Investing in Additional Dwelling Units

Additional dwelling units typically come in the form of modest, detached structures that can serve as temporary or rental housing, among other uses. Two of the most common types of additional dwelling units are accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs).

An accessory dwelling unit – also known as a granny flat, in-law suite, guest house or backyard cottage – is a secondary structure that exists on the same lot as a single-family home. ADUs are typically significantly smaller than their adjacent single-family homes. Though these structures can be used for many purposes, including gyms, recording studios, storage spaces, kid’s playhouses, etc., ADUs specifically feature kitchens and bathrooms, which categorize them as dwellings.

Differences Between ADUs and JADUs

Aside from size, JADUs don’t have requirements pertaining to separate bathrooms (JADU occupants can share a bathroom with the primary residence) or parking. If the JADU is attached to the home – say, the homeowner converted a garage into a JADU – it must feature a separate exterior access point.

Many California cities don’t require the landlord of an ADU to live on-site in the main residence. However, this is required for JADU rentals.

Can You Have Both an ADU and JADU on One Property?

California Assembly Bills 881 and 68 allow for both types of additional dwelling units on your property. While you can have both an ADU and JADU, you cannot have two ADUs on one property. You must also obtain the proper permitting from your city/municipality to build these structures.

Keep in mind that because JADUs can only exist on owner-occupied properties, you’ll have to reside in the primary residence (or the ADU) if you want to rent out your JADU.

The Value an ADU Can Add to Your Property

ADUs and JADUs have become invaluable resources for both homeowners and cities looking to provide more affordable housing. That’s because the small size of these units come with lower rents than the average apartment.

Thanks to legislation changes, there were 14,702 permits issued for ADUs in California in 2019, according to the ADU Hour podcast. This represents an 11-fold increase in ADU permits in just three years!

An ADU or JADU can also enhance your primary residence’s value once you go to sell. Architects LA notes an ADU can increase the value of your home by 20% to 30%!

Another perk that shouldn’t be overlooked is that ADUs and JADUs don’t typically have a huge impact on your property tax bill. These structures are assessed independently, and about 1% of that assessed value will be added to your property taxes. The best part? The addition of an ADU or JADU will not trigger a property 13 reassessment on your home’s value.

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