By Nicholas Tsontakis | DwellBoldly
Phoenix’s new Accessory Dwelling Unit (ADU) policy has created a unique opportunity for beginning real estate investors who own their primary residence in single-family zoned areas in Phoenix. Many investors get started by house hacking (or renting out rooms in their primary residence) and using the income generated from renters to offset their mortgage payments. This strategy has been widely used as a first step in an investor’s journey into investing. With the updated regulations surrounding ADUs, the concept of “house hacking” has been forever changed in Phoenix – house hacking without roommates? Yes, please! Investors can now add ADUs to their existing properties or purchase properties with the intention of developing these secondary units. The person who has considered investing but has not taken the deep dive now has a different and exciting path than was previously available.
One of the key advantages of Phoenix’s ADU policy is the flexibility it offers investors. They can choose to convert an existing, detached structure, such as a garage or storage unit if they exist on the property into ADUs or construct new units on their properties to either remodel or build new offers more than the traditional house hacking method of simply renting out a room in the house.
Phoenix’s ADU policy opens a unique learning opportunity for investors. Those who are new to real estate development can gain invaluable experience in navigating zoning regulations, permitting processes, construction management, and property management. This hands-on experience can be a steppingstone to more significant real estate development projects in the future and enhance an investor’s credibility in the industry. In essence, Phoenix’s ADU policy not only offers a profitable investment avenue but also serves as a valuable educational platform for aspiring real estate professionals looking to expand their horizons and expertise in the market.
Here is a summary of the text amendment to the zoning ordinance that references ADUs (full text here: https://www.phoenix.gov/pddsite/Documents/PZ/Z-TA-5-23-Y_Accessory%20Dwelling%20Units.pdf).
Summary of ADU Amendment:
ADUs would be allowed to be constructed within a required rear yard when subject to the same development regulations as detached accessory structures, as follows:
- One ADU per single-family detached lot may be constructed.
- A detached ADU may be located within the required rear yard and may not exceed fifteen feet in height, unless use permit approval is granted.
- An attached ADU may project into the rear yard if the same side yard setbacks as the primary dwelling unit are maintained, and a maximum height of fifteen feet is provided.
- An attached ADU that meets all required standard setbacks may be constructed to the full height permitted by the zoning district.
- An ADU must comply with lot coverage requirements for the lot, though most have been increased.
- For up to lots 10,000 square feet in area, the maximum size of the ADU is 1,000 square feet.
- For lots over 10,000 square feet in area, the maximum size of the ADU is 3,000 square feet, or 10% of the net lot area, whichever is less.
- But in no case may an ADU exceed 75% of the gross floor area of the primary dwelling unit.
If any of those concepts seems confusing, consult your architect, and ask about getting started on your path to investing and developing.