So you have heard about the term ADU, which stands for an accessory dwelling unit, and you're talking about building one in your backyard, maybe converting your existing garage into ADU. Is it worth it? Is it add value to your home? Today, we're going to answer those questions, so stay till the very end.
ADU stands for an accessory dwelling unit. Most single-family homes are allowed to have a separate dwelling unit called ADU. It is an area that could have separate houses, separate kitchens, separate plumbing, and even a separate gas meter and water meter if you choose to. So that is becoming popular because of the housing shortage we experienced in the Bay Area during the pandemic. A lot of people are doing that because space has become essential. Now things are opening up. It is still a very popular trend. But does that actually add value to your home? The short answer to it is, it depends.
So let's talk about the different types of ADU's.
There is the separate detached ADU, which you could convert from a detached garage, a detached structure that you have on your lot. The conversion of the existing garage could be at the attached unit, and that could also be eligible for ADU conversion. There's also the basement or, you know, a secondary level on top of a garage on top of existing drawling. So those are options of ADU. A lot of people started to explore the idea of ADU because of the need for space. Let's face it, we have been trapped in the house indoors for a whole year, so our definition of space and living space has greatly transformed over the last year.
So space-wise is an excellent idea to have that option. ADU can also be used as a guest cottage if you have friends and family over. It could also be used as a rental if you don't have a use that could generate a separate rental income. So in that way, it does provide a tremendous value to your living situation to have that separate space for different purposes. Many people are working from home permanently now. That could be a separate office space office studio where you can just conduct all your business separate from the main house so you can still keep a work personalized, separate balance to have a balance that way.
So that's another great reason why ADU makes sense in terms of property value. It depends on what I'm saying that having that ADU does meet a lot of needs. And for people in general, with the buyers looking at a home, a property with ADU and without an ADU giving In the same location that finishes of the house the same price point. Of course, they're going to choose the property with ADU, but we have seen a home with accessory dwelling units selling for a significantly higher price than one without it? So that might be something to consider. Obviously, an ADU preferably would be converted with a permit.
A lot of people just went ahead and, you know, rock their garage, plumbing, electrical to the garage and call an ADU without the permit, so technically, that could not be included in the tax record, and it may not reflect on the resale value because those square footage are not counted towards your legal living space. So that's not going to help you with your resale value. You may provide additional space for personal needs. But in terms of resale value, we're not seeing a consistently added value with a separate dwelling unit. So if you're thinking about resale value as a real estate agent, I am not seeing a huge justification for building an ADU-.
You were thinking that is going to significantly increase your property value. The other reason that you might want to consider is that people in construction are very busy now. Lumber prices have gone up. So if you are planning to build an ADU, it might take you more time and more budget to build what. So that might be something you want to talk to a real estate agent or and talk to a contractor about to get the specifics before you actually decide to do that. So now you know a thing or two about how heavy an accessory building unit could affect your property value.