s look at the why’s and what’s of building an ADU. This will give you a few things to consider before you take the leap and add an ADU to your property.
First things first, what is an ADU (which stands for accessory dwelling unit)? An ADU is a secondary unit added to your property that must legally have a functioning kitchen, a full bath and a living space. All ADUs require a permit and are dictated by size, setbacks from the property line, and other factors. ADU’s can be have many names used interchangeably such as granny unit, cottage, secondary unit, guest house, and in-law suite. As long as they fit the criteria, they are all ADU’s.
You should also keep in mind that building an ADU is often more expensive than expected. You are building a new house, however small, on your property, and the price can range from $150 - $325,000 for the building, installation, permits, hookups, and fees.
A shed, such as the panelized Studio Shed pictured above, does not need a full kitchen and/or bath, and can be helpful to add extra storage or living space to your home. The permitting requirements vary depending on the size, function, and the utilities you want to add to the unit.
Here are a few of the typical reasons that people are looking into building an ADU -
1. Added space.
Are you looking for a place that will be quiet will you work from home? Do you have frequent visitors? Are you looking for a source of passive income? Or a place for aging parents or young adult children to live independently? All of these are valuable considerations for adding a new detached structure to your property.
2. Added income.
With a housing shortage and rents at a premium in Santa Cruz County, an ADU can bring in an additional $1200 or more monthly. If you are planning on keeping your home long term, want to create passive income and help reduce Santa Cruz’s housing shortage then you have a viable reason to consider building. It is important to do your research before investing in an ADU for rental income. Check your local rental market to find out what similar rentals in your area are renting for. This way you can accurately assess your investment return. Also you will be receiving rental income from your ADU. Therefore, you will also be paying additional income taxes for that rental income.
3. Increased property value.
A properly permitted structure can add significant value to your home. In Santa Cruz County, an investment of $250k for an ADU could add 20% to 30% to the value of your home when you sell it. The flip side- when your property is reassessed by the county, the ADU’s value will be included in that assessment and this will impact your property taxes. If you plan on refinancing at some point in the future, the added value of an ADU enhances your property value and will give your home more available equity.
4. Aging parents or kids not leaving home..
With the prices of housing in Santa Cruz continuing its astronomical rise, many families are staying close together by adding an ADU to their property. This allows families to live independently while still being in close proximity.
5. Creative space or home office.
A close friend of ours added a detached living space to her property so she has a quiet place to knit without disruptions from her kids. Living the dream, right? The more common use of a detached living space is a home office that can double as a guest room. Houses in Santa Cruz typically don’t have the square footage to accommodate a family’s space needs and the added privacy demands of people working from home.
Soquel ADU with a view.
An ADU is an investment. If you are planning on keeping your home for the long term, adding a ADU to your property adds value to your home but also adds value to you and your family’s lifestyle. To get more details about Santa Cruz County’s guidelines for adding an ADU, shed, attached or detached structure to your property, contact us. We are happy to give you a free general estimate, an understanding of the possibilities for your property and basic budgeting information.
Elite-built home office using Studio Shed's panelized building materials.
