Things to consider before adding a granny flat to your property

Mon Oct 16 2023

A grandmother sits on her couch with her daughter and grandchild in her granny flat

Granny flats are becoming more popular for families all across the country – and for good reason! Not only can a granny flat help aging loved ones maintain a sense of independence, but they can also offset the high cost of buying a home. 

However, adding a granny flat isn’t a simple DIY home project. Let’s dig into what you need to know before you decide if it’s the best option for your household.

5 things to know before adding a granny flat

While you may see plenty of advantages to having a granny flat, you want to think carefully before you add one to your property. Here are five things to consider before building a granny flat.


There’s no way around it: adding a granny flat isn't cheap. How much one costs depends on any number of factors, but the most important one is probably the type. Building any structure from the ground up can be costly, but this one needs to be a livable space. That means it needs plumbing, gas, and electrical added to make it a liveable space. But don’t forget to factor in the cost of construction and permits, too.


Check your local building codes to make sure ADUs are allowed in your area. Many places may allow single-family dwelling properties to add granny flats, but not all do. You certainly don’t want to spend the time and money building something that is against zoning laws!

While you're at it, you might want to check with your homeowners association (HOA) rules.Some may forbid you from adding an ADU.


Your home insurance will likely be affected if you build a granny flat. Generally, a stand-alone ADU built on the grounds of a single-family home is typically covered as an other structure under Coverage B.  However, a granny flat that is freestanding and has a separate postal address, while uncommon, usually needs its own policy where it could be covered by Coverage A.

The other option is remodeling your home to add a granny flat. If you create an in-law suite in your primary residence, then it’s most likely covered by the dwelling portion of your home insurance policy. Either way, you may want to talk to your insurer to make sure you have sufficient coverage.

One more caveat: a granny flat that you use to generate income might not be covered by your homeowners insurance and instead require a commercial insurance policy.


Size impacts costs, but it can also determine whether or not you can legally build a granny flat. Some states have laws restricting how big your granny flat can be. California, for example, only lets you build an ADU that’s 1200 square feet or less, assuming there are no local laws that limit size.


You’ll likely need permits to build a granny flat. Your contractor should be able to help you pull the right ones. Don’t start work until you have the permits in hand or you risk having construction shut down.

Despite these factors, adding a granny flat (ADU, carriage house, or whatever you like to call it) is definitely achievable. All it takes is a little imagination and a lot of planning, but in the end you could have a beautiful space for your family to stay.

What is a granny flat?

A granny flat is a small living space, typically designed for just one or two people. This may be a studio apartment or small one-bedroom structure, and it may be part of your primary residence or a separate building altogether.

We’re calling this kind of space a granny flat, but the more official name is “accessory dwelling unit” (ADU). You might also have heard granny flats referred to as:

  • Mother-in-law cottages.

  • Granny pods.

  • In-law suites.

  • Coach houses. 

As the name suggests, a granny flat is typically built for elderly family members so they can live on the same property as their adult children and grandchildren. However, many homeowners use these spaces for adult children or domestic employees. Some even rent them out, but being able to do that depends on local laws.

Granny flats are often designed as self-contained areas, so they include most of the amenities you’d expect in a full-sized home, like a kitchen and a bathroom, only smaller. But you may see in-law suites that are actually apartments within a home. These types of granny flats often have separate entrances from the rest of the house.

What are the benefits of granny flats?

Building a granny flat has a lot of benefits for homeowners. The first, and probably the most obvious is that an ADU can mean extra living space for the family. That, and the security of knowing your older family members are close by, can be enough of a reason to build a granny flat.

But there are some monetary benefits, too. One study found that ADUs can add as much as 35% to your assessed property value. Another potential bonus is rental income. Many homeowners use their granny flat to offset their mortgage payment by using them as long-term and short-term rentals. 

If you want to use your ADU for extra income, then you really want to take a close look at home insurance. Most homeowners policies don’t cover short-term rentals. (Learn why in our article Does home insurance cover Airbnb?)


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