How Much Value Will Building An ADU Provide?

[Matt H.]

I'm looking to build an ADU ("accessory dwelling unit") on my property in Denver and am wondering if anyone has any experience with the type of value it might add to the total property. I know they are notoriously difficult to appraise due to lack of comps. I'm not necessarily expecting a dollar for dollar return but am hesitant to spend $200k on a project to only have it add 50k in value. Any thoughts are greatly appreciated!

[Bill S.]

Originally posted by @Matt H.:

I'm looking to build an ADU ("accessory dwelling unit") on my property in Denver and am wondering if anyone has any experience with the type of value it might add to the total property. I know they are notoriously difficult to appraise due to lack of comps. I'm not necessarily expecting a dollar for dollar return but am hesitant to spend $200k on a project to only have it add 50k in value. Any thoughts are greatly appreciated!

So I think that adding only $50k in value is unlikely. For example, $200k cost would be offset with $1,000 (probably on the low side) rental income. 30 yr am at 4%. Not saying any of those numbers are correct but to offer perspective. You are also adding square footage. Most areas the selling price per square foot is $250+ so just adding 800 sqft would increase the value more than your cost. Granted an ADU it's not the same as contiguous space unit but not everyone wants or needs the ADU to be a rental. They might need a home office or extended family so this makes it very nice.