With the demand for affordable housing growing, and mortgage payments increasing, accessory dwelling units (ADUs) are emerging as a possible solution for homeowners looking to earn additional income or accommodate aging family members. ADUs are self-contained housing units built on an existing property, usually in the backyard of a home, and can come in the form of a tiny house or laneway home.
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“The most popular ADUs are ones that are under 600 sq. ft. because this is the sweet spot that allows them to fit in with the regulations that most cities are adopting in the new bylaws,” explained Tiny Estates co-founder William Forbes. “Bylaws vary from city to city, but most properties do qualify for 300 sq. ft. to 600 sq. ft. ADUs.”
The recent passing of Bill 23 in Ontario allows for three residential units to be built per lot, and this is giving ADUs an opportunity to flourish. “We’re seeing a massive trend in the direction of adopting and allowing for ADUs by local governments because of the major housing shortage. By increasing density in residential areas with ADUs in backyards it allows us to tackle the housing crisis in a unique way,” said William. “From our experience operating in Kitchener, the area is investor-friendly and the ADUs are getting approval quite easily.”
It’s not just Kitchener that has opened the floodgates for more additional housing units to be built, but also Guelph, Cambridge, Brantford, and even Toronto.
What to Know Before Investing in an ADU
In general, detached properties with sufficient backyard space are ideal for investing in an ADU. It varies case by case, but having around 800 sq. ft. of usable land will be sufficient.
If you’re an investor looking to enter the housing market, ADUs are often more attainable than condos or other larger properties. “It makes more sense often to actually build the ADU, which is more affordable, than to buy a condo because you have the flexibility on how big to build it and its simpler from an investors perspective,” said William.
Some homeowners may be able to afford an ADU without outside help, but there are still plenty of financing options available, including home equity loans, a second mortgage, or even grant or loan programs offered by some cities. Depending on how you finance your ADU, you can expect to get a considerable return on your investment. “It’s hard to generalize, but I think it’s safe to say you can expect an 8-12% return on your money,” said William.
How the Building Process Works
The first step is getting your zoning application from your local government. After that, you’ll need to apply for a building permit and have a structural engineer draft the drawings for the permit. You’ll also have to get your electrical, water and sewage services checked in order to ensure there is sufficient service, and if not, have them upgraded.
After that, it’s time to build! First comes the underground trenching, then the foundation, and lastly the actual ADU unit. You can expect the build time to take between 4 – 5 months. If this sounds overwhelming, don’t fret. There are a lot of professionals who are ready to help you in the process.
“It’s important to speak with an expert in the field to get a better understanding on whether your property can support an ADU. We have good relations with the city and we will conduct a property feasibility assessment to see if your property qualifies for this,” added William.
If you’re in the Kitchener-Waterloo region and considering building an ADU, whether it be as an investment or as a personal space, Tiny Estates can help. If you’d like to speak with a realtor to hear more about real estate investment and alternative properties, give us a call today!
