urbanMSP

Hmm. I don't feel like cost is the issue. And I say that as a person who thinks that buying rental properties is a stupid way to get ahead. In any semi-desirable location the numbers will work out quite nicely.

Cost.

But many people have $60-80k worth of home equity available to borrow against, and you can use that to build a passive income stream.

Yes, the footprint of the accessory structure must be no greater than 676 sqft (or 10% of lot area, whichever is larger). But detached ADUs allow up to 1,000 sqft of total floor area, including parking and half-story area.

I know it'd be quite expensive due to the load bearing requirement of the first floor (must be able to hold 1-2 cars), but would that 1,000 sqft limit also apply to any additional space made by a basement in the ADU?

Maybe it's because the realities of being a landlord and having somebody living in your backyard is unappealing to the vast majority of SFH owners?

Exactly.

Cost. Not many people have 60k-80k sitting around to build an apartment, especially if they currently have a fully functional garage that isn't in need of replacement. ROI is for or more years and it would seem they'd choose a kitchen remodel or another bathroom first.

On top of that, isn't the cost of running sewer and water hookups to the back of your lot what makes a detached ADU really cost prohibitive?

I think internal and attached ADUs are going to be fairly popular, but the cute detached ADU "laneway house" is going to be a rarity. I could see some getting built in southwest along with newly constructed homes. If you're already dropping >$800k or whatever and tearing up the whole lot for a new foundation, etc...maybe then it works out financially. For those few detached ADUs that do eventually get built, I'd guess the vast majority of them will be actual granny flats for family members (expenses being less of a consideration than the need to house a family member), rather than a prospective rental income thing.

Cost.

But many people have $60-80k worth of home equity available to borrow against, and you can use that to build a passive income stream.

We just built a garage and I didn't really give too much serious consideration into adding an ADU. Why? I don't really want to be a landlord, especially not in my back yard. Also, having just bought the house and the new garage, I didn't feel like putting yet more cash into it. Finally, I wasn't super confident in the demand for a rental unit like that in the neighborhood.

And as I think about it now, I can imagine my neighbor across the alley wrinkling her nose at the idea.

Also involved, is do I really want to build a place for my mother or brother in law to try to move in?

If you're already dropping >$800k or whatever and tearing up the whole lot for a new foundation, etc...maybe then it works out financially.

And what's the real return on a rental ADU? If you're dropping $800K+ on a teardown lot, you aren't exactly lacking in money. Is the extra cash worth giving up backyard privacy?

I'm assuming that should have read $80K, right? There's no way you ever make the numbers work on an $800K project. I'm also skeptical that you could actually build an ADU for $80K, unless you were able to do all of the work yourself.

I thought the $800k was meant to be total to purchase an existing home, tear it down and build a new, bigger one. Which sounds higher that I'd assume for some, but not out of the range.

As Xandrex said, though, I don't know how many people who are paying that kind of dough for their home are interested in having a stranger live in their backyard.

Right, I indeed meant $800k for a fancy southwest teardown situation. I assume that's the roughly the starting point for the purchase, teardown, and new build of a nice custom home. My point was that if you're already spending a boatload of cash AND tearing up the whole lot, building a new foundation, etc., then maybe maybe the opportunity arises to also build a detached ADU at the same time. But as others have said, most people dropping that kind of cash probably don't want someone living in their backyard either, UNLESS it is a family member out of necessity or whatever.

And to MNdible's $80k question - surely we can find real world examples of newly built detached ADUs, no? I would also guess $80k is on the low end, if a nice 2-car garage is approaching $30k, with fancy man-cave garages reaching $50k.

Yeah, I was referencing twincitizen's post under the assumption of a full teardown where you're rebuilding everything anyway. If you're wealthy enough and dropping hundreds of thousands of dollars to buy a house, tear it down, and rebuild what is presumably your dream home, it seems like not much of a personal benefit to spend extra money to get a small monthly return while trading off backyard privacy and the hassle of a being a landlord.

I have essentially built an ADU in my yard (they're not legal over here). Doing most all of the work myself minus the sewer run we'll be at 60k. We had an existing garage that we built upon, but our basic-bob 2-car garage at the old place was 30k.

Obviously, the numbers work out a lot better if you're already building/replacing the garage. That's the situation I've been talking about. And personally the privacy angle is a minor consideration (for detached ADUs on an alley). Just be smart about window placement.

So, a couple thoughts:

Cost of sewer/water/gas can be mitigated by tying into the back of the house. I don't think you need to run all the way to the sidewalk for those, as I've actually been in talks with a firm who's doing 2 detached ADUs now and that's allowed. I don't know if that negates the Met Council SAC fees or not. If so, that's dumb, but I'm not sure it's a total dealbreaker financially. Not that I think most people building detached ADUs are going to be in it solely for the long-term revenue stream (like me), but rather for a family member or future living flexibility.

I also don't know that the owner-occupancy thing is a huge dealbreaker **for now**. ADUs haven't caught on yet here. We don't have a local ADU industry, at least for detached structures (internal you could basically hire any GC, so I'll admit that's different). To be sure, the owner occupancy requirement is totally stupid. We allow duplexes and triplexes owned by non-homesteaded landlords all the time. The world turns.

Finally, yeah, I agree that many people don't want to be landlords, specifically to someone in their backyard. I had to do some arm twisting and convincing with my wife to get her on board with the idea for us (and it still might not pencil out financially). It's why I'm frustrated by much of the talk about development, zoning, etc. People say they want small-scale stuff in their in-demand neighborhoods, and a backyard cottage or 500 sqft apartment above a garage or a hidden basement apartment could not fit in better with their single family homes. But people by and large don't want to build one and maintain it. And they also don't want buildings torn down or 3+ story apartments next door, etc etc. Kinda asking for cake and eating it too IMO. Either put up and deal with the minor loss of privacy and duties of being a landlord, or let someone else do it by building new housing in your area.

Sewer most be hooked up on the mainline. Believe me. Water and gas can come off the house.

Yikes. That means going under or around the house.

Yep. Here is what my yard looked like. It was completed in just one day though (we hired a great crew). Our garage is actually lower than the sewer main at the front so we have a pump station in the garage. The new line hits its high point on the side of the house and then slopes down to the main.




We had no landscaping to speak of so the mess wasn't a big deal. Gave us a nice new blank slate.

There are currently 5 ADUs before planning. I wonder if there is data for the year somewhere.

Interior/ attached:
2924 Grand Ave S
2550 Pillsbury Ave S


Detached:
128 35th St W
4215 Bryant Ave S
2401 Sheridan Ave S

I'm sure we could go back and mine the planning applications. I'd guess there have probably been 15 or including these. It sure would be great if we had a more coordinated effort on the advocacy side to get some standard designs out there that meet every letter of the ordinance and would fit on a standard 40' relatively flat lot. Maybe 1 or 2 examples each of a small cottage, single stall garage with finished space on ground level and upstairs, and a 2 stall garage with a unit above. Provide rough construction costs for each as well. Would help people visualize what they could build and make a connection to what they could rent it for and/or how they could use it for family members/flexible space.