Updated: Nov 10
Interest in Accessory Dwelling Units (ADUs) is growing rapidly around the country for various reasons. Homeowners love the ability to create rental income or a separate space for family and friends. Municipalities desperately need to create more housing and are keen on urban infill and housing diversity (something other than 200+ unit apartments). And as the real estate market finds itself in a stalemate, the option to add more housing to existing properties is appealing to investors. So, naturally, everyone's first question is, “What do ADUs cost?”
ATL ADU 1 bed, 1bath, 504 square foot 'RTown' ADU in Inman Park
As more people learn about ADUs, some associate them, and their cost, with tiny homes and the tiny house movement, where homeowners downsized into their $50,000 tiny house and traveled the country. But here’s the problem, the popular tiny house shows like Tiny House Big Living, Tiny House Nation, and Tiny House Hunters all came out in…2014! Not only are those price points ten years old and predate the recent historic run up of construction costs, but more importantly, tiny homes are very different from ADUs.
343 square foot tiny house by Houslein Tiny House Co.
In general, tiny homes are mobile units built on wheels, and therefore do not factor site work or utilities into their cost. Comparatively, ADUs are fully permitted, permanent structures that require site work, a foundation, and utilities, which is a large percentage of construction costs. Tiny homes tend to be smaller than ADUs, averaging roughly 200 square feet, while the City of Atlanta allows ADUs up to 750 square feet. Tiny homes are often built to a manufactured (mobile) home or recreational vehicle (RV) standard, which does not meet the City of Atlanta’s definition of a dwelling, and therefore may not be allowed in your area. Many of the tiny homes with lofts and ladders fall under this category. ATL ADU client, Eva Mauldin, captured the difference well when she noted, “Everyone who visits our ADU says, ‘Oh, this is like an actual house’”.
ATL ADU bedroom with 10 ft ceilings compared to lofted beds in tiny homes with 4-5 ft of clearance.
With that distinction in mind, let’s discuss the cost of a detached ADU. Currently, the cost of our one bedroom, one bathroom “RTown” ADU is in the range of $190,000 - $215,000 all in. We provide a turnkey service, so that price includes the survey, site plan, design, permitting, site work, construction, and project management, all the way to the certificate of occupancy. All our clients have to do is pick a predesigned model and exterior paint color and we handle the rest. We’re the first to admit that we offer a premium service, so you could take a more DIY approach to cut costs, but as we’ve warned, DIY ADUs are challenging and saving money is not a guarantee. ATL ADU started in 2017 when ADUs became legal in the City of Atlanta. So while other builders “figure out this ADU thing”, ADUs are all we do and we’ve been doing it since day one.
Vaulted ceiling, electric range, microwave, dishwasher, refrigerator, and stacked washer/dryer are included in the pricing of the RTown ADU.
Other than the DIY route, you’ve likely encountered prefabricated or modular ADUs in your research. Prefab ADUs, built offsite in a warehouse, are a viable option and one that ATL ADU is currently exploring. But it is only slightly less expensive than vertical construction once you start adding everything back into the cost like site work, foundation, transportation to your site, craning it into your backyard, and utility hookups. We also estimate that only 10-20% of our clients will be eligible for modular delivery due to the amazing tree canopy we have in Atlanta. That’s why modular ADUs are popular in places like Florida and California. And we shouldn’t even have to reference it, but as for the Home Depot ADU kits, just read the fine print - “includes only the steel structure”. That’s it. Just the framing. And you have to assemble it!
A modular ADU, by Abodu, craned into a San Jose, California backyard.
There is a disadvantage to writing a cost analysis in the Fall of 2023. Interest rates are at a 20 year high and single family home supply is at historic lows, which negatively impacts affordability. But even in this challenging market, ADUs still make sense. Why? Because you already own the land. Where else in the City of Atlanta could you purchase a brand new, one bedroom, one bathroom home, with all new appliances, 10’ ceilings, and a vaulted kitchen/living area for $215,000? Anything in that price range is likely distressed and in a less desirable area. Alternatively, let’s say you live in, or have a rental property in, a neighborhood like Kirkwood, where the median sold home price is $540,000. By adding an ADU, you just invested in a very desirable, brand new, cash flow positive rental property (we'll discuss cash flow in our next post), in a rapidly appreciating market, for less than half the median sold home price!
This street facing, corner lot, RTown ADU, turned valuable (unused) backyard space into an income producing asset, in a popular, Beltline adjacent neighborhood.
Can you put your ADU on wheels and travel the country? No. Can you live in the ADU, rent out your primary home, and travel the country while building equity in your property? Yes. Sounds like a great investment to us! For a free consultation, contact us here.