Do you need more space but have a tight budget? Learn why an ADU makes financial sense for your current and future needs.
If you are concerned about aging parents, helping growing kids afford a home of their own one day, generating additional income, or needing more office space, you may have wondered if an ADU – Accessory Dwelling Unit – is a viable option for you. The inevitable second question is whether or not you can afford it. Are ADUs worth the cost?
In order to answer this affordability question, let’s take each one of these issues into account:
Aging Parents
For many of us in our 40’s and 50’s, our parents are Baby Boomers who are probably in their 70’s. Caring and paying for our aging parents is a real concern. Hopefully our parents have financially planned for their twilight years, but with this expensive world and sky high medical costs, even those who planned ahead may not have enough to pay for full time care.
An ADU is a great option for those of us in this position for many reasons. First of all, an ADU or granny unit is a small independent structure that lives on your property. (A tiny home is usually mobile and has wheels like an RV while an ADU sits on a concrete foundation in case you were wondering.) An ADU has a kitchen, bathroom, and living space and may or may not have a separate bedroom. It has plumbing and electricity and can be as minimal or elaborate as your style and budget dictate.
If your parents are able to care for themselves, this gives them an option to have their independence while also being close enough should they need help for a medical emergency. While they could live in a senior independent living community, it is extremely expensive. According to SeniorAdvice.com, “With costs of independent living communities in California typically ranging between $542 and $4,950 monthly, the median yearly cost comes in around $24,750. The monthly nationwide median cost is around $1,925.”
An ADU can cost between $50,000 to $100,000 depending on size and features. For the same cost of an assisted living apartment, you could pay off your ADU mortgage in just two to four years. While the rent may be gone, you get to keep the ADU, AND you’ll have peace of mind knowing your parents are being cared for properly.
Adult Children Dwelling Space
If you have kids who are in college or are looking to stretch their wings and set out on their own, you know that apartment prices are astronomical right now. For a one bedroom apartment in California, RentCafe reports that the average cost is $1,409. For many young people, the high cost of living makes it almost impossible to save for a home down payment. An ADU can provide a place for them to spread their wings just outside of the nest. In just about three years, you’ll have paid off $50,000. If you rented an apartment, after three years you’ll have… nothing. Well, actually, if you’re moving, what you’ll have is the hassle of scraping together first and last month’s rent for a new place or a down payment for a new home.
Rental Income
So what can you do with the space if your parents move to a senior resort in Florida and your kid snags a hot job in high tech and doesn’t need to live in your ADU anymore? First, you thank God above for your luck, and secondly, consider if using this space as a rental would be a good choice for your family.
So how much can you get for rent? That depends on your location, the size of your ADU, and the condition it’s. Talk to your real estate agent to nail down the amount based on your unique situation, but it could be close to what a one bedroom apartment goes for in your area. More than likely, this amount will be much more than your monthly loan payment on the ADU. For example, the LA Times shared that for one Los Angeles ADU owner, “The $1,800 rent is not only paying off the $440 monthly payment on the loan he took out for the project but helps with the mortgage payment on his primary residence.”
Another thing to consider is that if you don’t want a long term rental and you live in a popular vacation spot, you may be able to rent out this space using an online platform such as Airbnb or Vrbo.
Home Office or Craft Space
Don’t need the extra income? Congratulations! But what do you do with this extra room? How about a home office? Imagine peace, quiet, and privacy that you don’t get working inside your main residence. Or how about making it into a craft space and you don’t have to worry about cleaning up the mess before your project is done. Are you a musician? This could be a great place to practice your keyboard or guitar without bothering others. The possibilities are endless!
(And notice we didn’t say She Shed? Love the concept, but I personally hate the term.)
So are you ready to talk numbers? Call ADU Warehouse today! They have a variety of price points, styles, and options to fit your budget and needs. They can tell you how to choose the right model, apply for permits, where to place it on your lot, they’ll arrange for the contractors, and they can even tell you the new value of your property. They’re the one stop shop to buy and build the ADU of your dream.