ADUs are all the rage these days. Most homeowners have tons of space in their yards just waiting to be put to good use. After all, if you’re paying taxes for your entire plot of land, it should be used for more than just a pet bathroom, right?
ADUs (accessory dwelling units) solve the problem of wasted space on your property. With an ADU on your property, you can let friends and family members come and visit you without having to pay for expensive hotels.
But how much does an ADU cost? Just because they are small and simple doesn’t mean that they are cheap. You essentially have to build a brand new, miniature house.
If you want to learn about the benefits of an ADU along with the average ADU prices across the country, then keep reading below to find out.
What Is an ADU?
Accessory dwelling units are structures that provide full, safe, legal living quarters. They are built on your property and can either be attached to your home or completely detached.
To be considered an ADU, it has to be complete. It has a bedroom, a kitchen, and a full bathroom.
ADU regulations vary by state and city. But in general, ADUs need to be smaller than the original property. Sometimes, ADUs have a maximum square footage allotment of between 800 and 1,000 square feet.
You often need to have at least one off-street parking space available for tenants of an ADU. And because this is a major construction project, every step needs to be reviewed and approved by your local planning department.
How Much Does an ADU Cost?
You can think of an ADU as a small house. It needs everything your existing home has; a solid foundation, walls and a roof, electricity, HVAC, plumbing, and all.
So how much is an ADU? The cost can vary from about $30,000 to more than $200,000. It’s completely up to you how much you want to spend.
The size and design of your home, along with the internal components and applicants selected will determine the cost. If you plan to build a completely custom ADU, you can expect to spend a lot of money.
However, there are many companies that focus on accessory dwelling unit construction. They will usually have pre-drawn plans for multiple ADU models.
By working with a company like this, you can save thousands of dollars by not having to pay an architect and engineer to craft plans from scratch. You just work with the company to choose the best plans for your property, get them approved by the city, and get to work.
And because the builds are streamlined, the overall cost will be much less than choosing materials from scratch.
The Average Cost of an ADU
When building an ADU, construction materials and labor is basically the same as normal residential housing construction. So the average cost will match the average cost of construction in your area.
Across the US, the average cost of home construction is between $100 and $200 per square foot. So an 800 square foot ADU could cost between $80,000 and $160,000. But this varies by region and by state, depending on the cost of labor and materials.
According to Homelight, the average cost is the highest in the West at $158 per square foot. The lowest is in the South at $110 per square foot.
While these numbers can seem overwhelming up front, remember that home prices are typically amortized over 30 years. So while an ADU might cost $100,000 upfront to you, you can look at it like it’s $277 per month for 30 years, just like your mortgage.
How to Finance an ADU
Most people don’t have the money to pay for an ADU with cash. So those looking to add livable square feet to their property have to get creative.
Most people will tap into their home equity to do this. They can either get a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance.
With these strategies, you are funding the construction of your ADU with the money you already have. Accessing this money will provide you with the lowest interest rates available.
If you don’t have enough equity, you can try taking out a personal loan if you have strong borrowing power.
Some lenders even specialize in financing an ADU, as they can take into account the property value after the ADU is complete. This provides you with better rates and helps you overcome the barriers with other types of loan programs.
Benefits of an ADU
Regardless of what you use your ADU for, it can be an opportunity to make additional monthly income. The money you make has the potential to cover, or at least help cover, the mortgage on your home.
Some people will rent out their ADU to vacationers and those looking for short-term rentals. This can provide the most income, but also comes with the most work. And some neighborhoods and cities don’t allow this.
Others will rent their ADU to long-term tenants. These may or may not be people they know. The benefit is that this rental strategy is mostly passive. But the monthly income will be less than that of a short-term rental.
Most people, however, build an ADU to house family members. More and more families are interested in multi-generational housing. So the owners of a home might build an ADU for their aging parents.
That way, they can have their own personal space, but they are still close enough to provide assistance to. Plus, they’ll get to see their grandkids much more often. This type of elderly housing is often cheaper than other options, like retirement homes.
And if you don’t need the income, you can just invite friends and family members to come and stay with you whenever they want. This way, you won’t have to convert your home office into a makeshift bedroom or have anyone sleeping on your couch.
Turning Your Yard Into Someone’s Home
So how much does an ADU cost? It depends on so many factors, and accurate estimation is hard to provide.
It depends on where you live, how much labor costs in your area, and how simple or complex you want the ADU to be. You’ll need to reach out to local contractors to get more specific numbers.
But in general, you can expect a “normal” ADU to cost between $80,000 and $200,000.
Looking for more information like this? Head over to our blog for more ideas on making your house a home.