What Does ADU Mean in Real Estate?
Workplace Inspiration

What Does ADU Mean in Real Estate?

|May 6, 2023

Of many growing trends we observe each year, ADUs are the town's new talk regarding residential needs. ADUs being suitable as secondary living spaces within the primary boundary, offering the right level of privacy, and also a great passive income source, have gained popularity over the years. With ADUs, homeowners have found a way to utilize the extra space on their land to convert it into a separate tiny home that can be used for personal or income reasons.

For personal use, ADUs can greatly benefit from covering various needs. ADUs can be used as a backyard guest house, home office, or granny shed. But what exactly does ADU mean in real estate? Is it a good decision to build an ADU? And how does ADU in real estate benefit entrepreneurs and homeowners?

Well, these are some questions we have pondered since the popularity of ADU in real estate has increased. This article will explain all you need to know about ADU real estate definition. So let’s read on to find out.

What is an ADU in Real Estate?

ADU is known under several names, but the technical term ADU has an abbreviation 'Accessory Dwelling Unit’. In simpler terms or ADU meaning in real estate, ADU is defined as a secondary housing structure built on the same property as the primary building. You may know them as prefab guest houses, granny sheds, modular ADUs, backyard sheds, or offices. An ADU can be attached or detached from the primary residence. Still, all the ADUs fill the primary purpose of providing an independent living space with all the facilities required for safe living. To pass a unit as an ADU, it should offer permanent living, sleeping, eating, cooking, and sanitation facilities.

With the concept of growing ADUs, certain approved laws bring uniformity and safety when working on shed house ideas. Other ways to get an ADU are to purchase small house kits or even built ADUs from retailers such as Autonomous ADUs.

However, before adding a secondary unit to your home or working on guest house plans, ADUs require you to monitor and understand the ADU laws in your region closely.

What is an ADU in Real Estate?

Types of ADUs

If you learn about what does ADU mean in real estate technically, you will realize ADUs are not a new concept, but they have been present for decades in the form of secondary storage units, kid's rooms, grandparents' sheds, garage-to-home conversions, etc. But with each state's modern zonal laws and regulations, ADUs are now defined into categories and types. Here are some common types of ADUs.

Freestanding ADUs

Freestanding ADUs or independent ADUs are called various names, such as granny pods, mother-in-law apartments, and backyard cottages. They all stand apart from the main home and have separate facilities and entrances. A freestanding ADU ranges from 500 to 1200 square feet or can be even more. You can choose a structure-built ADU or build one from scratch for a freestanding ADU.

Freestanding ADUs - adu meaning real estate

Garage Conversion

The second type of ADU, which is also cost-friendly compared to building a whole structure, is a garage conversion. There are several ways that garages can be turned into ADUs, and it is possible to turn the entire garage into a living area. Carriage houses are a common name for detached garages that have been transformed into ADUs. Garage conversions are also known as attached ADUs since they are attached to the primary property.

Basement ADUs

If you have a basement that isn't under use, you can convert it into an ADU. Basement ADUs are more common than other types since they are the most budget-friendly ADU method. Although for a basement to classify as an ADU living space varies from region to region.

workpod for gamer

Advantages of ADUs

Suppose homeowners worry about what does ADU stand for in real estate regarding house value and cost benefits? In that case, they must know there are multiple benefits of ADUs besides providing extra living space.

Income Asset

Using the spare space on your land to generate income is a low investment, high returns method. This is why many people opt for ADUs, as they can create a rental property without purchasing separate land.

Increases Occupancy

As the family grows, homes become tight. Or some people do prefer their privacy which isn't possible with a big family. An ADU increases home occupancy without increasing living expenses, which also means ADUs are affordable.

Rental Property Option

Owners who no longer require the expansive constraints of their primary residence may be able to relocate to an ADU home and rent out the main residence. This allows them to choose a tiny or bigger residence for their personal needs.

Advantages of ADUs

Disadvantages of ADUs

On the other hand, building or living in an ADU also has some drawbacks you must be aware of.

Uses Backyard Space

With an ADU, you must compromise on the backyard space, which means no space for outdoor gatherings or summertime chilling. Also, if your ADU is rented to an unknown, the backyard stroll might be limited due to privacy concerns.

Zoning Laws

ADUs seem straightforward, but several zonal laws make building and maintaining an ADU a huge task. Also, these zonal laws and building an ADU within the laws become costly.


Adding a secondary unit to your home increases property taxes, especially if you use your ADU for rental needs.

Disadvantages of ADUs

Cost of an ADU

The cost of construction of an ADU is dependent on several factors. And the most significant of these is whether the unit is attached or detached. For instance, detached accessory dwelling units are significantly more expensive than their attached counterparts as they require the whole foundation to be built. A detached ADU can cost as low as $10K to as high as $300K, whereas an attached ADU costs anywhere from $4K to $200K. That's a huge difference just because of the type of ADU built.

Other cost factors include the ADU size, facilities, interior, number of rooms, and design. However, when it comes to building an ADU, several financing options are available to facilitate the homeowners.

Get your ADU now and experience the benefits it offers.

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