by Keith Vaughan
This query comes to me about 30-40 times a year: “Hi, How can I make a legal, rentable apartment?” thus ending the small-talk. Many Homeowner’s want to put a dent in their [ever-rising!] mortgage costs. In response to this not-so-simple question, we’ve created a 3-page laundry list based on local, national, and even international codes. The harsh reality is that even when possible any property conversion to a legal 2-unit flat (or multi-unit) with a Certificate of Occupancy creates a change of use for the land. It is quite complex and can be cost-prohibitive. After this 30-minute consultation winds down, the most common Client response is “Holy Mackerel!”
So: what is an ADU and how does it alter the game? An “ADU” (stands for Accessory Dwelling Unit) is a small accessory apartment that in Washington, DC no longer has to be a stand-alone - or fully separated – dwelling unit. In lay terms you can share all the house’s plumbing, electrical service, mechanicals, and still add a kitchen, bathroom, bedroom and the like and then legally rent it out or let it serve as a true in-law suite for a relative, or aging parent.
In September of 2016, the District of Columbia smartly, and long-overdue, changed the Zoning Codes to allow accessory apartments by a matter of right in the vast majority of R- zones as long as the Owner of the property also lives in the house. This means that you can more easily and cost-effectively build or remodel an “ADU” into your basement, attic, garage, carriage house, or some other creative form of separation and accessibility.
Every project and house is unique, so, you’ll need to start the actual conversation of your project requirements with your architect or design-build firm to assess feasibility and concept development. However, here are some basics:
· There is a minimum livable square footage applied to the home – 1200 SF in some zones and 2000 SF in others - and you cannot dedicate more than 35% to the “ADU”
· The residence must remain your primary residence, however, the homeowner can choose to live in the primary portion or the “ADU”
· There must be permanent access in and out for the accessory apartment
· There can be no change to the “residential” aesthetics and use of your home
· The homeowner must get a basic business license and make sure the “ADU” is properly built and remodeled - and with permits and inspections
· Then it’s ready to rent (or let Mom move in!)
Keep in mind that this is definitively NOT a license for a “double-use” Airbnb as the Airbnb model needs to be assessed on a case-by-case basis based on local zoning, HOA, or Condo use restrictions.
It is our experience that when doing pro formas for apartment projects that they can absorb anywhere from 15-25% of the home’s monthly mortgage. The cost-to-value analysis is also important, and we tend to see a short, 5-7 year complete payback on the initial investment (which can often be funded by the new equity).
Since the costs on an “ADU” are significantly less expensive then this new, fully legal accessory apartment unit can create a really nice way to “put a dent in your mortgage” and let someone share these costs FOR you to build your equity. While this information is specific to Washington, DC, we suspect that other close-in, urban and walkable neighborhoods in the neighboring states will hopefully follow suit.
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