Should you build an ADU? The honest math

An accessory dwelling unit is a second, smaller home on a lot that already has a house on it. Washington has spent the last several years steadily making them easier to build, and around Puget Sound they’ve gone from a curiosity to one of the most common projects we get asked about.

They can be a genuinely excellent investment. They can also be the most expensive mistake a homeowner makes. The difference is almost always whether somebody ran the numbers honestly before the first check was written.

The three kinds, and what they cost

Garage conversion — roughly $110,000 to $190,000

The cheapest way in, because the shell already exists. You’re insulating, adding a proper floor, running plumbing and electrical, adding egress windows and heat, and building a kitchen and bath inside an existing footprint.

The catches: most garages were never built to living-space standards, so the slab may need work, the roof structure may need reinforcing, and you lose the garage. In a neighborhood where covered parking matters, that costs you something at resale.

Attached or interior ADU — roughly $130,000 to $230,000

Carving a separate unit out of the existing house — a basement conversion is the most common version around here. You need a separate entrance, egress, sound separation between units, often a second electrical panel or subpanel, and ceiling height that meets code, which is where a lot of old Seattle basements fail before we start.

Ceiling height is the first thing we measure. If you need to lower a basement floor, the project changes category entirely — that’s underpinning work and it is expensive.

Detached ADU (DADU) — roughly $200,000 to $340,000

A freestanding small house in the back yard. The most expensive per square foot, because you’re building everything from foundation to roof, plus running new utility lines from the street or the main house.

It is also the version that rents highest, appraises best, and gives you the most flexibility later — aging parents, adult kids, a long-term tenant, or eventually you, downsizing while renting out the main house.

The costs that surprise people

• Utility connections. Water, sewer and power to a new detached structure can run into the tens of thousands, especially if the sewer line has to be extended or upsized. Some jurisdictions also charge hookup or capacity fees.
• Site work. Puget Sound lots slope. Excavation, retaining, drainage and getting equipment into a back yard with no alley access all add up before anything is built.
• Design, engineering and permits. Budget real money and real months. Permit timelines vary a lot by jurisdiction, and this is the part homeowners consistently underestimate.
• Financing. ADUs often don’t fit a standard mortgage or HELOC cleanly. Talk to a lender before you talk to a designer.

The return side

There are three ways an ADU pays you back, and you should be clear which one you’re actually after:

• Rent. A well-built small unit in a decent Seattle-area neighborhood rents for real money every month. Run your own numbers against local comparables, subtract vacancy, maintenance, insurance and taxes, and see what the payback period looks like. For most detached builds it is measured in years, not months.
• Property value. Appraisals of ADUs have gotten better as they’ve become common, but do not assume you recover the full build cost on paper immediately.
• Family. The one nobody puts a number on and the one that motivates half our ADU clients. Housing a parent or an adult kid on your own property has a value that doesn’t show up in a spreadsheet, and that’s a completely legitimate reason to build.

If the only reason you’re building is that ADUs are supposed to be a good investment, run the payback math first. If the reason is family, build it and build it well.

When we tell people not to do it

• You’re moving in under five years. The math rarely works that fast.
• The lot fights you. Steep slope, no access, a sewer line in the wrong place, or setbacks that leave you a footprint too small to be worth building.
• You don’t want to be a landlord. It’s a real job. Some people discover this after spending $250,000.
• The budget is already at its ceiling. An ADU built to the bottom of the budget with nothing left for surprises is how projects stall half-finished.

What to do first

Before you spend anything: confirm what your jurisdiction allows at your specific address, get a rough sense of where utilities run, and get a realistic build range. Then talk to a lender. Then talk to a designer.

We do the feasibility walk for free — including telling you when the answer is no. A contractor who’ll only tell you yes isn’t giving you information, they’re giving you a sales pitch.