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Block Change Real Estate - Serving the areas of Palo Alto, San Jose, Milpitas

February 23, 2022


Adding an accessory dwelling unit, or ADU, to your property can increase the value of your home, become a source of rental income, or help you expand your living space to make room for your adult children or parents. Find out what an ADU is, the benefits of an ADU and options to help you finance the addition.

What is an ADU?

An ADU is a smaller, independent residential structure on the same lot as a single-family home. You may know an ADU as a granny flat, in-law apartment, carriage house or secondary suite.

To qualify as an ADU, the additional living area needs to include the following:

  • A kitchen.
  • A bathroom.
  • A separate entrance.

An ADU may share utilities and walls with the primary unit, but it does not need to include a bedroom.

Common examples of ADUs include a dwelling over a detached or attached garage, suite above the main floor of the home, basement apartment, or detached structure such as a guesthouse or backyard cottage.

Benefits of ADUs for Homeowners

By adding an ADU, you can increase the value of your home by as much as 35%. But the equity you add isn’t the only potential benefit.

Extra Income

If you rent an ADU to a tenant, you can earn extra income. This can help you pay your monthly mortgage or offset other expenses.

Age in Place

If you are looking to age in place, you could move into an ADU to downsize your living space while generating rental income from the main house.

A Space for Family Members

An ADU could be a good solution if your adult children are returning to live with you, you need to take care of your aging parents, or you are a caretaker for a family member with mental or physical challenges or limitations.

A Space for You

You can utilize an ADU as a standalone home office or workshop.

Check Zoning Codes Before You Get Started

Before you add an ADU to your home, you will need to learn about the zoning code that applies to your property and the surrounding area.

To find your local zoning code, you can

  • Check to see if your local government’s website has a section for zoning.
  • Reach out to your local zoning or building code office.
  • Contact the municipal planning department.

Did you know?

Freddie Mac study showed that the number of ADUs grew an average of 8.6% per year over the past decade.

Financing Options for Adding an ADU

There are loans designed to help you pay for improvements to your home, including converting a space to an ADU or building a new structure. For example, Freddie Mac CHOICERenovation® is a financing solution that can provide you with funding to add an ADU on your property.

Speak with your lender about the financing options available to you and which may best suit your needs.

To learn more about home equity and renovating your home, visit My Home by Freddie Mac®.

Should I Add an ADU to My Home? (2022, February 23). My Home by Freddie Mac. Retrieved April 4, 2022, from https://myhome.freddiemac.com/blog/homeownership/should-i-add-adu-my-home

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