Live Large and Go Tiny!
In luxury homes, secondary spaces have always served a variety of functions. Carriage houses, pool houses, and guest quarters frequently add value and convenience to even the grandest homes. Now, however, this type of bonus space, called a Tiny Home, Accessory Dwelling Unit or ADU, has become a big trend for homeowners of all budgets and needs, serving a variety of purposes and adding value without fundamentally changing the footprint of the primary space. Many people love the idea of a Tiny home but can’t imagine having to be in tight quarters with loved ones, especially due to COVID. But going tiny can not only add to your home’s value, but give you the opportunity to spread out!
In-law Suite
If you’ve been considering having an elderly family member live with you, a separate space can make all the difference in how they feel about the transition. Instead of an in-law suite inside the home, an ADU can allow your elderly relative to maintain their independence while feeling more secure and comfortable through closer proximity to you and your family.
Home Office
If you are one of the many people who are currently working from home—and especially if your company has put in place permanent work from home policies—a home office located in an ADU offers the peace and quiet you need to get more done each day. If you and your spouse are both working from home, you can configure your space to accommodate your individual needs.
Talk to your financial advisor or tax attorney about the possibility of writing off some of your ADU expenses on your income tax return. Keep careful records, and remember that in order to qualify, you’ll need to be able to show that your home office is a dedicated space used only for business purposes.
Rental Space
One of the things that many people learned from the COVID-19 shutdown was just how fragile their financial life could be. If you’re looking for the opportunity to pay down the principal on your home and increase your monthly cash flow, an ADU used as a rental space can offer you a host of options.
If you live near a military base or in a college town, you’ll have a steady flow of long-term renters to draw on in the years ahead. If you live in a resort area, you may want to be a short-term rental host through one of the popular commercial platforms.
Just as with the home office, there are a variety of legal and tax implications to owning an investment property. Talk to your attorney or CPA and determine how to make your rental space work for your specific financial needs. Find out what special features you’ll need to put in place in order to qualify your ADU as a rental property. In addition, check with your HOA to determine whether there are restrictions on the way that you can use your property.