An ADU to help pay the mortgage: what it costs and what it earns

What an ADU is

A second, smaller dwelling on a lot that already has a house: a converted garage, a finished addition with its own entrance, or a detached unit in the back.

It has its own kitchen, bathroom and entrance. That is what separates it from a spare room, and it is also what triggers the permitting.

The permission question comes first

Florida has no single ADU rule. Miami, Miami Beach, Orlando, Tampa and St. Petersburg all treat them differently, and some municipalities effectively do not allow them at all.

Four things to confirm before you spend anything on drawings:

• Zoning. Is an accessory dwelling permitted on your specific parcel, and at what maximum size?
• Parking. Many ordinances require an additional off-street space, which can be what kills a project on a narrow lot.
• Owner occupancy. Some cities require the owner to live in one of the two units.
• The association. An HOA can prohibit what the city permits. Read the declaration.

The arithmetic

Cost is a construction question. Value is two different questions, and they do not move together.

An ADU pays back in two ways, and only one of them is reliable:

• Rent, which is immediate and measurable. Even a modest unit renting for $1,200 to $1,800 a month in a South Florida market covers a real share of a payment — our payment calculator will tell you what share of yours.
• Resale value, which is not one-to-one with the cost. An appraiser may treat a permitted, legally separate unit as additional living area, or as an amenity, depending on the comparables available. In a neighbourhood with no comparable ADUs, the second is more likely.

The honest framing: build it because the rent works for you while you live there. Treat any resale premium as a bonus rather than as part of the business case.

What it changes about the property

Three things, and two of them are worth planning for.

1. Insurance. Adding square footage and a tenant changes the policy. Tell the insurer before, not after.
2. Property tax. New permitted square footage is new assessed value, and the improvement is assessed at market rather than being protected by your accumulated Save Our Homes cap.
3. Homestead. Renting part of your homesteaded property can affect the exemption on the portion that is rented. It is a proportional question, not an all-or-nothing one — but it is a question, and the appraiser’s office answers it, not the internet.