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Dec 08, 2023 PropStream

Introducing PropStream’s ADU (Accessory Dwelling Unit) Calculator!

As a leader in the real estate industry, PropStream notices trends in the market, with hardware stores now offering ADU frames (tiny homes for sale) and a general increase in interest. In the next couple of years, PropStream predicts that ADUs will gain more popularity as a strategy for real estate investors due to current and projected market conditions related to demand and supply within the housing market.

This has inspired PropStream to add a new feature to the platform: The ADU Calculator!

Read on to learn more about what ADUs are, why they’re increasing in popularity, and the benefits of using this calculator as a real estate pro!

What is an ADU in Real Estate?

What is an ADU in Real Estate?

An ADU (Accessory Dwelling Unit) is a second residential unit that shares a building lot with another home. An ADU can be attached to the main structure or detached.

Therefore, if you already own a property or want to purchase a new one, you can potentially build an ADU on the property and rent it out. Some real estate influencers on social media refer to this as a form of “house hacking.”

Why Are ADUs Becoming More Popular in the Real Estate World?

The short answer is that ADUs address a huge modern-day problem: too few housing options with a growing population.

Let us explain…

The United States is still experiencing a housing shortage, with no slowdown in population growth in the foreseeable future. In fact, experts predict the United States population will continue increasing at a steady rate until it peaks in 2080.

To compound the problem, interest rates are still at the highest level in 30 years, creating an all-around expensive real estate market. While new constructions are being built at a record pace compared to previous years, many new builds are inaccessible to the average American homeowner due to the high upfront cost and higher monthly payments from today’s interest rates.

ADUs are a unique solution to this pressing issue. With housing less accessible, the ability to configure existing properties to accommodate several tenants is a major game changer.

But, Are ADUs Legal?

Important Note: PropStream does not offer legal advice. Before attempting to organize an ADU on your property, we recommend familiarizing yourself with local laws and regulations regarding this type of housing.

The legality of ADUs varies from region to region.

However, some local governments recognize the unique issue the US is facing regarding housing accessibility and are adapting their by-laws to help curb the problem. These by-law changes are meant to offer more flexible zoning permits, removing the barriers preventing additional property construction. Some governments are also considering tax breaks and other incentives to encourage specific new builds.

How Can Real Estate Pros Use The ADU Calculator?

adu cost calculator

Real estate professionals can use the ADU Calculator in these ways:

  • Buy and hold investors can use it as an estimate to see the return on investment if they choose to add an ADU.
  • Fix and flippers can use the estimate in initial calculations to determine if an ADU is a worthwhile addition to the flip.
  • Wholesalers can use the calculator to talk about the potential of selling a property with prospective cash buyers.
  • Agents can use the calculator to discuss the property’s selling potential with their clients. Agents can also use this calculator to help buyers imagine the possibilities for a listing (e.g., additional income, a place for older family members to stay).
  • Loan Officers can use the estimates from the calculator to assist with refinances. This can also be combined with current home equity information to offer additional services to clients.

What To Expect When Using PropStream’s ADU Calculator

The ADU Calculator is designed to assist professionals in estimating property comps when considering adding an ADU to a subject property.

However, before an ADU is considered, the idea should be carefully thought out and estimated to ensure it will offer worthwhile returns.

With our ADU Calculator, users can easily:

  • Estimate the cost of adding an ADU to a subject property, considering the ADU type (e.g., attached, detached, garage conversion, etc.).
  • Customize an estimate with several options regarding build quality, square footage, and HVAC/laundry estimates.
  • Get a total estimate for the entire ADU as well as a breakdown of the cost of each component (e.g., permits, architect fees, each room, etc.).

And more!

The ADU Calculator has everything a real estate pro or homeowner needs to determine if the subject property will benefit from adding an ADU, given the return potential and upfront cost.

How to Run the ADU Calculator in PropStream

First, search for a property and open the property card. From the property card, select “ADU Calculator” from the “Tools” dropdown menu.

Once selected, the calculator will open up, and users will need to:
  • Select ADU Type: Detached, Attached, Above Living Area, Above Garage, or Garage Conversion
  • Select Square Footage: Common sizes include 200, 400, 600, 800, and 1200 sq. feet
  • Quality of the Build: Five grade levels influence the estimate of your ADU project (e.g., from economy to designer grades).
  • Select optional add-on features, Including HVAC and laundry

Try the ADU Calculator for Free!

Want to see the ADU Calculator in action? Sign in to your PropStream account or activate your 7-day free trial and enjoy 50 complimentary leads.


Other FAQs Regarding ADUs/The ADU Calculator

What does ADU stand for, and what does it mean?

ADU stands for Accessory Dwelling Unit. An ADU is an additional residential unit that shares a building lot with another home. ADUs are often used to generate rental income without purchasing an entirely separate property.

What is the ADU Calculator used for?

The ADU Calculator is meant to give real estate professionals an estimate of what it would cost to establish an ADU on a subject property. This information can then be used to calculate any potential returns on investment.

How are the calculations provided?

Your calculations are an estimate based on the zip code for the property, and the figures are based on the most common square footage sizes.

What is the difference between the Rehab Calculator and ADU Calculator?

In short: The Rehab Calculator offers estimates for a wide variety of renovation projects for an entire property, while the ADU Calculator specializes in pricing out the addition of a separate dwelling on a subject property. While some capabilities of these calculators align, the use cases are entirely different.

For example, the Rehab Calculator allows you to estimate the costs of renovations from specific rooms to the entire property. As a result, you can use it to calculate the cost of projects large and small (e.g., a whole kitchen reconstruction or just fresh paint).

The ADU Calculator creates a hypothetical “mini dwelling” on your subject property, using your guidelines (e.g., square footage and additional features like HVAC and laundry setup) to offer a more thorough estimate for an ADU.

How can I find a property that will accommodate an ADU?

Before using PropStream to find a property for your ADU, we recommend researching local regulations to ensure they’re legal in your region.

Once you’ve done your due diligence, PropStream offers several search filters to help you find an excellent property for your ADU, like:

  • Lot size
  • Property type (e.g., multi-family, duplex, triplex, quadruplex)
  • HOA (Homeowners Association)/ COA (Condominium Owners Association) status
  • Specific home features that can be turned into an attached ADU (e.g., garage, basement, attic)

You can even use our Quick Lists that suggest homeowner selling motivation (e.g., pre-foreclosure, pre-probate, divorce, etc.) to find off-market property deals.

Published by PropStream December 8, 2023