What Makes The Best ADU Design?

The Accessory Dwelling Unit (ADU) has emerged as a transformative force in modern housing, offering homeowners opportunities for additional income, flexible living space, and even multigenerational living. But amidst the excitement, a crucial question arises: what makes the best ADU design?

There's no one-size-fits-all answer, as the ideal ADU blends seamlessly with the characteristics of your property, your project budget, and the intended use of the ADU. However, certain key principles guide the creation of exceptional ADUs:

1. Functionality Reigns Supreme:

Start by defining your vision. Will the ADU serve as a rental unit, home office, in-law suite, or guest quarters? Each purpose demands distinct functionalities. Prioritize essential features like the number of bedrooms and bathrooms, size and layout of kitchens and living areas, carefully considering occupant needs and space limitations. Utilize space-saving solutions like built-in storage, convertible furniture, and open floor plans to maximize every square foot.

2. Embrace the Power of Design Flexibility:

Don't be confined by conventional layouts. Explore various ADU plan options online, including pre-designed blueprints or customizable ADU floor plan templates. These resources offer a springboard for inspiration, allowing you to adapt and tailor the design to your specific needs. Remember, flexibility doesn't compromise style. Look for plans that integrate with your personal style and taste, or your existing home's architectural style, creating a cohesive aesthetic.

3. Invest in Sustainability:

A well-designed ADU is not only functional and stylish, but also environmentally conscious. Consider incorporating energy-efficient features like solar panels, water-saving fixtures, low-energy lighting and other systems, and recycled and locally sourced materials when possible. These choices not only benefit the environment, but also reduce your long-term operational costs. Remember, sustainable design is an investment in your future and the planet's.

4. Let Natural Light Flow:

In any living space, natural light is essential for well-being and creating a sense of spaciousness. Opt for generous windows, skylights, and strategically placed light sources to illuminate your ADU. This design element not only enhances aesthetics, but also promotes mental and physical health. It can also reduce your electric bill.

5. Don't Neglect Outdoor Connections:

Every ADU benefits from a connection to the outdoors. Include a private patio, deck, or balcony for occupants to enjoy fresh air and natural surroundings. This outdoor space can become a haven for relaxation, entertainment, or even gardening, further expanding the living experience. With the smaller square footage of ADUs, outdoor living space can make them feel and act larger then they are.

Ready to Transform Your Vision into Reality?

While these principles provide a roadmap, crafting the perfect ADU requires expert guidance. Consider partnering with experienced architects, designers, and builders who specialize in ADU construction. Their expertise can ensure regulatory compliance, structural integrity, and aesthetic harmony, transforming your vision into a functional and beautiful reality.

Investing in an ADU is a wise decision, unlocking both personal and financial benefits. By incorporating these design principles and seeking professional guidance, you can turn your ADU into an asset that enriches your life and property for years to come.

Start your ADU journey today! Explore our comprehensive database of ADU plans and connect with qualified professionals to bring your dream to life.

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One of the most popular ADU designs on the internet is available for purchase. What makes this the best ADU design? The ADU plan is simple yet functional. The design is both modern yes practical and affordable. People love the covered outdoor space, the large windows, and the large open great room making the ADU interior design both beautiful and functional.

Navigating ADU Financing: Tailored Options for Your Unique Scenario

When embarking on the journey of constructing an Accessory Dwelling Unit (ADU), choosing the right financing option is paramount. Rushed or poorly planned decisions could lead to financial repercussions and lower return on your investment. In this guide, we'll explore the best ADU financing options based on various scenarios, helping you align your financial strategy with your unique circumstances.

Your Financial Situation

Understanding your financial situation is crucial for making informed decisions about your future. By taking the time to assess your income, expenditures, savings, and investments, you can gain clarity on where you stand and chart a path toward your financial goals. Whether it's creating a budget, clearing debt, or planning for retirement, a comprehensive understanding of your financial landscape is the foundation for a stable and secure future.

Your Equity Position

Before delving into financing specifics, it's crucial to assess your equity position. Equity, the portion of your existing home that you own, is the linchpin for various financing avenues. High equity broadens your options, and calculating it involves subtracting your mortgage balance from your home's value.

Example: If your home is valued at $500,000 based on the local real estate market, and you have a remaining mortgage balance owed of $150,000, your equity is $350,000.

The advantage of having a lot of equity is you can potentially do a cash-out refi or a Home Equity Line Of Credit, also known as a HELOC, to help finance an ADU project.

Your Credit Score

A good credit score is your ticket to favorable financing terms. The higher your score, the less risk you pose to lenders, potentially resulting in lower interest rates. A credit score between 670-739 is considered "good," with higher scores being more attractive to lenders. If your credit score is too low banks or other lenders may not approve you for a loan, limiting your options to finance a project.

Your Income

Your income or salary influences your Debt-to-Income (DTI) ratio, a key factor for loan eligibility. Lower debt and higher income enhance your chances of qualifying for certain loans. It is also worth tracking some recent trends in terms of what banks - and especially the federal government - will take into consideration as income to help back a loan. Specifically, there is new regulations that allows the future revenue from renting an ADU to be counted as part of your potential income, resulting in more people qualifying for loans to build ADU projects. Ask about this when you talk with your bank or loan broker.

ADU Financing Options If You Have High Equity

Home Equity Line of Credit (HELOC)

We briefly touched on this earlier. For those with high equity in their property, a HELOC is a versatile option to fund adding an ADU. It leverages your home's value, providing a credit limit based on your equity. The more equity you have, the greater your potential funds. Typically HELOCs will allow you to leverage up to 80% of your home’s appraised value.

For Example: Using the situation we described above, with a home appraised at $500,000 and a $150,000 mortgage balance, 80% of your appraised value yields a total debt amount of $400,000. You already have $150,000 on your mortgage balance so you could take out a HELOC with a balance of $250,000 that can be used on your ADU project.

Cash-Out Refinance

In a cash-out refinance, homeowners can refinance for more than they owe, receiving the difference in cash. It's a way to convert home equity into funds to be used on other projects. Sometimes a bank could even calculate what the value of the property would be after the ADU is built, giving you more flexibility on how much you could take out.

The down sides of this approach is you are basically taking out a new mortgage, so you would be resetting to payment schedule for another 30-Term (assuming you do a standard 30-year fixed mortgage).

ADU Financing Options If You Have Low Equity

Construction Loans

For those with low equity, construction loans evaluate the property's future value post-ADU completion. It allows borrowing against the anticipated value increase.

Example: A home worth $500,000 without an ADU might appraise at $700,000 after the ADU is built, allowing a loan of up to 80% of the increased value - so a loan of $560,000.

The challenge here is that you will have to bridge the difference between the loan you can take out and the cost of building the ADU with additional funds - ideally cash.

Personal Loans

Personal loans, obtained from lenders, offer flexibility. They have fixed interest rates and repayment terms, with your credit score influencing the interest rate offered. There is no limitation on what Personal Loans can be used for.

However, be careful here. Personal loans often have higher interest rates the mortgages or HELOCs, and sometimes have variable interest rates which can be risky. And if you aren’t able to make regular payments it can negatively impact your credit score for many years.

We recommend only using personal loans on smaller amounts to maybe bridge between another loan product and the final cost of construction on your ADU. Ideally, you can avoid these altogether.

Rehabilitation Loans - FHA 203(k)

This FHA loan aids in purchasing a home while financing significant renovations. It's suitable for ADUs, offering a single monthly payment for both mortgage and renovation costs. Typically this would be used if you are planning on purchasing a new house and building an ADU on that new property at the same time.

ADU Financing Options If You Have A Good Credit Score

Traditional Bank Loans

Banks, offering low-interest loans, are a standard choice. However, stringent requirements, collateral, and a time-consuming application process are factors to consider. Interest rates are also currently high based on recent history so you may end up refinancing in the near future. There are fees associated with taking out a loan as well as refinancing, so calculate those as part of the analysis of the total loan costs and the return on investment of your ADU project.

Hard Money Loans, or Peer-to-Peer Lending

Cutting out financial institutions, peer-to-peer lending connects borrowers directly with investors. Your credit score will influence the interest rate you will receive. These sorts of loans tend to have much higher interest rates than banks or mortgages, and often the repayment period is much shorter. These are often used to get cash quickly to start construction with the goal of refinancing the project into a more traditional mortgage within a year or two and paying back the full Hard Money loan. It is not advised to carry these loans for a long period of time as the interest payments can cause financial hardship.

ADU Financing Options If You Have A Low Credit Score

Secured Loans

Secured loans, requiring collateral, are easier to qualify for and often have lower interest rates. However, defaulting may lead to the loss of the collateral asset. For example, you may use stock investments or some other asset as collateral but if you default on payments those assets would be lost.

Government Assistance Programs

Government programs, like homeownership vouchers, could assist in financing ADUs even with low credit scores. Check out the federal and state programs in your area to see if there are any that are applicable to your situation.

ADU Financing Options for Limited Income Scenarios

Grants and Subsidies

Grants and subsidies offer awarded money without repayment requirements, supporting various projects, including ADU construction. These are growing across the country as more and more governments are seeing ADUs as one part of the solution to housing affordability challenges. New York State just announced that they will cover the costs of ADUs as part of a trial period. California also has grant programs to help cover the up front soft-costs aspects of an ADU Budget, which are the design and permitting fees. These programs can give a huge boost to making your project affordable so definitely research what programs are available in your area and what the qualification requirements are.

Shared Equity Programs

Shared equity programs make homes more affordable, offering below-market prices or subsidies in exchange for future limitations on resale. I have seen some of these instigated in the Portland area but they aren’t as wide spread. They also may limit what you can do with your ADU in the future in terms of rental prices, who the renters are, and what you could get if you sell the property in the future. Make sure your read all the terms and conditions very carefully to know what you are getting into. Often it would be a better long-term investment to pay the full cost of an ADU rather than giving up future value.

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In conclusion, taking the time to thoroughly comprehend your financial situation and actively seeking out personalized ADU financing solutions is crucial in setting the stage for a successful ADU project. By doing so, you can approach the endeavor with a sense of assurance, knowing that your financial strategy is specifically tailored to suit your individual circumstances. This strategic approach not only provides a solid foundation for your ADU construction but also alleviates unnecessary stress associated with financial concerns, allowing you to focus on the creative and practical aspects of bringing your ADU plans to life. Therefore, the proactive exploration and consideration of tailored ADU financing options are key to ensuring that your financial resources are efficiently aligned with the unique requirements of your ADU project.

What Does ADU Stand for (in housing, in real estate, in building)

In the dynamic landscape of housing and real estate, the acronym "ADU" has been gaining prominence, offering homeowners a unique avenue to enhance their property value, generate supplemental income, and contribute to the ever-evolving concept of sustainable urban living. ADU, or Accessory Dwelling Unit, is a term that carries profound implications for homeowners, architects, and urban planners alike. As an ADU design expert, it's my pleasure to shed light on what ADUs stand for in the realms of housing, real estate, and building, and why homeowners should consider embracing this transformative concept on their property.

What Does ADU Stand For?

At its core, ADU stands for "Accessory Dwelling Unit." This term encapsulates a versatile and innovative concept in housing design and urban planning. Accessory Dwelling Units are additional, self-contained living spaces that exist on the same property as the primary residence. These units can take various forms, including standalone structures (detached ADUs), garage conversions, or basement apartments (attached ADUs). The essence of ADUs lies in their ability to provide homeowners with an auxiliary living space that is functionally independent to the main dwelling but resides on the same property.

ADUs in Housing: A Revolution in Living Spaces

In the realm of housing, ADUs represent a departure from housing models that proliferated after WWII when suburbs led to the rise of single family homes. In some ways ADUs reintroduce more historically common housing types. They offer a pragmatic solution to the growing challenges of housing affordability, urban density, and shifting demographics. By allowing homeowners to leverage their existing property to create additional living quarters, ADUs provide an avenue for multigenerational living, rental income, a private space for aging parents or adult children, or even space for short term guests or work-from-home office space.

One of the defining features of ADUs is their flexibility. Whether a detached backyard cottage, a converted garage, or an added unit within the existing structure, ADUs adapt to the specific needs and constraints of the homeowner. This adaptability makes them a powerful tool for homeowners looking to maximize the utility of their property.

ADUs in Real Estate: Elevating Property Value and Market Appeal

From a real estate perspective, ADUs have emerged as an asset that significantly enhances a property's value and market appeal. In a landscape where housing shortages and rising property prices are prevalent, having an ADU on your property can be a game-changer. Real estate experts increasingly recognize the added value that an ADU brings to a property, making it a sought-after feature among homebuyers.

The additional income potential from renting out the ADU provides homeowners with a sustainable and ongoing return on their investment. Moreover, the ability to market a property with an ADU as a versatile and income-generating asset sets it apart in a competitive real estate market.

ADUs in Building: Embracing Sustainable and Smart Design

In the context of building, ADUs embody the principles of sustainable and smart design. As cities grapple with issues of urban sprawl and environmental impact, ADUs present a compelling alternative. By utilizing existing land and infrastructure, homeowners can minimize the environmental footprint of their living spaces.

ADUs also encourage thoughtful design that optimizes space, energy efficiency, and resource use. Whether constructing a new standalone unit or repurposing an existing structure, the building process for ADUs often involves innovative solutions that prioritize functionality, aesthetics, and environmental consciousness.

Why Homeowners Should Consider Building an ADU

Now that we've demystified the acronym, the question naturally arises: Why should homeowners consider building an ADU on their property? The answer lies in the multifaceted benefits that ADUs bring to the table.

1. Supplemental Income: ADUs offer homeowners the opportunity to generate supplemental income through rental arrangements - either short term like AirBnb or VRBO, or long term leases. This additional income stream can be a powerful financial tool, helping homeowners offset mortgage costs or fund other investments or just contribute to their cost of living.

2. Flexible Living Spaces: As families evolve and dynamics shift, the need for flexible living spaces becomes increasingly important. ADUs provide homeowners with adaptable spaces that can serve a variety of purposes, from housing extended family members to creating a home office or studio.

3. Property Value Enhancement: The addition of an ADU can significantly increase the overall value of a property. Real estate markets value properties with ADUs for their versatility, income potential, and the flexibility they offer to future owners. Properties with ADUs sell for significantly higher prices.

4. Urban Density and Sustainability: In urban areas, where available land is limited, ADUs offer a sustainable solution by maximizing the use of existing space. They contribute to more efficient land use, reduced urban sprawl, and a lower environmental impact compared to traditional housing models. In places like Vancouver, Chicago, or Toronto, ADUs or “laneway suites” are already popular ways to add new housing to historic neighborhoods. While cities like Los Angeles, Seattle, and Portland are seeing a huge increase in ADUs in backyards across their historically single family properties.

5. Multigenerational Living: The concept of multigenerational living is gaining traction, with families recognizing the benefits of shared spaces. ADUs provide an ideal solution for multigenerational households, offering a balance of independence and proximity. This is great for adult children who want a starter home, or for aging family members who would rather live close to family rather than move into a retirement community.

6. Future-Proofing Your Property: Embracing the concept of ADUs positions homeowners at the forefront of a housing trend that is gaining momentum. As cities explore innovative solutions to housing challenges, properties with ADUs become increasingly valuable and desirable. It allows you to change how you use your property over time. You may want rental income now, more space for a growing family in a few years, and a home for an aging family in a decade from now. ADUs give you all of these options as your family’s needs shift over time.

7. Regulatory Support: Recognizing the potential of ADUs, many jurisdictions are revising zoning and building regulations to facilitate their construction. Homeowners building ADUs benefit from a supportive regulatory environment that encourages the integration of these units into residential properties.

In conclusion, understanding what ADU stands for is not merely an exercise in terminology but an exploration of a transformative concept that has the potential to reshape the way we live, build, and invest in real estate. For homeowners seeking a strategic and forward-thinking approach to property ownership, the addition of an ADU is more than an acronym; it's an investment in a dynamic and sustainable future. As an ADU design expert, I encourage homeowners to explore the possibilities that ADUs present, recognizing them not just as additional structures but as key contributors to a more resilient, versatile, and valuable living space.

This is the design that started it all for us. Our first ADU project, designed to be a short term rental unit on Airbnb. Located in NE Portland it has been a fantastic investment for the homeowner and a project we are proud to say launched our interest in this housing type.

A Comprehensive Collection of ADU Links and Resources Across the US and Canada

Are you ready to embark on the journey of creating your very own Accessory Dwelling Unit (ADU) project? At Modern ADU Plans, we have curated an invaluable list of resources that outline a wide range of information and resources about ADU projects throughout the United States and Canada.

Whether you're a homeowner, builder, designer, or investor, the list below should lead you to some great information to make your project a success. And we will keep updating and adding to this list as we find more helpful information to share.

Canada ADU Resources (Also referred to as Laneway Suites and Garden Suites)

British Columbia

• Accessory Dwelling Units: Case Studies and Best Practices from BC Communities

Alberta

• Secondary Suites – Building Codes

• Secondary Suite Standards

Manitoba

• Municipal Planning Guidelines for Secondary Suites

• Secondary Suites Application Guide

Ontario

• Adding a Second Unit in an Existing House

• Building a Laneway House

Quebec

• ADUs in Quebec: Challenges and Opportunities

• Status report on ADUs in Quebec in 2021

United States ADU Resources

AARP

• All About Accessory Dwelling Units

California

• https://www.aducalifornia.org/

Washington

• City of Seattle: Accessory Dwelling Units 2022 Annual Report

Unlocking the Potential of Your Property: The Power of Backyard Cottage Plans

Are you a homeowner looking to optimize the space on your property and create an additional living area that serves multiple purposes? Look no further than the charm and versatility of a backyard cottage, otherwise known as an accessory dwelling unit. In this article, we'll explore the many benefits of incorporating a backyard cottage into your property and discuss why purchasing a pre-designed ADU plan can be a game-changer. From accommodating loved ones to generating rental income, backyard cottages offer a range of possibilities. So, let's dive into the world of backyard cottage plans and discover the transformative potential they hold.

Maximizing Your Space with Backyard Cottage Plans

Backyard cottages, also known as accessory dwelling units (ADUs), have emerged as a popular solution for homeowners seeking to maximize the the potential of their property. By utilizing the available space in your backyard, you can unlock the untapped potential of your property and enhance its value - all for less investment than purchasing another property.

The benefits of having a separate living area within your property are numerous. Firstly, backyard cottages provide a convenient and comfortable space for accommodating guests. Instead of squeezing visitors into your main residence, a separate living area offers privacy and independence for both you and your guests, especially for extended stays. Additionally, a backyard cottage can serve as an ideal home office, providing a quiet and dedicated workspace away from the distractions of your primary dwelling. This setup promotes productivity and work-life balance and is an increasingly popular home amenity with more and more remote or hybrid work arrangements. Furthermore, backyard cottages open up opportunities for generating rental income. By renting out the cottage, homeowners can generate passive income or offset mortgage costs, making it a smart financial investment.

When considering the construction of a backyard cottage, opting for a pre-designed plan offers significant advantages. A pre-designed backyard cottage plan streamlines the construction process and saves valuable time. These plans are meticulously crafted by experienced ADU designers who understand the intricacies of ADU construction and maximizing the livability of smaller sized dwellings. By choosing a pre-designed plan, you gain access to a comprehensive blueprint that is tailored to maximize functionality and beautiful, modern aesthetics. This eliminates the need to start from scratch and go through the time-consuming design and approval process. With a pre-designed plan, you can confidently move forward with your ADU construction project, knowing that you are working with a proven design that limits your risk.

Convenience and Efficiency of Pre-Designed ADU Plans

Most homeowners like you want to see what you are going to get before paying for an ADU design. Pre-designed ADU plans are a great way to start the path to building an ADU in your backyard while seeing the design before you get started. It takes the guesswork out of the design process.

Purchasing an ADU home plan also is more convenient than going with a custom design as most of the work is already done. It saves months of time and eliminates the stress of having to make hundreds of design decisions. Starting with a ready-to-use ADU blueprint makes adding a backyard cottage a relatively simple process which ultimately saves both time and money.

One the biggest benefits of selecting one of our modern ADU designs is that they are all crafted by experienced designers who have been designing beautiful ADUs for years. The plans are proven to be livable, efficient uses of space, and offer a range of styles that can compliment almost any main home. Our plans are carefully crafted to be incredibly functional and are optimized to provide great places to live within the size limitations placed on ADU projects.

By not starting from scratch you get reduced cost, a faster timeline to completion, and a proven ADU design that is beautiful, functional, and affordable.

Customization within Pre-Designed Backyard Cottage Plans

Although we believe that the best option is to pick the plan that best meets your needs and jump right into the engineering and permitting process, we understand that sometimes you may want to make some tweaks or revisions to the ADU plans we offer. Customization is definitely a possibility and can still end up being more affordable than going with a fully custom ADU design process.

We work closely with many of our clients to make adjustments to our plans to meet your needs or taste. This can include small tweaks to the interior layout, kitchen cabinets, or windows, to larger changes to the overall form and structure. Of course, there will be some extra fees for this work and the more changes you make the higher those need to be. But overall this is still a very economical way to get a beautiful ADU that is semi-custom and adjusted to your unique property or project goals.

Along with some design changes that need to be documented in the drawing set in order to get engineering and building permits approved, there are many smaller changes that you can control later in the process. There is a lot of flexibility with the selection of interior finishes that you can make further down the road. Things like tile selection, cabinets, countertops, and even flooring or light fixtures can be ways that you can put your fingerprint on the project and customize the design to meet your taste.

If there is one of our designs you are leaning towards but you have ideas for changes, don’t hesitate to reach out and we can discuss doing a semi-custom projects specifically for you. We will simply listen to your ideas, offer some thoughts, and then put together a proposal based on the agreed upon scope of work. It is simple, straight forward and with our fixed prices you never pay more than what we quote for the changes.

Time and Cost Efficiency of Pre-Designed ADU Plans

None of us have enough time, especially when you are balancing jobs, family commitments, and want some time leftover for fun, hobbies, or relaxing. Saving time is one of the biggest values of starting with a pre-designed ADU or guest house floor plan. Starting with a plan set eliminates the lengthy design process typically associated with custom ADU designs. In general we typically find that a custom design takes about 6 months from start to being ready to submit for permit approval. Starting with a pre-designed plan for your backyard cottage or rental unit can bring that timeline down to just a month or so.

And since you are starting with a set of drawings ready to go, you can bring them straight to a contractor to get cost estimates on day one. Rather than working for months crafting a design only to find it is above your budget, starting with a finished plan can give you a better sense of the total project cost from day one. In fact, some of our clients have come to us with a builder already on board so they get rough cost feedback prior to making a purchase. This makes budgeting and financial planning more manageable for your ADU project.

Let's also talk about design fees here for a minute. We have designed over 50 custom ADU projects and have talked with architects and designers who have done hundreds of these projects. In general you can expect to pay between 10-15% of the total project cost on design fees when going the custom route. Prices can vary but if you see fees that are much lower than that I’d have serious reservations about the quality of the design you will receive. On the other hand our designs start at around one thousand dollars. This is a huge cost savings when compared to the custom route. Even if you want to make some revisions to our designs, the final price will typically be less than half of the cost of a custom ADU design.

We can provide our plans at a fraction of the cost because of economies of scale. We develop our designs to work on a wide range of properties, fit a range of styles, and come in a variety of sizes and configurations so we don’t have to start from scratch for each project. These savings are passed on to you.

Peace of Mind and ADU Expertise

Starting a project of this magnitude can be intimidating and stressful. ADUs, although relatively small in size, still are a significant investment. Our goal is to give you peace of mind and start you off on the right foot. We have over a decade of experience designing ADU projects and embed this vast design knowledge into each plan set. Our pre-designed backyard cottage plans are created by professionals with experience in ADU design and construction, giving you a higher quality project for a much lower cost.

The plan you select has been carefully crafted to reduce the risk of design flaws or unforseen issues. Our experience leads to plans that are relatively simple and affordable. They maximize the use of space - which is imperative in these small homes - and recommend systems that are efficient and increase the comfort of living in the ADU.

And importantly we offer support, guidance, and access to additional resources and knowledge to help your project be a success. Along with the drawings themselves we offer consultations, custumizations, and can be on call if you need additional design support.

Conclusion

Backyard cottage plans offer homeowners like you an incredible opportunity to maximize your property's potential, whether it's creating additional living space, accommodating loved ones, or generating rental income. By choosing a pre-designed ADU plan for your backyard cottage, you gain the convenience of a ready-to-use blueprint, customization options, time and cost efficiencies, and the assurance of expert design. So, why wait? Take the leap and unlock the transformative power of a backyard cottage plan, and watch as your property evolves into a haven of functionality, comfort, and value.

Backyard cottages and ADUs can be great guest houses, rental units, or homes to downsize into. They can be integrated into your backyard to preserve privacy between the main house and ADU while allowing the new home to open up to the outdoors. And by starting with a pre-designed plan you can see what you are getting before you start!

The Benefits of Modern Design for Your ADU: What You Need to Know

As the popularity of accessory dwelling units (ADUs) and laneway houses continues to rise, so does the demand for modern designs that fit seamlessly into their surroundings.

When it comes to ADU design, modern style has become increasingly popular in recent years. But what does "modern design" actually mean for ADUs, and why should you consider it for your next project? In this blog post, we'll take a closer look at modern design principles that we incorporate into ADUs.

Minimalism and Simplicity

One of the key features of modern design is minimalism and simplicity. This means that modern ADUs often have clean lines, simple forms, and a lack of ornamentation. The focus is on functionality and practicality, which can be especially useful when designing a small space like an ADU. We believe in the philosophy of less, but better. Meaning we keep the form of our ADU designs simple and efficient but invest in high quality systems and materials leading to a better end result. Consider quality over quantity.

Natural Materials

Modern design also emphasizes the use of natural materials, such as wood, stone, and metal. These materials are often used in their raw or untreated state, giving the ADU a more organic and authentic feel. The use of natural materials also helps the ADU blend in with its surroundings and create a more harmonious relationship with nature. We love natural cedar siding, exposed wood in the interiors, and concrete floors. Being true to the materials lets us celebrate how our buildings are built while relying on the natural beauty of the material to be the defining design features in our ADUs.

Energy Efficiency

Modern design principles often prioritize energy efficiency and sustainability. This means incorporating features such as high-quality insulation, efficient heating and cooling systems, LED lighting fixtures, and energy-efficient appliances. By designing an ADU with energy efficiency in mind, you can reduce your carbon footprint and save money on utilities in the long run. This coincides with the simple forms we discussed above, as we aim to design tight building envelopes that are energy efficient and optimized for the local environment.

Open Floor Plans

Another hallmark of modern design is open floor plans, which prioritize flow and connectivity between different spaces. In an ADU, an open floor plan can help create a sense of spaciousness, even in a smaller space. It can also make the ADU feel more versatile and adaptable to different uses. The best example of this is by designing a “great room” that combines the kitchen, dining, and living spaces into one open room. This helps make smaller sized ADUs feel spacious and they are more functional than having separate rooms for each function.

Large Windows and Natural Light

Modern design principles emphasizes the use of large windows and natural light to create bright and airy spaces. This can be especially important in an ADU, where space may be limited. By incorporating large windows and plenty of natural light, you can create an inviting and comfortable space that feels much larger than it actually is. Additional benefits include using natural light which can reduce energy use, and natural ventilation which can create a more comfortable and healthy indoor environment. Plus we use large windows and sliding doors to make strong visual impact on our ADU designs, creating more beautiful design solutions.

Conclusion

Modern design can help create ADUs that are both functional and aesthetically pleasing. By prioritizing minimalism, natural materials, energy efficiency, open floor plans, and natural light, you can have an ADU that is perfect for your needs. Whether you're building an ADU as a rental property, a guest house, or a place for aging relatives to live, a modern design can help you achieve your goals while creating a beautiful and comfortable space that will stand the test of time.

If modern design is inspiring for you and you would like to discuss building an ADU please reach out. We would love to talk through your ideas and project goals and offer advice to help you succeed with your project. Or if you are ready to move forward with a predesigned ADU plan, check out our Modern ADU Plans available for purchase today.

Simple form, natural materials, and large sliding doors are hallmarks of our focus on modern design.

Clean lines, natural materials, and views to the garden define this modern kitchen design.

Why settle for prefab? Here's why a custom ADU design is the way to go.

When it comes to building an accessory dwelling unit (ADU), there are two main options: choosing a prefabricated unit, or investing in a custom ADU design. While prefab ADUs seemingly offer a quick and easy solution for those seeking an additional dwelling space, they are not the best fit for everyone. Here are a few reasons why a custom ADU design might be the way to go to achieve your ADU dreams.

An ADU tailored to your needs and preferences

A custom ADU design allows you to tailor your unit to your specific needs and preferences. With a prefabricated ADU, you are often limited to a set number of design options that may not fit your unique needs. A custom ADU design, on the other hand, allows you to work with a designer or architect to create a space that is exactly what you need and want. Having worked with hundreds of clients over the years, we love taking client’s ideas and crafting beautiful solutions. Even with our pre-designed ADU plans, we offer customization services to adapt the designs to client’s needs.

An ADU that fits your property

One of the biggest downsides to a prefab ADU is that it may not fit your property. Because these units are pre-designed, they may not work with the specific layout of your property, potentially leading to difficulties during installation. Features such as trees, existing structures, site topography, or adjacent power lines or other utilities could hamper the ability to install a prefabricated ADU. With a custom ADU design, you can ensure that the unit fits your property and takes advantage of site features, orientation, views, and other strategies to seamlessly integrate the new unit to your property.

Materials, systems, and finishes selection

While prefab ADUs are often marketed as a more affordable option, the materials used in their construction are typically pre-selected by the company fabricating the unit. There is limited opportunity for you to pick the materials, finishes, fixtures, and systems that will define the look and feel of your ADU. A custom ADU design allows you to choose the materials, leading to a design that aligns with your style. Plus you have the opportunity to focus on picking materials for durability, quality, and sustainability.

An environmentally friendly ADU

Custom ADU designs can be more environmentally friendly than prefab units. One of the biggest advantages of a custom design is it can be tailored to respond to the site, climate, and take advantage of active and passive strategies for sustainable design. Orienting the ADU’s roof towards the sun and adding a PV system could make your ADU a net-zero energy home. Designing the unit to get natural light and ventilation can reduce energy usage further and create a healthy indoor environment. Because you are able to choose the materials, systems, and features of your unit, you can select high-performance, environmentally friendly options such as energy-efficient appliances, solar panels, solar hot water systems, and sustainable building materials. This can lead to a lower environmental impact and reduced energy costs over time.

Custom design doesn’t have to cost more

Many prefab ADU companies will advertise that their units are more affordable than a custom solution. On the surface this could look like it is true. The price tag on many prefab accessory dwelling units are very attractive. However, it is important to consider the full costs of adding an ADU. Often prefab ADU prices don’t include things like site prep, getting utilities to the ADU, concrete work, pathways and landscaping, permitting fees, and other important aspects of adding an ADU. At the end of the day, the size of the unit, quality of materials selected, and the finishes, fixtures, and systems chosen for the ADU are the biggest determining factor of project cost. A custom design could come in at the same overall cost as a prefab unit and in some cases could even be cheaper. We have designed many nice ADUs that are comparable in cost to the prefab designs we see on the market.

In conclusion, while prefab ADUs can be a quick and easy solution for some, a custom ADU design is often the better option. With a tailored design for your taste and property, ability to select all the materials, and the ability to design a great accessory dwelling unit within your budget, a custom ADU is a smart investment in the long run.

We would love to help you achieve your ADU goals. whether through a fully custom design or by starting with one of our pre-designed ADU plans and adapting it to meet your needs. You can check out our plans for sale here, or contact us if you are thinking about doing a custom ADU.

Custom ADU interior with exposed wood structure and a series of skylights to bring in lots of natural light.

Exterior rendering of a custom ADU design. The simple form makes for an affordable project while the natural cedar siding, large sliding glass doors, and metal roof make for a high quality and beautiful home.

Understanding California's Title 24 Requirements for Accessory Dwelling Units

Accessory Dwelling Units, or ADUs, are becoming an increasingly popular way to add living space and housing options to existing residential properties. In California, ADUs are subject to a number of regulations and requirements, including Title 24 of the California Code of Regulations. Title 24 sets standards for energy efficiency, lighting, and other aspects of building design and construction. In this blog post, we will explore California's Title 24 requirements for ADUs and explain what homeowners and builders need to know to ensure compliance.

Promoting Energy Efficiency

One of the main purposes of Title 24 is to promote energy efficiency and reduce the environmental impact of buildings. California has set ambitious goals for reducing greenhouse gas emissions and promoting sustainable building practices, and Title 24 is a key tool in achieving these goals. The regulations apply to all new construction and remodeling projects in the state, including new construction ADUs.

Insulation, Systems, and Construction Considerations

For ADUs, Title 24 requires compliance with specific energy efficiency standards. This includes requirements for insulation, air sealing, heating and cooling systems, and more. For example, ADUs must have insulation that meets minimum R-value requirements, and they must be designed to minimize air leakage. HVAC systems must also meet certain efficiency standards to reduce energy consumption and emissions. We typically recommend that ADUs have insulated wall cavities in addition to continuous rigid insulation around the entire outside of the home. We also recommend ductless mini-split systems as an efficient way to provide heating and cooling.

Lighting Considerations

In addition to energy efficiency requirements, Title 24 also sets standards for lighting in ADUs. These requirements are designed to promote energy efficiency and ensure that ADUs are well-lit and safe for occupants. This includes requirements for the type and placement of light fixtures, as well as the use of lighting controls such as timers and motion sensors. To meet lighting requirements and reduce energy consumption we recommend LED light fixtures throughout all ADU projects.

Accessible Design

Another important aspect of Title 24 for ADUs is the requirement for accessible design. California law requires that all new construction and remodels meet accessibility standards under the Americans with Disabilities Act (ADA). This includes ADUs, which must be designed to be accessible for individuals with disabilities. This may include features such as wider doorways, lower countertops, and accessible bathroom facilities.

Solar Energy Requirements

An important aspect of Title 24 is the requirement to add solar energy systems that will offset the energy use of new construction residential projects. This includes ADUs. It is important to consider this requirement when budgeting for your project as well as locating the ADU on your property. Making sure the roof pitch is best oriented towards the sun will help you get the maximum benefits of a PV system. Along with solar energy production, you could also consider solar hot water systems and a way to further reduce your energy consumption and make your ADU more sustainable.

How To Comply

Most jurisdictions in California require a Title 24 report that analyzes your ADU design and does that calculations to show it complies with the code requirements. There are many companies that can provide these reports in only a few days time and typically for a few hundred dollars. They will provide the documentation and/or drawings needed to submit to your building department as part of the permit review process.

Overall, California's Title 24 requirements for ADUs are designed to promote energy efficiency, safety, and accessibility. While complying with these requirements can add some additional costs to a project, it is important to ensure that ADUs are built to the highest standards of quality and sustainability. By following these requirements, homeowners and builders can create ADUs that are comfortable, safe, and environmentally friendly, and that will provide long-lasting benefits for years to come.

Typically Title 24 reports are performed once the design of the ADU is completed but prior to submitting to permit. You can use our pre-designed ADU drawing sets to send to a company that provides Title 24 Reports and typically you can get the report in a few days.

Rooftop solar panels.
Photo by Mischa Frank

Seattle Is Permitting More ADUs Than Single Family Homes

According to a recent article in the Seattle Times, the growth in popularity of ADUs has seen the more ADUs permitted than single family houses. This is a welcome change in that it shows that changes to local regulations meant to encourage ADUs are working, but also that demand ADUs and multi-unit properties is outpacing the antiquated idea of single family houses in our cities.

We are definitely a fan of densifying our cities and ADUs are an important part of that. Density is beneficial for everyone as it leads to more amenities, new neighbors, more customers for local small businesses, and a larger tax base to fund public infrastructure like public transit, parks, and schools.

One of the things that drives what we do is providing more housing opportunities and more affordable homes. As this article points out, ADUs can help achieve these goals whether they are for rental or turned into a for-sale home by condoizing the property.

It is encouraging to see so many new homes being permitted, although this is still just a small drop in the bucket for the number of homes we need to be building to keep up with demand and growth projections. We would love to see ADU regulations be standardized state-wide or even nationally, rather than city by city. Having a patchwork of different rules and restrictions makes ADUs harder to design and build and often limits some types of ADUs, like modular or pre-designed ADUs.

We believe it would benefit everyone to make ADUs more accessible by taking down barriers to this housing type. It would make housing more affordable overall, it would make ADUs more attainable for more homeowners, it would allow for more multi-generational living or co-housing options, and will help meet our housing needs by working within the context of our many single family housing neighborhoods.

Another interesting aspect of this data is the balance between detached ADUs (DADU) - or backyard cottages - and attached ADUs - often called junior adus - which are often renovations to interior spaces like basements or attics. Detached ADUs are definitely leading the way but it was pretty close

It is also interesting to read that ADUs are becoming an amenity that developers are including in new homes. Rather than taking a property and building a single family house, developers see the interest in ADUs and are making projects that already have detached ADUs or attached adus included. And in places where it is allowed, sometimes both - meaning 3 units are being built instead of just one. This is really great to see.

Still, ADUs are a very small percentage of the overall housing production, with the most homes coming from new multi-family housing developments. Out of the approximately 11,000 homes built in the Seattle area, a little under 1,000 came from ADUs. Backyard Cottages, basement apartments, garage conversions, and other types of ADUs are still growing in popularity and will continue to be an important part of our future housing supply. Especially in neighborhoods that aren’t zoned for larger scale development, ADUs can easily become the easiest and most affordable way to add new homes.

Overall, this is great to see in the Seattle area and aligned with what we are seeing in many cities across the country. As more state legislatures adopt state-wide ADU regulations we are optimistic that ADUs will become an even larger piece of the housing pie.

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10 Design Features of Accessible ADU Plans

Designing an accessible ADU is an important consideration for homeowners who want to create a living space that accommodates the needs of all individuals, regardless of mobility or disability. This is especially important when building an ADU for an aging family member, or when downsizing your home as you get older. By incorporating universal design principles and accessibility features into ADU plans, homeowners can create a space that is functional, comfortable, and safe for everyone. In this blog post, we will explore the key design features of accessible ADU plans. We will also highlight some of the benefits of designing an accessible ADU and provide tips for homeowners who are considering this type of project.

10 Design Features of Accessible ADU Plans:

1. Wide doorways and hallways: Accessible ADUs typically have wider doors and hallways to accommodate wheelchairs and other mobility devices. This also may lead to extra space around furniture to allow for easy movement around the accessory dwelling unit.

2. No-step entry: A no-step entry eliminates the need for stairs or steps, making it easier for wheelchair users to enter and exit the ADU. This could take the shape of a ramp or landscaping paths that lead up to the ADU level. We also typically look to do slab-on-grade construction for ADUs to keep the floor level as low as possible to allow for easier transitions.

3. Open floor plan: An open floor plan provides plenty of space for maneuvering a wheelchair or mobility device. This design feature also allows for flexibility in furniture arrangement.

4. Accessible kitchen: An accessible kitchen typically features countertops at a lower height, ample floor space for turning a wheelchair, and accessible appliances and storage. We used these strategies in the kitchen design for the Modern Japandi ADU - with custom height counters at 32” plus a space on the island without lower cabinets so a wheel chair could roll under the counter.

5. Accessible bathroom: An accessible bathroom often includes features such as a roll-in shower, grab bars, and a toilet with sufficient clearance on both sides. For the Modern Japandi ADU we did a barrier free shower, extending the floor and wall tiles into the shower area for seamless transition. We also used a special toilet paper roll hanger that doubles as a grab bar. We put extra blocking in the walls of the shower so additional grab bars could be added in the future. We also made sure to specify a shower head that had a hand shower attachment which is helpful when bathing with limited mobility.

6. Lever handles: Lever handles on doors, cabinets, and faucets are easier to operate than traditional knobs and handles, making them ideal for individuals with limited hand strength or mobility.

7. Non-slip flooring: Non-slip flooring can help prevent slips and falls, which can be especially dangerous for individuals with mobility impairments. We carefully select tiles and other flooring materials that won’t get slippery even when wet.

8. Adequate lighting: Adequate lighting is important for individuals with low vision or vision impairments. A well-lit ADU can also help prevent falls and accidents. WIth ample light fixtures and dimming switches we aim to give a wide range of lighting options that can be adjusted based on the time of day or lighting needs for specific activities.

9. Universal design: Universal design principles aim to create spaces that are accessible and usable by everyone, regardless of age or ability. Accessible ADUs often incorporate universal design features to make them more functional and appealing to a wider range of users.

10. Single Floor ADUs: this one may be obvious but many of our ADUs are designed as a single level to allow them to be more accessible for all. Stairs are a big barrier and a risk when getting older. Making sure there is at least one bedroom and one full bathroom on the main level of the ADU, or having the entire ADU on one level makes it possible to be converted into an accessible ADU that is ideal for aging-in-place.

By incorporating these design features into accessible ADU plans, homeowners can create a living space that is functional, comfortable, and safe for individuals with disabilities or mobility impairments. Accessible ADUs can also provide a valuable solution for families seeking a home that accommodates their unique needs.

We have worked with clients on a range of accessible ADU designs and have translated our lessons learned into many of our available ADU plans for sale. Check out our shop for the single level ADUs. We can also work with you to make adjustments to one of our designs or custom design an accessible ADU that will meet your needs.

This bathroom was designed specifically for accessibility. The room has extra width allowing for the turning radius of a wheel chair. The toilet paper holder is designed to double as a grab bar to assis with getting on and off the toilet. The shower is barrier free with the tile seamlessly flowing into the bathing space with a linear drain across the back. The shower is equipped with a hand shower making bathing easier from a seated position.

Features of The Best ADU Designs

What makes one ADU design better than another? Lessons learned from designing over 60 custom ADUs and offering award winning pre-designed ADUs has lead us to some fundamentals in good ADU design. Designing the best ADU for your property requires careful planning, consideration of your needs, and the help of an experienced design team. Through years of experience we have crafted beautiful and functional ADUs that are some of the best available plans on the market. In this blog post, we'll explore what makes the best ADU design.

1. Functionality and Flow

   The best ADU designs take into account the function and flow of the space. A well-designed ADU should feel spacious and open, with well-defined areas for living, sleeping, and cooking. The layout should flow smoothly from one area to another, and provide ample storage space. The design should also take into account the specific needs of the inhabitants, such as mobility and accessibility requirements. Since ADUs are smaller homes, it is imperative that their layouts are efficient and functional.

2. Energy Efficiency

   Another important aspect of the best ADU design is energy efficiency. An ADU that is built with energy-efficient materials and features can save you money on your utility bills and reduce your environmental impact. Features such as continuous insulation, low-flow fixtures, and energy-efficient appliances can help you save on energy costs, while also making your space more comfortable and sustainable. Passive strategies like sun shading, natural light, thermal mass and other features are things that a great ADU design can incorporate.

3. Integration with the Existing Property

   The best ADU design is one that seamlessly integrates with the existing property. A well-designed ADU should complement, but not necessarily mimic, the style and character of the main home, while also providing a unique and independent living space. It's important to consider the landscaping and outdoor areas when designing an ADU, so that the entire property looks cohesive and well-designed.

4. Privacy and Comfort

   Privacy and comfort are also important aspects of the best ADU design. The design should take into account the privacy needs of the inhabitants, as well as provide a comfortable and relaxing living space. This can be achieved through the use of soundproofing materials, adequate lighting, and comfortable furnishings. This is important both in terms of the interior design of the ADU, providing privacy between spaces, as well as between the ADU and the main house.

5. Flexibility and Adaptability

   Finally, the best ADU design should be flexible and adaptable to changing needs. An ADU that can be easily modified or repurposed as your needs change can save you money and hassle in the long run. The design should take into account the possibility of future modifications, such as adding or removing walls, or changing the use of the space - perhaps from a rental unit to a home office, or from a guest suite to a home for an aging parent. One of the true benefits of an ADU is that they can be used for so many things over the years.

In conclusion, the best ADU design is one that takes into account functionality, energy efficiency, integration with the existing property, privacy and comfort, and flexibility and adaptability. By working with an experienced design team, you can create an ADU that meets your specific needs and enhances the value of your property.

The design locates the large floor to ceiling windows overlooking the trees in the backyard, providing great views into nature but lots of privacy from the surrounding houses.

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ADU Plans For Sale. A Great Way To Begin Your ADU Project

If you're looking to add extra space and value to your property, you may be interested in purchasing ADU plans that are for sale online. ADUs are quickly becoming popular among homeowners as a way to increase living space or generate passive income, and there are numerous benefits to building one on your property.

When searching for ADU plans for sale, it's important to understand the different types of ADUs available and which options may be best suited for your needs. The most popular types of ADUs include garage conversions, backyard cottages, and basement apartments.

Garage conversions are one of the most popular types of ADUs and involve converting an existing garage into a separate living space. Basement apartments are another popular option, which involves converting an existing basement into a livable space.

These can be affordable options for homeowners as it eliminates the cost of building a separate structure. However, they aren’t the best option for many. Not every property has a suitable garage or basement, many homeowners don’t want to lose the parking or storage space, and if the existing garage structure or basement isn’t in good condition or built to code, it could actually be more expensive to convert it into an ADU that building a new detached ADU. It is also difficult to purchase a pre-designed ADU plan for a garage or basement conversions. You will most likely have to spend more on the design fees to make a custom solution for the specifics of your garage structure or basement space.

Backyard cottages, or Detached ADUs, are standalone structures that are typically built in the backyard and can range from small studio apartments to larger two-bedroom homes. When searching for ADU plans for sale, it's important to consider factors such as size, layout, and design. Many homeowners opt for open floor plans, which create a sense of spaciousness and make the most of the available square footage. Others may prefer a more traditional layout, with separate rooms for living, dining, and sleeping. The design style of an ADU is also important, as it can impact its rental value and overall appeal.

Another important consideration when purchasing ADU plans for sale is local zoning and building regulations. It's essential to understand the requirements in your area and work with professionals such as designers, architects, engineers, and contractors to ensure that your ADU meets all necessary codes and regulations. Starting by purchasing ADU plans can save time while still working with a local expert to help with small revisions and the permitting process.

When it comes to purchasing ADU plans for sale, there are numerous resources available online. Many websites like Modern ADU Plans, offer a variety of plans to choose from, ranging from small, basic structures to larger, more complex designs. The cost of these plans can vary widely, with some plans available for a few hundred dollars and others costing several thousand dollars or more. There is also the option of starting with an ADU plan and the working with us to adapt or revise the design to meet your specific needs.

It's important to be selective when choosing a plan, and consider factors such as the size of your property, local zoning codes, your budget, and your desired outcome. You may also want to consider the potential resale value of your ADU, as this can impact your long-term investment. All of these factors can influence the appropriate project budget and the ultimate return on your investment.

We have seen ADUs grow in popularity across the country. We follow ADU rules and regulations as well as research what homeowners are searching for to find more information about ADUs. Some of the most popular keywords when searching for ADU plans for sale include "small house plans", "guest house plans", "modern house plans", "cottage plans", "backyard studio plans", and "granny flat plans". These keywords are indicative of the desire for homeowners to find a small, affordable, and modern living space on their property, and highlight the flexibility and versatility of ADUs. Although we think the plans we offer at Modern ADU Plans are beautifully designed and meet a range of project goals and desires, there are many options out there.

In summary, purchasing pre-designed ADU plans can be a smart investment for homeowners looking to add extra living space and value to their property. With a wide range of plans available online and the flexibility to choose the best option for your specific needs, there has never been a better time to explore the benefits of ADUs. By considering factors such as size, design, and local zoning regulations, and utilizing the most popular ADU search keywords, homeowners can find the perfect ADU plan for their property and start generating passive income.

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While pre-designed ADU plans are great options for many homeowners, we also offer custom designed ADUs for those who want something unique, luxurious or high-performance. The cost for a custom designed ADU is definitely higher than purchasing ADU plans for sale, but for those looking to invest in something special please contact us to discuss your project.

This is a sample page from one of our Modern ADU Plan sets. It shows the ADU’s floor plan, roof plan and a reflected ceiling plan.

ADUs As A Strategy For Passive Income

Our Personal ADU Investment Story

If you are considering adding an ADU project to your property as an investment and have any questions, don’t hesitate to reach out. I started this business to help people realize the dream of adding an ADU and starting to earn passive income through real estate investment. Althought I am trained as an architect and have designed dozens of custom ADU projects over the years, it is through building one for ourselves that really proved the power these small projects can have on improving your life and wealth.

My wife and I added an ADU to a property we owned in Portland, Oregon, converting an interior part of a house into a 1 bedroom rental unit. We rolled up our sleeves and did most of the work, from designing a compelling modern interior aesthetic, to lifting a sledge hammer to do the initial demolition work.

The original house was purchased for around $325,000 and we spent about $100,000 on the build to add the internal ADU. We did a lot of the construction work ourselves to save on labor costs - it would be been closer to $150,000 if we hired a GC to do the whole thing. We then rented the ADU for around $1,800 a month. We also rented the main house for around $2,400 per month and the rental income from the two units combined covered the full mortgage payments, maintenance costs, property management fees, and left a a few hundred dollars per month in our pocket.

After 4 years or renting out the property we moved across the country and ended up selling it for about $610,000. Overall, it was a great investment and adding the ADU was a huge part of that. We probably put in about $175,000 in cash including the down payment, property improvements, adding the ADU, and general maintenance and upkeep. Just with the sales price we earned close to a 100% return on that initial investment. Of course a hot market helped a lot, but making two cash generating rental units pushed up the sales price significantly.

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ADUs Are A Great Passive Income Strategy

As the cost of living continues to rise across the country, it has become increasingly difficult for many people to afford their monthly bills and expenses or to purchase property of their own. In order to generate additional income, many people are turning to passive income strategies like investing in real estate. One real estate investment that has become increasingly popular in recent years is building accessory dwelling units (ADUs) on existing properties. This allows you to maximize the investment in your own property, and helps people afford to purchase a home by using rental income to help cover mortgage payments. In this blog post, we will explore the concept of ADUs as a strategy for generating passive income.

What Are ADUs?

ADUs, also known as accessory apartments, in-law units, or granny flats, are self-contained living spaces on the same property as a primary residence. These living spaces are typically smaller than the primary residence and can be used for a variety of purposes, such as rental units, guest houses, or additional living space for family members. ADUs can be attached to the primary residence, such as in the form of a basement apartment, or detached, such as a separate backyard cottage. In general, ADUs are great investments that can have a great ROI.

Why Build an ADU?

There are a number of reasons why building an ADU can be a smart investment strategy. One of the primary reasons is that an ADU can generate passive income in the form of rental income. Renting out an ADU can provide a steady stream of monthly income that can help cover mortgage payments, utility bills, and other expenses. Additionally, an ADU can increase the value of a property, making it an attractive investment option when considering the long term value of a property and future sales price.

Another advantage of building an ADU is that it can provide flexible living arrangements for homeowners. For example, if a homeowner has aging parents who require assistance with daily living, an ADU can provide them with a separate living space while still allowing them to be close to their family. Additionally, if a homeowner has adult children who want to live independently, an ADU can provide them with a more affordable living option. These benefits are financially positive as an ADU could be more affordable than the cost of assisted living or market rate housing in high demand cities, saving significant costs on a month-to-month basis.

How Much Income Can You Generate with an ADU?

The amount of income you can generate with an ADU will depend on a variety of factors, including the size and type of ADU, the location of the property, and the rental rates in the local market. In general, however, ADUs can be a lucrative source of passive income. According to a report from the National Association of Home Builders, the median rental income for an ADU in the United States is approximately $1,400 per month. In higher cost cities like Berkeley, Seattle, Los Angeles, or Vancouver, Canada, it is possible to rent out ADUs for over $3,000 per month. And where you can list them on AirBnB or other short-term rental sites, we have seen people earn well over $4,000 per month in revenue off a well designed ADU.

Of course, the amount of income you can generate will also depend on your rental strategy. If you choose to rent out your ADU on a long-term basis, you can expect to generate a consistent stream of monthly income. However, if you choose to rent out your ADU on a short-term basis, such as through a platform like Airbnb, you may be able to generate even more income per night, although the income stream may be less consistent from month to month.

Beyond the rental income, resale value is another aspect of investing in an ADU, although this technically is not passive income it is still important to consider at the outset of your ADU project. A 2021 study covered in Porch.com showed that homes in the western U.S. sold for about 35% higher than homes without an ADU. When combined with the rental income you can earn prior to selling a property, ADUs almost pay for themselves twice.

What Are the Costs of Building an ADU?

The cost of building an ADU will depend on a number of factors, including the size, type, and location of the unit, as well as the cost of materials and labor in your area. According to a report from the Urban Land Institute, the cost of building a detached ADU can range from $90,000 to $500,000, while the cost of building an attached ADU can range from $75,000 to $250,000. In our experience, when you combine the full cost of the project, including design, engineering, permits, utilities, site improvements, and construction, most ADU projects cost over $200,000 and could be much higher in expensive cities. Yet, this is still a strong investment.

While building an ADU can be a significant investment, it is important to keep in mind that it can also provide a significant return on investment in the form of rental income and increased property value. Additionally, there may be financing options available to help offset the initial costs of building an ADU, such as home equity loans or lines of credit.

Starting with a market analysis of the rental prices can help you work backwards to determine the maximum project budget. As a back of the envelope calculation you can spend about $100 on the development of an ADU for every $1 of monthly rent. For example, if you could rent your ADU for $3,000 per month in Berkeley, California, a comfortable project budget would be around $300,000.

This is just a general rule of thumb and not meant to replace a more in-depth financial analysis. There could be many reasons why you want to spend more than the rough estimate above. For instance if you wanted to add an amenity for the main house like a garage below the ADU, or you wanted to build a fancier unit with higher-end finishes knowing it would be more durable and have lower lifetime costs. Or perhaps you wanted to invest in super efficient systems or passive house construction to reduce energy usage, lowering the operational costs. Another reason to increase the up front investment would be to consider the resale value of the property in the future. Good design can often add 10% or more to the sales price of a property. Often going with the cheapest solution is not the best investment.

Questions to Ask Yourself When Considering an ADU as an Investment

• What are the long-term goals for the project?

• What is the local market for rental units? What is the average monthly rent for similar sized units in your location?

• How many bedrooms are ideal to maximize the rental price?
  (Typically we would see 2br units as the best option for investment ADUs)

• What do I need as a monthly ROI to make this project worth it?
  (You want it to be cashflow positive after any financing you take out to fund the project)

• What financing options are available and how much will I need to borrow?

• What is the maximum project budget for the ADU?
  (include all potential costs like design fees, engineering, surveys, permits, and construction, etc.)

• Who will manage the rental unit when it is complete?
  (There really is no such thing as truly passive income. Rental properties take time and effort to manage. Are you ready to take on this work on your own or do you want to hire a rental management company to handle it for you?)

In conclusion, ADUs can be an excellent investment for those looking for a passive income stream. They offer homeowners an opportunity to create additional space on their property while generating rental income.

To maximize the return on investment, homeowners should consider factors such as location, design, and potential rental income when deciding on an ADU project and crafting the project budget. It’s also important to be aware of local zoning and building regulations and work with experienced professionals such as designers, architects, contractors, and property managers to ensure a successful outcome.

While the initial investment may be high, the long-term benefits of owning an ADU are clear. Not only can they generate passive income, but they also increase the value of a property and can provide a multi-generational housing solution for families.

As the demand for affordable housing options continues to rise, ADUs will continue to be an attractive investment for homeowners looking to generate passive income while also contributing to their local communities. By taking advantage of the benefits of ADUs, homeowners can build a secure financial future for themselves and their families.

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This is a basement ADU design we worked on for a family in Portland, Oregon. They live in the main house above and rent this unit out on Airbnb and use it for friends and family. They make a nice income off the short term rental and it helps them cover the cost of their mortgage.

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How Long Does It Take To Build An ADU?

After cost, timeline is one of the most commonly asked questions by those looking to add an ADU to their property. It is important to understand the full project timeline and not just the construction phase as you begin to plan your project.

Projects can typically be broken down into 4 phases:

1. Planning and Research

2. Design

3. Permitting and Approvals

4. Construction

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The Planning and Research Phase: 4-8 weeks but potentially longer

This is vital to having a successful project as it is always easier and cheaper to make decisions on paper than when the project is under construction. It is also important to have the base research done to understand and accommodate the wide range of factors that will impact the project, from local rules and regulations, material supply availability, cost of materials and labor, interest rates and other financing information, to the specifics of the existing conditions of the property.

The length of time for this phase can vary from a few weeks to a few years depending on the client and how motivated they are to move forward with the project. When clients come to us to assist with this work, we typically estimate about 4 weeks to review the property, understand the local rules and regulations, and work with the client to develop a project budget and building program.

The ADU Design Phase: 3-6 months but sometimes up to a year

A common theme in all of these rough timeframe estimates will be that it depends on the client. Some people are quick to make decisions or just trust the design team to make decisions for them. Others want to be involved with the specifics of each decision throughout the project or may need a good amount of time to think through the options before settling on what they want to do.

We typically walk clients through a custom designed ADU process in 3-4 months. We feel that is a good balance of collaborating on the important decisions while our expert designers handle the details as we develop the permitting and construction drawings. You can then add on another month or two for the various other consultants that may need to be involved in the project. This would be consultants such as structural, mechanical, electrical, and plumbing engineers, landscape architects, arborists, civil engineers and other professionals. Most of these consultants will need the architectural design to be complete before they can carry out their work.

This is a place that starting with a pre-designed ADU plan can save significant time. If you are ok with one of the designs that are available for purchase, you can condense 3-4 months into just a couple of weeks. You would basically be skipping most of the design work and moving straight into engaging with consultants.

The Permitting and Approvals Phase: 1 month to 1 year, or more!

That range may seem crazy and we agree. This is one of the biggest frustrations homeowners, designers, and builders of ADUs have in the process. Each jurisdiction has their own rules and regulations and often there are conflicting rules between towns/cities, counties, and states. It is challenging to work through the various levels of regulation. Adding further frustration is how slow most building departments are at responding to questions as well as reviewing and approving submitted plan sets.

For some specific examples, we found that it took about 4-6 months on average to work through the permitting process in Portland, Oregon. Places in the Bay Area, like San Francisco, Berkeley, Oakland and others, the process could easily stretch out to one year or more. Seattle also has incredibly long review processes, probably falling somewhere between Portland and the Bay Area. Smaller towns or states with less regulation often work a lot faster. Places like Idaho or Texas can review and approve ADUs in just a few weeks or months, assuming the town you are building in allows ADUs, and the designs meet the local codes.

We highly recommend talking with your local building department as part of your Planning and Research phase, to get a realistic estimate of the permitting time you can expect.

The Construction Phase: 6-9 months

Once you receive approved plans from the permitting process you can break ground and start construction. From this point you could probably assume a 6-9 month construction timeframe. Of course this could vary based on your local climate, material supply, labor market, etc. Also, some contractors have larger crews and may move quicker. You may also chose to work with someone who will take their time and be a bit more meticulous with the construction details to deliver a higher quality final result. Sometimes taking longer is prefered.

Remember a few key things: starting construction in the spring is ideal as you will hopefully avoid delays due to winter climate conditions (freezing cold, snow and ice, and heavy rains can delay construction significantly). In the post covid world, material supply chain and skilled labor are significant challenges to overcome. There are significant delays in getting some key building materials, especially windows, that could significantly extend the construction timeframe.

The construction timeline for building an ADU can also vary based on the type of ADU. Converting a basement or attic, or even a garage could potentially be a bit quicker to complete vs doing a ground up construction. Working within an existing structure - assuming it is weather protected - may not face climate caused delays and also may reduce some of the work such as pouring foundations or doing significant framing.

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Overall ADU Timeline

If you are just beginning to consider adding an ADU a good safe estimate is it would take about 12-18 months from start to finish. That would include pre-design research, the architectural design phase, permitting approvals, and construction. Of course some jurisdictions - I’m look at you Bay Area - will probably throw some wrenches in the gears and take too long to review your project and issue permits, so it could take longer.

To bring this timeframe down you can consider strategies like starting with a pre-designed ADU, or even an prefabricated or modular ADU. It is also wise to plan for a a springtime construction start, and to hire your design team and general contractor well in advance so they can collaborate and plan for a successful construction process. The best time to start design would be late summer or early fall with the goal of starting construction the following spring or summer.

If you are starting a project and have any questions don’t hesitate to reach out. We are always happy to help you get on the right track. And if you want to cut down on your timeline and want to start with a pre-designed ADU plan check out our available designs by clicking the button below.

Is an ADU a Good Investment?

Whether an ADU (accessory dwelling unit) is worth the investment will depend on a variety of factors, including your specific circumstances, the local real estate market, and the costs and benefits of building an ADU. In general, we have found that they have been great investments for most of our clients.

There are several potential benefits to building an ADU, including:

• ADUs Provide Rental Income:

  An ADU can provide a source of rental income for property owners. By adding an ADU to their property, property owners can rent out the space to generate additional income. This can be especially useful for property owners who have a large amount of unused space on their property or who are looking for a way to supplement their income and help pay down their mortgages.

• ADUs Increase Property Values:

  An ADU also increases the value of your property. By adding additional living space, property owners are effectively increasing the overall built square footage of their property, which can make it more valuable. This can be a particularly good investment for property owners who are planning to sell their property in the future, as the added value of the ADU can increase the sales price when they are ready to sell.

• ADUs Are A More Affordable Housing Option:

  ADUs also provide a more affordable housing option for homeowners who want to add additional living space to their property. Because they are typically smaller than traditional homes, ADUs can be less expensive to build and maintain. This can be especially appealing for homeowners who want to add a separate living space for family members but want to save money compared to purchasing a full house.

However, there are also several potential drawbacks to building an ADU, including:

• Initial ADU Cost:

  Building an ADU can be a significant investment, as it requires the purchase of materials, labor, and any necessary permits and fees. This initial cost can be a significant financial burden for some property owners and/or require construction loans or refinancing of the main house to cover those costs. It is important to balance the cost with potential income or increased property values. Overall, we see most detached ADUs starting at an investment of around $200,000 or more. Check to see if rental income in your area will offset the initial investment and make it worth pursuing. In most larger cities rent is high enough to make it a good investment despite the initial costs of ADU construction.

• Ongoing ADU Costs:

  In addition to the initial cost of building an ADU, there may also be ongoing lifecycle costs associated with maintaining the unit, such as utilities, insurance, and any necessary maintenance and repairs. These costs should be considered when evaluating the potential profitability of an ADU - balancing these costs with potential rental income.

• ADU Zoning and Legal Issues:

  Depending on the location of the property, there may be local zoning laws or other legal restrictions that impact the ability to build an ADU or what you can do with it (for instance many cities ban renting ADUs as short term rentals like Airbnb). It is important to research and understand these laws and regulations before embarking on an ADU project.

Overall, whether an ADU is worth the investment will depend on a variety of factors and should be carefully evaluated on a case-by-case basis. However, in our experience most ADUs are excellent investments for homeowners as the potential rental income plus the increase in property values more than offsets the upfront and lifecycle costs.

If you are considering adding an ADU as an investment and have any questions don’t hesitate to reach out. We love helping people embark on their ADU journeys. And if the goal for your ADU is as an investment, starting with a pre-designed ADU plan can help you get off on the right foot and reduce the development costs by saving on design fees and time.