When Not to ADU
There are a lot of reasons to build an ADU, and a lot of reasons to do this sooner than later. There is one time that is less than ideal though- when you don’t have an income.
This may seem obvious, but it matters for folks thinking through Aging in Place strategies. An ADU is a great way to be able to afford to stay in your neighborhood as you consider retirement, offering several options. The first stage could be having supplemental rental income while you stay in your house, helping to defray property taxes and other costs. Later, it offers the chance for you to rent out your main house, while downsizing into your ADU. This allows you to keep a foothold in your community, greatly reducing or eliminating your housing costs, and providing freedom to travel the world.
If you plan to finance your ADU, your bank or mortgage broker will have a much easier time getting the loan approved if you still have an income. Loan appraisers often struggle to properly value a proposed ADU, which means they may significantly undervalue it, or give it no value at all. An undervalued appraisal can easily sink a loan approval.
Getting your ADU financed and constructed before retiring is exceedingly important for folks that don’t have easy access to all the cash necessary to pay for their ADU out of pocket. Food for thought.