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How Can Homes with Accessory Dwelling Units (ADUs) Boost Property Value?

An accessory dwelling unit, also known as an ADU, is a secondary residential living space on the same lot as a single-family home. It can be attached to the primary residence, or it can be completely detached, referred to as a DADU in some areas.  

cottage house

To be considered an ADU, the unit must:

  • Be on the same lot as the principal residence.

  • Include living, sleeping, kitchen, and bathroom facilities.

  • Have a private lockable entrance door.

Adding an Accessory Dwelling Unit (ADU) to your property can be a strategic investment, potentially boosting its value in several ways. Here's how:

Increased Living Space and Square Footage:

  • Direct Value Addition: Detached and attached ADUs add new living space, which appraisers consider when calculating your home's value. The increase can be significant, often around 30%, depending on the ADU's size and location.

  • Garage Conversions: While converting a garage might not add total square footage if it was already included, it creates usable living space, potentially increasing value and offering rental income.

Enhanced Appeal and Versatility:

  • Wider Buyer Pool: ADUs cater to diverse needs, attracting potential buyers seeking in-law suites, rental income opportunities, home offices, or guest quarters. This broader appeal can lead to a quicker sale and potentially higher offers.

  • Unique Selling Proposition: In competitive markets, an ADU sets your property apart, making it more memorable and desirable to buyers.

Financial Advantages:

  • Rental Income: Renting out your ADU provides a steady stream of passive income, offsetting your investment costs and potentially generating positive cash flow.

  • Investment Appreciation: The long-term value appreciation of your property, combined with rental income, can make an ADU a financially rewarding investment.

Important factors to consider:

  • Local Market: Demand for ADUs varies depending on location. Research your area's trends and regulations to understand potential value uplift and feasibility.

  • ADU Type and Quality: Detached ADUs typically add more value than attached or converted ones. High-quality finishes and features can further enhance desirability.

  • Construction Costs: Building an ADU requires upfront investment. Ensure the potential value increase outweighs the costs for a positive return.

ADU Statistics in 2023 in Washington state

In 2023, homes with ADUs made up 2.3% of the total residential properties sold by NWMLS brokers. The vast majority of homes with ADUs that sold in 2023 were in King County (462 listings), however, a good number of homes with ADUs were also sold in Pierce (167), Snohomish (150), Kitsap (78), Thurston (60), Island (51) and Whatcom (54), with a little over 300 scattered throughout other counties covered by Northwest MLS.

Homes with ADUs typically attract a specific type of buyer. NWMLS data shows that on average, homes with ADUs were on the market longer than homes without ADUs in most counties.

median days to sell ADUs in 2023

However, patience may pay off when it comes to listing a home with an ADU. In 2023, the median sold price for a home with an ADU was higher when compared to homes without an ADU.

median sold price for ADU in 2023

Accessory dwelling units are a great way to provide more living space for family, earn extra cash, or add significant value to your home. If you are interested in purchasing a home with an attached or detached accessory dwelling unit, I am here to help! Equipped with advanced search options to help you find homes in your ideal location, I am also able to search for ADU square footage and number of bedrooms and bathrooms, to ensure you find exactly what you are looking for.

Please note: ADUs are not legal unless they have been established through a permit process. A legally permitted unit in the home is called an attached accessory dwelling unit (AADU). A legally permitted unit on the property (but not within the home) is called a detached accessory dwelling unit (DADU) or backyard cottage. Tiny houses, with foundations, are considered DADUs.

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