There are a variety of reasons why an ADU might be a benefit to homeowners:
An ADU could be the perfect way to keep elderly parents or grandparents close to you at a much lower cost than various types of senior housing.
Adult children with disabilities could be close to family but still have their independence.
If elderly or disabled family members live in the main house, an ADU could provide housing for a caregiver.
Adults often return home and need a place to stay.
The space could be perfect for guest housing or a home office.
If the space is rented to an outside tenant, the income could be used to help pay the mortgage or as an investment.
Basement apartment—This option tends to work best if the basement is a walkout or at least has a separate entrance. If the basement is already finished with bedrooms and a bath, it may not take much to make it a separate functional unit.
Garage Conversion—Losing a parking space could be a key issue. Garages seldom have any conversion infrastructure already built in, likely making it more expensive to create.
Detached ADU—Some communities will call this an alley house, a house behind a house, or a tiny house. A whole new structure will likely be the most expensive option. Many communities will not allow an ADU that is completely detached from the main home.
Junior ADU—This could be the creation of living space out of a sun porch or recreation room. This would be for a situation where the occupant would likely share in many of the services of the main home.
Not all single-family homes create the perfect structural situation for creating an ADU. Boulder recognized the need for ADUs many years ago and have guidelines set up. Guidelines do vary for attached, detached, Landmarked or affordable units. If you are considering setting up an ADU in your home, be sure to check your local municipality see if they are legal and what the requirements are.
As an example, here are a few of the basic rules taken from the City of Boulder’s code. There are two types of accessory dwelling units (ADUs) permitted in the City of Boulder: attached and detached. An attached accessory dwelling unit means a separate and complete single housekeeping unit within a detached single-family home. A detached accessory dwelling unit means a separate and complete single housekeeping unit within an accessory structure on a property on which a detached single-family home is located. In addition, specific standards apply to affordable accessory units (i.e., units that meet the affordability standards) and designated historic properties. ADUs are regulated per Section 9-6-4(a), B.R.C. 1981. ADUs are allowed on lots 5,000 square feet or larger in the RR, RE, RL, RMX, A or P zoning districts. A single-family dwelling unit with an accessory dwelling unit is not considered a duplex or a multi-family dwelling. The owner must reside in either the principal dwelling unit or ADU. Depending on the zoning district, the number of allowable ADUs that may be issued for a given area is limited (see Subsection 9-6-4 B.R.C. 1981 for more information). Additional compatible development restriction standards apply to properties located in the RR, RE, RMX-1, and RL-1 zoning districts. If the proposed ADU or principal dwelling unit is to be rented, a rental license is required. Short-term rentals (less than 30 days) are not allowed on either the ADU or principal dwelling unit unless the ADU and rental license were established prior to January 3, 2019.
This link provides access to the rules and application process for the City of Boulder. https://bouldercolorado.gov/sites/default/files/2021-03/adr-accessory-dwelling-unit.pdf
An ADU can help increase the velocity of your wealth in a variety of ways:
If you rent the ADU, the income can be used to help pay the mortgage payment. The rent could be applied directly to the principal of the mortgage, building equity faster. Another possibility is to take the rent each month and wisely invest it.
By using the ADU for elderly or disabled family members, there would likely be a large savings on housing as compared to senior housing or assisted living.
Many buyers are looking for homes that specifically have an ADU. Higher demand for this type of property would likely increase the value of the home and, in turn, create more equity.
If you’re purchasing a home with what seems to be an ideal ADU, it’s crucial to confirm that it is legally permitted. Many homeowners have constructed separate units without adhering to proper procedures, which could prevent you from using the property as you planned.
Be sure to consult your local Realtor® for help in determining if an ADU is right for you
Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail duaneduggan@boulderco.com, call 303.441.5611 or visit BoulderPropertyNetwork.com.