With the high price of Los Angeles real estate these days, homeowners would be wise to research whether an accessory dwelling unit (ADU) would be right for them, either as a place to live or to rent out and make extra income.
You’ve no doubt heard of ADUs, but just by another name. They’re commonly referred to as “granny flats” or “in-law apartments,” which is a living space either in the home or, more commonly, a separate unattached dwelling unit built in the backyard or at the side of a house.
ADUs serve many purposes—they can house an aging relative or another family member who needs a place to live or can be used as a guest house if you have a lot of visitors. They can even be used to house a nanny or someone else employed by a family.
But that’s not all. ADUs can be rented out to generate additional money to help pay your current mortgage. In another twist, an aging couple looking to downsize could build an ADU in their backyard, move into it, and then rent out their bigger house.
Work with an Agent
If you’re looking to buy Los Angeles real estate that comes with an ADU, your best bet for success is to hire a knowledgeable real estate agent. You should have a neighborhood or suburb in mind, as well as a budget range for the size of property you can afford.
Begin your search online for Los Angeles real estate agents who represent buyers in your preferred area and read their testimonials and highlights of their successes. If you know anyone who has recently purchased a home with an ADU, ask if they highly recommend the agent who represented them. If so, you’re in luck because a personal endorsement is the best kind.
After you’ve hired an agent, now it’s time to sit down and strategize. Tell your agent what you expect from both the home and the ADU and how much you can comfortably spend. Your experienced real estate pro will then put his or her knowledge of the area to work and line up your needs with properties. Great agents already know where these properties are, and they find out immediately when new properties are listed. ADUs are special properties, and you will appreciate the attention to detail your agent will show during your search.
You should know going in that homes with ADUs will cost more than single-family homes without them. As it is, the median price of Los Angeles real estate is $913,754, according to Zillow.com. That’s a rise of 17.7% during the last 12 months. Los Angeles remains a seller’s market, which means there are more people looking to buy than there are houses available.
What are ADUs?
Accessory dwelling units come in different types and are either attached or detached. If you want to buy Los Angeles real estate with an ADU, it will help to look at as many different options as possible so you can decide which will work for your situation, whether it’s to house a relative or to rent out.
For instance, if you plan to rent it, you may feel more comfortable if it’s detached. If you plan to have a relative living there, you might want it to be attached, even if it has a separate entrance.
Attached ADUs
ADUs can be part of the main home in a few different forms. They are essentially apartments made up of rooms separate from the main dwelling and usually come with their own entrances and exits. These ADUs can be built into a basement, at the back of a single-family home, over a garage, or even as part of a garage conversion.
When viewing Los Angeles real estate with ADUs, make certain that they have been built to code and that proper permits were obtained by the owner. The safety of the occupant of an ADU is imperative, especially if they are elderly.
Free-standing ADUs
The other type of ADU is a free-standing, or detached, structure that is located on the same lot as the main house, usually in the back or to the side. These are great for renters who will appreciate the privacy they afford.
Some people refer to detached ADUs as backyard cottages; carriage houses, a term that originated long ago on the East Coast; or by the quaint name that’s fitting for Los Angeles real estate, casitas. Casitas is Spanish for “small house,” which certainly fits the bill in a city as diverse as Los Angeles.
Other Uses
Depending on the location on the property, and whether they’re attached or detached, ADUs can also serve as workspaces for professionals such as accountants and lawyers, or as studios for artists or photographers. Professionals and artists are willing to pay for these spaces because they offer unique workspaces away from the hustle and bustle of commercial districts and are often more secluded and private.
Have a Plan
If you intend to use an ADU for a relative, you should be good to go.
If you plan to rent it out, check to make sure you are following all local regulations that pertain to rental units and make sure it is properly insured. You should also research any tax advantages for renting out your ADU. Your real estate agent can recommend a good tax attorney who can advise you.
Another benefit of owning Los Angeles real estate with an ADU is that it will help your home appreciate in value faster than that of a single-family dwelling without an ADU. Properties with ADUs are always going to be in demand because of the high price of real estate in L.A. and the additional value these homes have.
You can certainly have an ADU built on your property, or have a portion of your house converted, but it is easier to find a property to buy that already has an ADU.
If you plan to buy Los Angeles real estate with an accessory dwelling unity, let The Passman Group assist with a smooth transaction.
*Header image credit: Homeowner Law