Cottage ADU: Unlocking the Potential of Your Property

A cottage ADU is a self-contained living space on the same property as the main home, designed to be independent and provide extra living space.  This compact living space can be used as rental units, in-law suites, home offices, or extra living space for the family.

At RenoFi, we prioritize helping property owners like you make informed decisions through guides like this one. We’ll cover the perks of adding a cottage ADU to residential homes and share some inspiring design ideas. Plus, we’ll explain ways to finance your project effectively.

Overview of a Cottage ADU

A cottage ADU, or Accessory Dwelling Unit, is becoming popular among homeowners looking to get more out of their property.  It provides additional living area without needing a full-scale home addition or renovation. Although the unit is typically smaller than a standard home, it comes with everything necessary to make it efficient and functional.

While cottage ADUs must follow local zoning codes and building requirements, you can customize them to fit your needs. You can add full kitchens, bathrooms, and living areas. You can even design the unit to include energy-saving features such as solar panels and rainwater harvesting systems.

Common Cottage ADU Styles

Cottage ADUs come in many styles, from classic to modern. You can make yours match your main home or give it a unique look that stands out while still giving you privacy and independence. Here are some common styles you might want to consider when building a stand-alone ADU in your backyard:

• Traditional Cottage Style: These are designed to have a cozy, rustic feel. You’ll often see features like slanted roofs, little windows sticking out the top, and wooden siding. If your main house has classic elements, a cottage-style ADU can blend in nicely.
• Craftsman Cottage Style: This style draws inspiration from the Craftsman architectural movement. You’ll notice features such as low, wide roofs with beams and rafters showing, and they use a lot of natural materials like wood and stone. It gives the ADU a warm, handmade kind of look.
• Farmhouse Cottage Style: These usually have a country-style feel that is common with old farmhouses. It’s common to see features like board-and-batten siding, front porches, and simple, symmetrical designs. Adding a farmhouse-style cottage ADU to your property can create a nice, rural feel in your backyard.
• Coastal Cottage Style: If you prefer a breezy, seaside look, a coastal cottage ADU might be the way to go. These often have shingle siding, big windows, and a light, airy color palette. The design is meant to capture the relaxed, beachy feel of a traditional coastal cottage.

Why You Should Add a Cottage ADU to Your Property

Adding a cottage ADU to your property can bring many benefits, including:

• Increased Property Value: A cottage ADU can boost your home’s overall value by up to 35%, especially in big cities. That’s because, in addition to providing an extra living space, it can also be rented out for additional income, so it makes your property more attractive to potential buyers.
• Extra Living Space: A cottage ADU provides more room for family members or guests. You can also use the space as a home office, art studio, or guesthouse.
• Privacy and Independence: Living in a cottage ADU offers privacy and independence, which is great for elderly parents or older children who prefer to live independently while staying close to home.
• Cost-Effective: It is usually cheaper to build a cottage ADU, and because it’s smaller, it costs less to maintain over time. This makes it a budget-friendly way to expand your property.
• Environmental Benefits: Constructing these smaller units with energy-efficient features and sustainable materials can reduce your carbon footprint. This makes your home more environmentally friendly, which is better for the environment.

Design Ideas to Make Your Cottage ADU More Independent

When designing a cottage ADU, it’s important to create a space that can function independently, especially if it will house elderly parents or adult children. Here are some key design ideas to ensure your ADU provides a self-sufficient and comfortable living space:

• Full Amenities: To make the ADU a fully independent living space, be sure to include all necessary amenities, such as a kitchen, bathroom, and laundry facilities. This allows the occupant to live independently without needing to rely on the main house for basic needs.
• Accessibility: Prioritize making the ADU accessible for everyone, including older adults or those with disabilities or mobility issues. Consider adding features such as wider doorways and ramps or level entry points. It’s also a good idea to add grab bars in the bathroom. The layout should be easy to move around in. And be sure to arrange furniture pieces in a way that allows for smooth movement.
• Natural Light: ADU designs that include natural light can make the space feel open and inviting. Consider installing big windows or skylights to help bring in more natural light and improve the overall atmosphere.
• Outdoor Space: To create a sense of independence, the ADU should have a private outdoor area. Include a patio or make sure residents can have easy access to the main property’s garden or backyard.
• Separate Entrance: Add a separate entrance that’s easily accessible and well-lit. If possible, install security features such as a camera or motion-sensor lighting for added safety. These features can increase a sense of independence.

Maximizing Privacy in Your Cottage ADU Design

To create a cottage ADU on your property, it’s important to incorporate designs that make the most of your space while making sure it feels private and comfortable. Here are some ideas to help you create privacy for your ADU:

• Considering Sightlines: You don’t want direct views between the ADU and the main house, so it’s important to factor in sightlines when designing your ADU. Consider adding a fence or some landscaping to block the view and provide more privacy for both spaces.
• Separate Entrances: In many places where ADUs are allowed, these units are required to have separate entrances. This way, anyone living there can come and go without disturbing the main house. You can add a walkway or path leading to the ADU or even create a completely separate entrance.
• Smart Window Placement: Be sure to place windows in a way that maintains privacy. For example, having windows high on the walls can let in sunlight without compromising privacy. You can also use curtains or blinds to keep the space private when needed.
• Private Outdoor Areas: Create an outdoor space just for the ADU. A private patio or deck gives residents a place to relax outside without sharing the main house’s outdoor space. This can make the ADU feel like its own private retreat.

Know the Rules and Permits for Your Cottage ADU

Before you start building a cottage ADU, it’s important to understand the rules and permits involved. Here are some key points to keep in mind.

• Zoning Laws: Research your local zoning laws as they determine where you can build an ADU on your property. In most cases, accessory dwelling units can be built on single-family homes, but be sure to check with your local planning department to see if your property is zoned for an ADU. In addition to zoning, the planning department will provide information on size limits, setbacks, and other requirements.
• Building Codes: These codes ensure your ADU is safe and livable. They cover everything from structural integrity to electrical and plumbing systems. Make sure your plans meet all local building codes to avoid any issues during construction.
• Permits: You will need several permits to build your ADU, including building, electrical, and plumbing permits. Contact your local building department to find out which permits you need and how to apply for them. It’s essential to have all the necessary permits before starting construction to avoid fines or costly delays.
• Inspections: During construction, your ADU will need to be inspected at various stages to make sure it complies with all building codes and regulations. You want to schedule inspections with your local building department because passing these inspections is crucial for the final approval of your ADU.
• Homeowners Association (HOA) Rules: If your property is part of an HOA, check their rules regarding ADUs. Some HOAs have specific guidelines or restrictions that you need to follow.
• Utility Connections: Consider how your ADU will connect to utilities from the main house, including water, electricity, and sewer. You may need to upgrade the existing systems in your primary residence or install new ones. Remember to check with your utility providers for any requirements or permits needed.

How to Finance Your Cottage ADU

One of the best things about building a cottage ADU is that it adds space and value to your property without physically expanding its footprint. However, figuring out how to pay for the project can be challenging, even though it’s essentially a smaller home.

The good news is that there are several financing options available to help you turn your ADU plans into reality. Here are some common options to consider:

RenoFi Home Improvement Loan

RenoFi is a new way to finance your ADU project. ADUs not only increase your home’s value after renovation but can also generate rental income. However, ADUs are costly. If you don’t have enough equity in your current home, funding ADU construction with a home equity loan is impossible.

For example, let’s say your current home value is $500,000, and your outstanding mortgage balance is $400,000. You are planning on adding an ADU and expect the value of your home to increase to $640,000. Your current loan-to-value ratio (LTV) is already at 80%, which means that most home equity loans are out of reach because that’s the maximum LTV they allow. So, your borrowing power using your current equity is $0.

RenoFi, on the other hand, would allow you to go as high as 150% LTV of your current value or 90% of your after renovation value, whichever is lower. So, in this example, while using a standard home equity loan results in your borrowing power being $0, a RenoFi loan allows you to borrow up to $176,000 by using the after renovation value of your home!

 Get started with your RenoFi loan here

Government Programs and Grants

Depending on where you live, there may be government programs or grants available to help finance your ADU. For example, if you live in California, you might be eligible for the state’s ADU Grant Program. The goal of these incentives or grants is to encourage homeowners to create more affordable housing. It’s common for these programs to offer favorable terms or even forgivable loans. Check with local housing authorities to see what options might be available to you.

Other Financing Options

• Personal Loan: You can take out a personal loan to build your ADU. But because this is an unsecured loan, it usually has a higher interest rate compared to other options. That said, the application process is typically straightforward, and you don’t need to use your home as collateral.
• Construction Loan: A construction loan is specifically designed for building projects. With this loan, you get funds in stages as the construction progresses. This way, you have the money you need at each step of the project. While construction loans can be more complex and often require a larger down payment, they can be great for building ADUs and other construction-related expenses.
• Refinancing Your Mortgage: Another option is to refinance your existing mortgage to access additional funds for your ADU project. Cash-out refinancing lets you take out a new mortgage for more than you owe on your current one and use the difference for construction. This can be a good way to secure a lower interest rate and get the funds you need.

Start Your Cottage ADU Project Today With RenoFi

Building a cottage ADU can be a fantastic way to make the most of your property. It gives you additional living space that you can use for various purposes, including generating rental income. While the idea of building an ADU can be exciting, bringing your project to life can be expensive.

But with RenoFi, you don’t have to worry about getting the funds you need for your project. We can connect you with our trustworthy lending partners, who will provide financing suited to your situation.

RenoFi loans are the smartest way to finance a home renovation project. Unlike traditional loans, which are based on your current home value or require you to refinance your primary mortgage and give up your low rate, RenoFi loans are based on the after renovation value of your home. This allows you to borrow, on average, 11x more, get a low monthly payment, and keep your low rate on your first mortgage. Contact us today if you need help financing your cottage ADU.