StreamHome Construction Podcast

The Financial Power of ADUs: How a Second Home Can Transform Your Property Value

• Alex Kosley • Episode 9

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What Are The Benefits Of Building An Accessory Dwelling Unit (ADU)?

Discover the game-changing potential of Accessory Dwelling Units (ADUs) in this eye-opening episode with licensed general contractor Alex Kosley. We dive deep into how these versatile structures—whether you call them mother-in-law suites, backyard cottages, or casitas—are revolutionizing property ownership in Colorado Springs.

The financial benefits alone are staggering. Colorado Springs homeowners are currently earning between $1,200 and $4,000 monthly from their ADUs, depending on their rental strategy. But that's just the beginning. Alex breaks down how a $200,000 ADU investment can generate approximately $100,000 in equity after 10 years and potentially $450,000 after 30 years, making it one of the smartest wealth-building strategies available to homeowners today.

Beyond the impressive numbers, we explore how ADUs solve real human problems. For families with aging parents, an ADU provides a compassionate alternative to expensive assisted living facilities while maintaining independence for everyone. "Close but separate" becomes the ideal arrangement that preserves relationships while acknowledging everyone's need for personal space.

Ready to unlock your property's hidden potential? Visit www.Yourstreamhome.com for a free consultation or call/text 719-644-6777 to start your ADU journey with Stream Home Construction.

To learn more about StreamHome Construction visit:
https://www.YourStreamHome.com
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Speaker 1:

Welcome to the Stream Home Construction Podcast, where we take your project from conception to completion. Hosted by Licensed General Contractor Alex Kozley, we cover everything from accessory dwelling units to commercial construction in the greater Colorado Springs area. Whether you're dreaming of a new ADU, planning an office upgrade or tackling a major renovation project, we've got the expertise to guide you through it. Let's get building.

Speaker 2:

Looking to add value, flexibility and income potential to your property, an accessory dwelling unit ADU could be the smartest investment you make. Welcome back everyone, tony Hill's co-host, slash producer, back in the studio with licensed general contractor Alex Cosley. Alex, how's it going?

Speaker 3:

Tony, I'm doing awesome today. How's your day going so far?

Speaker 2:

It's awesome. It's awesome, and that's great to hear that you're doing great too. Everyone wants to know, Alex, what are the benefits of building an accessory dwelling unit ADU.

Speaker 3:

Well, yeah, I love the question. It's definitely one of our favorite questions. Before I get into answering that too deep, first I do want to pause and just clarify something for anyone new to the term and who may be wondering what is an ADU. So ADU stands for Accessory Dwelling Unit, which basically just means a second, smaller home on the same lot as your main home. Some folks call it a mother-in-law suite, a backyard cottage or even a casita, among many other names. And yes, the phrase mother-in-law suite might come from the idea of housing your in-laws, sometimes lovingly, sometimes strategically. You want them close by, but maybe not too close. We get it All joking aside.

Speaker 3:

Whether you're looking to add rental income, house a family member or just boost your property's long-term value, adus are one of the smartest moves a homeowner in Colorado Springs can make right now. So let's break this down. The top three reasons why. Number one rental income potential. We're in a rental market where people are earning anywhere from $1,200 to over $4,000 per month in rental from their ADU, depending on whether it's a long-term rental, mid-term furnished unit or even a short-term Airbnb style. That income could cover your mortgage or at least offset your mortgage, substantially accelerate your retirement plans or fund other investments. We've had clients tell us this ADU changed the game for our family financially. So another benefit when we're looking at ADUs is really just housing for family without the extra mortgage.

Speaker 3:

This one's personal. For a lot of people, caring for aging parents or helping adult children who need to come back home is a big priority on many people's radars these days and a lot of families are facing tough questions like should we spend $5,000 to $8,000 on putting our parents in assisted living? Do we co-live and lose privacy? But an ADU kind of gives you the best of both worlds. You get independence and proximity and the savings. You're paying for an ADU which is going to cost you a lot less than an assisted living facility, and also not only that, you're keeping for an ADU which is going to cost you a lot less than an assisted living facility. And also not only that, you're keeping your loved ones close by makes them easier to care for, keeps them close. But you can also still preserve your space in Sandy because they're close but separate, and for a lot of families the emotional value of having the family together is priceless. But you also get some savings compared to going into a typical care unit.

Speaker 3:

Another top value from building an ADU is really just the ability to build equity. So, just like your home, you can build an ADU with a mortgage, a 5%, a 20% down payment, but you get 100% of the equity upside. It's one of the most powerful financial plays in real estate and one of the reasons that owning a home in general has been one of the most critical pathways to wealth in the United States historically. Using historical real estate appreciation figures, if you build a 200,000 ADU in 10 years you're likely going to have about 100,000 in additional equity built into that ADU over that time. Over 20 years you could see around $240,000. And in 30 years $450,000 in equity. And that's just from holding it and it just going up in accordance with historical appreciation rates in the United States. So you can see big returns can just pay for itself just sitting there.

Speaker 3:

In some senses ADUs also they increase your property value sometimes can help you sell a property faster if you do go to sell, of course, for a higher price with the ADU on it and do open the door for some creative loan structures that wouldn't be available otherwise. So kind of pro tip for the realtors out there. You can most often use projected rental income from an ADU to help one of your buyers qualify for a bigger mortgage. Or even if they're stuck and they're kind of on the lower end of the kind of entry level in the market, an ADU can sometimes be an option that will get them from not qualifying to be able to buy anything to be able to buy, you know, an entry level home and get an ADU in there and at the same time they're also going to have a lower mortgage payment than if they just went out and bought a house right off of the market that didn't have an ADU. So you know that can mean a better house, can mean a better location and more long-term wealth building potential as well. So ADUs, you know, aren't just a space solution, they're a strategy.

Speaker 3:

In addition to the financial and familial value that can be gained from an ADU, having additional space on your property can provide other benefits and opportunities as well. We've seen homeowners use ADUs for home offices, for teen hangout spaces, for guest houses, creative or art studios, even a quiet place to work from home without stepping over Legos. It's not just a structure. We want people to know these are flexible, wealth-generating tools and talking about affordability from an owner's perspective. Housing affordability in Colorado Springs is tight, but for homeowners, as we've discussed some already, building an ADU is one of the few moves you can make right now that gives you additional revenue stream, a long-term asset and a way to support your family without draining your resources.

Speaker 3:

So final takeaway why build an ADU? It pays you every month or saves you money if you're housing family, compared to owning two houses or putting a family member into a care unit. Also grows your wealth through appreciation. Gives you flexibility and freedom as well. So whether you're paying to a rental unit, a mother-in-law suite or space for your college grad to live rent-free while they launch their next chapter, the ADU investment has layers of return. So if you're here wondering, can I build an ADU in my backyard in Colorado Springs, let's talk At Stream Home Construction. We'll help you evaluate your lot, explore your options and walk through the numbers so you can make a decision with clarity and confidence. Visit us at wwwyourstreamhomecom and schedule a free consultation. We're here to help you build smarter.

Speaker 2:

Alex, how long does it take to build a typically ADU?

Speaker 3:

Yeah, tony.

Speaker 3:

So typically ADU process for custom design build projects we're looking at about four months of pre-construction time. So that's to get through all the planning and all the permitting, get all the approvals from the city and the building department and then once we start construction which is pretty much as soon as the building plans are approved and we can pull a permit we're typically looking about four months of construction on our average ADU project. Now, that being said, on our model ADUs that we've talked about some here, we're trying to really tighten those timelines down by creating a streamlined process. We don't have to go through all the design work. We already have approved master plans with the building department. We're expecting to be able to get a contract signed and start construction within one month, as opposed to four months on a custom project and construction. We will be able to get that down to around three months once we've really optimized those processes. So we're really excited about that, to really get that timeline almost cut in half from about eight months down to four months when looking at a model.

Speaker 2:

Okay, can you share a success story where an ADU really made a difference for a homeowner?

Speaker 3:

Absolutely. Yeah, I think one of my favorite stories is a project we did over on the west side of Colorado Springs. It was a couple got married. One of the spouses lived with her parents and her son and then the couple got married and you know they didn't want to kind of everyone move into one house and now the other spouse is living with the one spouse's parents and kid. So what?

Speaker 3:

We built the ADU and then the couple moved into the main house and then the parents and the child, her son, moved into the, into the ADU, and they both have separate spaces in the ADU as well. So the son and his grandparents can live, you know, relatively independently there as well. But they could have kept two houses but that would have cost them several thousand dollars more per month to do that. Additionally, in this family the parents are aging. We were able to install an ADA-compliant walkway ramp between the main house and the ADU, so when and if the parent or parents are in a wheelchair, they'll easily be able to get back and forth between the two properties. We've really just created a solution for this family that is going to save them a bunch of money over time and keeps the family close together, separate so that not everyone has to live under the same roof, but they're all on the same property. They're close by, but they can easily go to their own property and get some privacy.

Speaker 2:

That's one of my favorite success stories of how ADU really added value to one of our clients. Well as always, alex, that's some informative and helpful information you gave us today. Thanks again, and we'll catch you in the next episode. Have a fantastic rest of your day.

Speaker 3:

You too. Thanks again, Tony. See you next time.

Speaker 1:

That's a wrap for this episode of the Stream Home Construction Podcast. Ready to bring your vision to life? Snag a free on-site consultation by visiting our website at wwwyourstreamhomecom, or call or text us at 719-644-6777. Until next time, let's keep building your residential and commercial dream in the greater Colorado Springs area.