They go by different names depending on the region: accessory apartment, in-law suite or in-law apartment, granny flat, second unit or secondary suite, and are also known as ohana units in Hawaii and casitas in the Southwest.

Regardless of what they're called, an accessory dwelling unit, also known as an ADU, is an additional living quarters on single-family lots that is independent of the primary dwelling unit, according to the U.S. Department of Housing and Urban Development. The separate living spaces are equipped with kitchen and bathroom facilities, and can be either attached or detached from the main residence.

ADUs have been steadily gaining popularity due to their flexibility. They’re originally designed to provide convenient and private housing to family members as they age. But these suites have evolved outside of this more traditional purpose and are now being used to provide housing for younger family members as they save for their place, or to help the homeowner generate passive rental income.

Read on to know more about accessory dwelling units, see their variety of uses, and key considerations if you’re looking to add one to your property.

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The classic ADU or in-law suite is a self-contained space that offers both proximity and privacy. At the very least, it includes:

• A separate entrance

• A bedroom or sleeping area

• A full bathroom

• Others may also include a kitchenette or even a full kitchen, and a living room

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• Attached - An ADU that is connected to the main house or part of the primary residence but is designed to be an independent living space. This unit usually has a separate entrance on the side or back of the house. Attached additions typically require less space than their freestanding counterparts and are less expensive to build.

• Detached - A detached in-law suite is often a smaller, standalone structure built on the same property as the primary residence. It offers more privacy than an attached suite so it's more desirable for a rental unit.

• Interior ADU or a converted existing space - This type of ADU is a separate unit located inside the main house. It can be an existing area that’s been converted or modified to create a separate living space, such as a basement or an attic, but may feature a separate entrance.

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An ADU is a versatile feature that can serve many purposes. Here are some uses to consider:

Home office - It could be the perfect place if you're looking to work from home or want to have a dedicated office for your small business.

Guest quarters - Suitable accommodation for out-of-town guests or relatives, so you both can have a little privacy even while staying within your property.

Residence for adult children or aging parents - Multigenerational living is on the rise due to the rising costs of homeownership. Since ADUs are flexible living spaces, it’s a great way for families to function together as a whole unit while maintaining each other’s independence and privacy. Adult children who are still establishing themselves financially can use it as a tiny home. Likewise, it can also be a permanent and practical dwelling for aging parents or relatives, especially for young families who want a home-share situation.

Rental unit - Since many ADUs can be considered as fully equipped apartments, they make ideal rentals. Renting it out for an extended period, or even for shorter terms through apps like Airbnb or VRBO, can help you recover the expense of building the unit and could potentially help you pay your mortgage. 

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1. Local building codes and zoning laws

Before dreaming about having an in-law suite, research local zoning laws first, as every locality has different rules regarding lot size, accessory dwelling units, and parking, among others. To find the laws specific to your property, go to the zoning office with your lot and block number to find out if having such a suite on your property is permitted. Even homeowners' associations may have stipulations when it comes to an in-law suite and its use.

If you're looking to have an ADU for income generation, there may be additional permits or inspection requirements for rental compliance, and it’s important to look into that before you start the process.

2. Purpose

Determine who will use it and what the purpose of your in-law suite is, so you can decide on which features are most important. If the space is to be used by aging parents, you may want accessibility features like wider doorways, ramps, or grab bars. If it’s for your small business or home office, you may need to think about the layout that will work best for you and your needs.

3. Utilities and infrastructure

ADUs often use the same utilities as the primary residence, which is why it’s crucial to ensure the existing gas and water lines and electric lines can handle the additional living space.

4. Budget and financing

While in-law suites are generally smaller and can be less of an undertaking than other living spaces, don’t forget that it may still be a significant financial investment. Make sure to explore your budget and financing options ahead of the project. There are several options you can consider, such as home equity loans, construction financing, and cash-out financing.

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The Bottom Line

With its flexibility and multiple benefits, in-law suites or ADUs have the potential to meet the wants and needs of anyone who needs a little extra space.