Photo by JillWellington on Pixabay
The possibility of converting your garage into an Accessory Dwelling Unit (ADU) has become increasingly popular in today’s real estate market. ADUs are a type of secondary housing that is smaller than the main house but still able to function as a stand-alone residence. According to data from the U.S. Census, there are approximately 16 million detached garages in America, which means that converting one into an ADU is a great opportunity for home owners looking to build equity without breaking the bank. This blog post will outline everything you need to know about whether or not an ADU makes sense for your property.
What is an Accessory Dwelling Unit (ADU)?
An ADU is a small secondary housing unit that can be built in one of two places: either attached to your primary residence (like an in-law suite) or in the garage space of your property. ADUs have been in existence for decades, but only recently have they become more popular in real estate transactions due to their many benefits. ADUs are a great way for homeowners to add value to their property without a significant investment. While building a new main house can cost hundreds of thousands of dollars, converting an existing garage or building an ADU can cost as little as $50,000. For people living in areas with limited housing supply, converting an existing garage or building an ADU is a way to add additional housing capacity to the area.
Why Build An ADU?
Now that we’ve covered what an ADU is, we can look at why you might consider building one. Here are a few advantages to building an ADU:
- Build additional housing.
- ADUs are a great way to build more housing on your property while also adding value to that property. It’s estimated that building an ADU will increase the value of a home by an average of $46,000.
- Create additional income.
- ADUs can be rented out for additional monthly income. In fact, rental rates for ADUs are often higher than those of the main house due to their lower maintenance costs.
- Retain equity.
- Converting a garage into an ADU is a relatively low-cost way to build equity in your property. Even if you have to spend a few thousand dollars to retrofit the garage, you’ll quickly make up for it by the amount of equity that you build. In many cases, you can sell the ADU on its own parcel of land, which means that you also get to keep the equity that you’ve built in your main house.
Pros of Converting a Garage to an ADU
- You already own the land.
- Converting your garage into an ADU will likely increase the value of your property, but it will also increase the size of your property. This is advantageous because you don’t need to go through a long and arduous process of purchasing additional land.
Cons of Converting a Garage Into An ADU
- While this is a minor disadvantage, the fact is that you’ll have to put some work into retrofitting your garage into an ADU. This means that you may need to install things like plumbing, wiring, and a ceiling in order to make the garage livable. Nevertheless, this is a relatively small amount of work compared to starting with a new build on your property.
- Converting your garage into an ADU means that you’ll have less parking space on your property. This may be an issue if you have an extremely small garage, but it’s important to keep in mind that you won’t have to share your parking with the new ADU residents either.
Should You Convert Your Garage?
To recap, converting your garage into an ADU is a great way to add equity to your property without a significant investment. Furthermore, this is a relatively low-cost way to build equity as compared to building a brand new house. Before you go ahead and start retrofitting your garage, you’ll want to make sure that converting it into an ADU makes sense. Here are a few things to consider:
- Is there enough room in the garage? Most municipalities require that the ADU be smaller than the main house, but it should also have enough room to be livable. Make sure that you have enough room in the garage for the ADU residents to comfortably fit their belongings.
- Is the garage attached to the main house? Many homeowners who are converting their garage into an ADU are doing so because the garage is attached to their home. If this is the case, make sure that your city will allow you to build an ADU in this location.
- Can you afford the retrofit? While converting your garage into an ADU will add equity to your property, it will also cost you money. Make sure that you have enough savings to cover the retrofit costs, as well as the costs associated with renting out the ADU.
Bottom Line
The conversion of a garage into an ADU is a great way to add value to your property without a significant investment. Converting your garage into an ADU will likely increase the value of your property while also expanding the amount of housing stock in your area. Before you begin the conversion process, make sure that you’ve considered the advantages and disadvantages of converting your garage.
