You probably have at least a few questions about building and using an accessory dwelling unit (ADU) on your property.
As North Carolina’s ADU experts, we’ve got answers.

FAQ: General ADU Questions

What is an ADU?

An ADU – also known as a secondary dwelling unit, granny flat, or in-law suite – is an independent living space added to a single-family residential property. It can be an attached structure, such as a constructed addition or converted space, or a detached structure. To be considered an ADU, the unit must be a fully-functioning independent living quarters with its own kitchen, bathroom, and living quarters.

Why build an ADU?

There are many reasons you may want to build an ADU. Adding a living space to your property allows you to create a separate space for an office or studio, to house family members, or to generate income as a rental unit. Building an ADU on an existing residential lot can also add to the housing stock of a city or town without requiring additional property.

What types of ADUs are there?

There are several forms of ADUs that you can build. Detached structures provide the most flexibility and separation from the primary home. However, you can also build independent living spaces with an attached addition to a house or by converting spaces such as a garage, basement, or attic.

What are the zoning and building code requirements for ADUs?

Zoning and building codes for ADUs vary by location. Different municipalities and counties have different regulations about where and how you can build a granny suite on your property. Even within those areas, HOAs and other organizations may also have regulations that you will need to comply with to build an ADU.

How much does it cost to build an ADU?

Our ADU builds typically range in cost from $80,000 to $200,000, but sometimes fall outside that range. Costs can vary significantly based on factors that include size, layout, materials used, location, local fees, and local labor rates. Our cost calculator can help you get an approximate estimate of what your ADU is likely to cost, and our team members can work with you to figure out a more specific estimate.

Can I finance the construction of an ADU?

Yes. While you most likely cannot get a traditional mortgage to finance the construction of an ADU, you do have several options. Many lenders can offer a home equity line of credit (HELOC) loan to finance your build. Home equity loans and construction loans are also popular options for financing an in-law suite build. The best financing option for you will depend on your specific financial situation and other factors.

Do I need special insurance for my ADU?

You may be able to include your ADU in your current homeowner’s insurance policy without the need for special insurance. However, some providers may require you to take out an additional policy to cover your ADU, especially if you plan to use it as a rental property. It is advisable to speak with your insurance provider before completing your build to ensure that you have all of the coverage you need.

Are there restrictions on renting out an ADU?

Like zoning and permitting, rental regulations vary from one location to another. In general, your ADU will need to meet local requirements that dictate what types of spaces and amenities must be provided for a rental unit, as well as your responsibilities as a landlord. Adhering to these regulations is essential to renting out your ADU in full compliance with the law, and failing to do so could result in legal penalties.

How long does it take to build an ADU?

Most of our ADU builds take between six to 12 months from the design stage to completion. But how long it takes to build an ADU depends on a few key factors. These include the size and complexity of your structure, weather conditions, labor availability, material availability, site preparation needs, and local permitting processes, among others.

Can I use my ADU for short-term rentals?

You can use your ADU as a short-term rental in many cases. However, your ability to use your in-law suite as a rental on sites such as AirBnB and VRBO depends on local laws and regulations, as well as HOA restrictions if your home is located in a neighborhood governed by an HOA. Be sure to read and understand these regulations thoroughly before listing your property.

Do I need a separate utility connection for my ADU?

You may need a separate utility connection for your ADU if you want to use it as a rental property, depending on local rental regulations. Even if it isn’t required, having a separate connection for electricity, water, and other utilities is probably a good idea to separate your bills from your tenants bills and simplify utility fee accounting.

What are the potential challenges in building an ADU?

Some of the biggest potential challenges to building an ADU include budget constraints, local zoning rules and building codes, and HOA regulations. In addition, the size, topography, and layout of your property may also pose a challenge for ADU builders.

FAQ: Building an ADU in North Carolina

Is building an ADU in North Carolina a good idea?

Building an ADU in North Carolina can have many benefits for homeowners and their communities if local regulations permit it. As property values continue to climb in many parts of North Carolina, an ADU can be a cost-effective way to add to your living space, increase your property value, and generate rental income.

Adding an in-law suite as a rental unit on your property can also add to the housing stock in communities facing high rents due to limited housing supply and provide a more affordable rental option for some.

What are the zoning requirements for building an ADU in North Carolina?

Every municipality in North Carolina has its own unique zoning requirements for building an ADU. Some counties also have their own requirements. These regulations can vary in terms of the size of ADU you’re allowed to build, how far it must be set back from the property, and other factors. Even within the same municipality, some HOA bodies have additional regulations for secondary dwellings or even forbid them entirely.

Are there any financial incentives or grants available for building an ADU in North Carolina?

Some municipalities in North Carolina may offer financial incentives or grants designed to promote sustainable development or affordable housing. However, at this time, they are not particularly common. Since these incentives and grants could potentially provide a significant amount of money towards your build, it’s worth inquiring with your local housing authority about whether or not they exist.

Can I use my ADU for short-term rentals in North Carolina?

Most municipalities in North Carolina allow for short-term rentals and it is likely that you can use your ADU for this purpose. However, the specific regulations around short-term rentals vary – often significantly – between different areas of the state. If using your ADU as a short-term rental is part of your plan, make sure to check the regulations for your area during the planning process. If your home is in a neighborhood governed by an HOA, make sure you understand those regulations as well.

What are the steps and timeline for obtaining permits to build an ADU in North Carolina?

Permitting processes and costs vary between different areas of North Carolina. While it is advisable to check with your local building and planning departments to make sure you fully understand the process for your area, as an experienced, full-service ADU contractor, we assist our clients in understanding and working through the various stages of the permitting process to remove one of the more stressful steps in building an ADU.

FAQ: Using Your ADU as a Rental Property

Can I legally rent out my ADU?

In many cases, you can legally rent out your ADU as either a short-term or long-term rental. However, different areas have varying restrictions on renting out secondary dwellings on your property or forbid you from doing so at all.

In addition, if you want to use your ADU as a rental unit, you will have to comply with local housing codes that dictate the amenities, spaces, and services you must provide to renters. Your local housing authority should be able to provide all of the information you need to ensure compliance.

Are there restrictions on the duration of rental for my ADU?

Again, restrictions around the duration of rental periods for your ADU vary – often substantially – between different areas. Regulations around long-term rental units tend to come with more restrictions and requirements, but also tend to be more stable. Short-term rentals typically come with fewer restrictions about what you as a landlord must provide, but these regulations also tend to change quickly.

Do I need a separate rental agreement for the ADU?

In some cases, you may be required to provide a separate rental agreement for your ADU. But even if you are not, it is almost always advisable to do so – even when renting to a trusted friend or family member. Rental agreements protect both parties and can help you avoid complex or otherwise difficult situations should problems arise. Most rental agreements include stipulations about the amount of rent, when rental payments are due, the duration of the lease, maintenance responsibilities, and the responsibilities of the renter.

Are there any special considerations for advertising my ADU as a rental property?

In some cases, your area may have regulations about how you can advertise your ADU as a rental property, especially if you plan to rent it as a short-term rental. However, providing full disclosure about the details of your property – including the fact that it is an ADU – is always the best practice. This can help you avoid potential conflicts, even if it isn’t legally required.

Do I need to pay taxes on rental income from my ADU?

Generally speaking, you need to pay taxes on rental income from your ADU. The IRS requires you to report any and all income on your tax return, including income you generate from a rental property. However, income from rental units and the expenses of maintaining one are often complicated, especially when taking into account differences in local tax regulations in addition to federal and state regulations.

A professional accountant can help ensure that you are in full compliance with the law and, in many cases, help you reduce your tax liability to maximize the profit you make from renting your ADU.