ADU 101: How to add a small, secondary home to your Indianapolis backyard

Looking to build a tiny house for Grandma, or bring in extra cash with an Airbnb in your backyard? Here’s everything you need to know.

INDYtoday: INDY_carriage house ADU Airbnb_OCT23

Got some extra room in your backyard? Building an ADU and renting it out to loved ones or as an Airbnb can maximize both your space and your income.

Photo via Airbnb

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While local leaders work to increase the supply of quality housing that is sustainable, accessible, and affordable while also enhancing + preserving diverse neighborhoods, homeowners can consider their own option: building an accessory dwelling unit, or ADU.

What’s an ADU?

Also known as a carriage house, in-law unit, granny flat, or backyard cottage, an ADU is an additional dwelling unit created on the same lot as a single-family home. An ADU is smaller than the main home and can be created by converting part of the existing house or garage, or by constructing a new building.

According to Freddie Mac, ADU construction has increased by an average of 8.6% per year over the last decade. This trend shows no sign of slowing down, since ADUs can increase a home’s value by as much as 35%.

Can I build one on my property?

Before you start loading up on lumber, you’ll want to research your home’s permit history and make sure your ADU dreams align with the city’s zoning codes. The Department of Business and Neighborhood Services has a handy checklist to help with the process.

Once you’re in the clear, you can start shopping for contractors — or learn what the state of Indiana requires if you plan to do the work yourself.

INDYtoday: INDY_Carriage House ADU Airbnb 2_OCT23

ADUs can be built to match the architecture of the surrounding area or the other house on the same lot so they don’t become an eyesore.

Photo via Airbnb

How much will it cost me?

We’ve found local builders that offer smaller ADUs starting at $135,000, while Living Room Realty estimates that building a larger detached ADU from scratch can cost at least $200,000-$250,000. However, there’s always hope for developing options that are far less expensive — the City of Bloomington recently created an online catalog of predesigned ADUs that may be constructed for far less.

You can explore different financing options, like taking out a home equity loan, through local institutions specializing in ADU builds.

Keep in mind that adding an ADU will lead to increased property taxes.

Where can I learn more?

Get in touch with the Department of Business and Neighborhood Services Monday-Friday, 9 a.m.-4 p.m.

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