In many families during the pandemic, some spouses may have lost their jobs or had to accept pay cuts. Now, thus, is the time to assess what assets a family could maximize to generate more income. Experts encourage entrepreneurship during the pandemic. This is if you have a sound long-term business plan that is recession-proof.
Unused land by the house is the most accessible asset of a homeowner. One of the best ways to use this land is to build a livable space that can be rented out.
Building an ADU
An accessory dwelling unit (ADU) can either be attached to the house or detached from it. It is even possible to build an ADU within the existing house if it is large enough. An ADU creates another asset that greatly increases the value of the property. It also provides passive income upon completion and pays for itself.
A homeowner does not need much land area for this project. Downsizing, minimalism, and tiny homes are currently popular. Even a studio apartment can provide a family with much-needed extra funds.
You could opt to use a part of your garden or current garage. You could add more space above the garage. If there is a pool that is seldom used or that the family can give up, it can be filled in. If the home stands on an uneven plot of land, the ground can be leveled. If this is done through professional excavation work, it will not affect the existing home.
Regulations on Building ADUs
Before considering building an ADU, check with your local authorities first. There are applicable policies, zoning regulations, and ordinances covering ADUs. Some states already allow and even encourage the building of ADUs. This is a response to the shortage of affordable housing.
Find out about the application process, requirements, design standards, and other protocols. There may be maximum and minimum sizes for ADUs in your locality. It is also particularly important to determine any impact fees or development fees. These fees can be hefty, but some cities do not charge impact fees for ADUs.
The cost of construction is the main expense. While the size of the structure determines cost, other factors can also affect it. Hiring a contractor is the easiest route, but it can also be the most expensive one.
Some available prefabricated ADUs of various sizes and styles on the market cost less. Even the labor involved in putting these up is more affordable. They also take much less time to build. To further cut costs, go the DIY route and build the ADU yourself. Many people have done it, and information is widely available online. This entails more than basic building skills, though.
Your savings might not be enough to cover construction costs. There are financing and loan options, though, for the construction of an ADU. You could apply for a construction loan, a renovation loan, or refinancing. There is also the home equity line of credit (HELOC). You can take out a HELOC if you already have significant equity on your home mortgage. These loans have varying pros and cons. You must carefully check which one is most beneficial to you.
If you build an ADU, will potential tenants come? The current shortage in affordable housing already guarantees this. There will always be people looking for a place to live in that is within their budget. It would also be a big advantage that your unit is newly built.
During the pandemic, many workers have shifted to working remotely. Those living in areas with high rent are looking for cheaper alternatives elsewhere. Now, they no longer need to consider proximity to their places of work. They can be among your potential tenants.
You could even look no farther than your relatives for a win-win situation. You will be offering them savings on their monthly bills. They, in turn, will be tenants you can trust.
Another way of earning through an ADU is in the form of savings instead of actual income. Are you a self-employed professional or small-business owner who rents an office space? You could instead pay rent to yourself by making the ADU your new office. This goes toward paying for the cost of construction. The unit still ends up paying for itself while adding value to your property. You also get to work right beside your home, lessening your exposure to Covid-19.
Amid this global health crisis, many people look for more sources of income. Some people make use of the Internet and start online stores. Others who already have existing businesses take these online to reach more customers. Those families that have unused land around their homes can build ADUs to rent out. As a business option, an ADU is hard to beat.