A mother-in-law suite is a separate dwelling on the same piece of property as a single-family home. They typically contain a separate bed/bathroom and a kitchenette, and are sometimes called secondary suites, granny flats, or accessory dwelling units (ADUs).
ADUs, like mother-in-law suites, can be attached or detached. They are frequently a conversion of an existing property structure (e.g., garage, basement, or attic), or they can be a completely new structure built after the primary residence.
The key benefit of mother-in-law suites is that they provide a separate living space with more or less the same amenities as a house. This means they can often be leased to tenants to generate rental income.
This article will cover the basics of mother-in-law suites and the costs and benefits of adding one to an existing property.
What makes it a mother-in-law suite?
A mother-in-law suite must have a separate bedroom and bathroom, and a separate living space. Usually, they have their own entrance, though not always. The actual structure might not be detached, but the space is distinct from the other amenities of the house.
Beyond that, details in a mother-in-law suite can vary. They frequently have a kitchenette with a sink and a small counter. Larger suites may have a full kitchen, complete with stove, microwave, and other appliances.
The term mother-in-law suite comes from the idea that it’s a dedicated space for in-laws to visit or live in, integrated with the family home while maintaining independence. Of course, an in-law suite is not strictly limited to family and can be open to anyone.
They might serve as separate housing for younger family members before they move out, or they can be leased to tenants and provide a source of rental income for homeowners.
Other names for mother-in-law suites (and what they mean)
The term mother-in-law suite can refer to a wide range of separate or attached dwelling spaces, separate from the primary residence on the property.
- ADU: ADU is typically the legal designation and regulatory term for mother-in-law suites in states such as California, Oregon, and Washington. Many states have recently been passing legislation allowing for ADU construction to address local housing shortages.
- Granny flat: Granny flats are another name for mother-in-law suites that reflect their original idea of housing older family members. Granny flats are typically in the backyard at ground level so older family members don’t have to climb stairs.
- In-law apartment: In-law apartments are a type of suite that’s added on to the existing property and that is usually smaller than the average rental unit.
- Carriage house: A carriage house is a detached living structure, typically with two floors. The term comes from old horse carriage houses on old properties that were converted to dwellings.
Uses and purposes of mother-in-law suites
One of the best features of a mother-in-law suite is its versatility. Below are some of the most common uses of in-law suites.
1. Multigenerational suites
The most true-to-name use of an in-law suite is for multigenerational families to house parents, grandparents, or older children.
According to data from the Pew Research Center,[1] more than 64 million (nearly 20%) of Americans live in a household with two or more generations.
The upside of multigenerational families is that they can save more money and divide expenses among additional adult household members. For those with elderly family members, an in-law suite can be a cheaper option than an assisted living facility or care home.
2. Rental property
An in-law suite can also be used as a rental property to generate passive income. ADUs with more complete features, like a full kitchen and separate entrance, could allow for rental tenants.
Renovating your home to add a mother-in-law unit can pay for itself once it starts generating rental income.
However, the legality of using ADUs as rental properties depends on the location. Some municipalities have structured habitability standards and may require more installations before they can legally serve as a rental unit.
3. Home office
Another use of in-law suites is as a home office. This option has become more popular given the rise of remote work and telecommuting.
The separate space of an in-law unit gives privacy and offers the professional feeling of being away from home while still being able to switch out loads of laundry in between Zoom meetings. The separate space also helps minimize distractions.
Mother-in-law suite vs. guest house vs. ADU
The terms mother-in-law suite, guest house, and ADU are often used interchangeably and can mean the same thing. However, specific features of the property can align more with one term than another.
Generally speaking, a mother-in-law suite is a separate, private living space with full or partial amenities. A guest house is a detached living space, but it usually lacks full amenities for living and isn’t meant for long-term or permanent stays.
ADUs, on the other hand, are typically freestanding structures completely detached from the primary resident on the property. They have their own electrical and plumbing systems and are typically constructed explicitly to serve as a rental unit.
“A mother-in-law suite differs from an ADU in that it is located on the property,” says Dan Salinger, luxury home expert at Zook Cabins. “ADUs can be used for investments and for adding additional affordable housing to a certain area. Now, depending on how you construct your mother-in-law suite, it may fall under ADUs guidelines.”
Below is a quick table showing the main differences between the three terms.
| Mother-in-law suite | Guest house | ADU | |
|---|---|---|---|
| Location | Attached | Detached | Detached |
| Kitchen | Kitchenette | None | Kitchen |
| Zoning treatment | Accessory unit | Accessory unit | Full unit |
| Typical uses | Permanent residence | Temporary stays | Rental unit |
What value does an in-law suite bring to a home?
A well-built in-law suite can boost property values by up to 35%.[2] In addition to the increase in home resale value, ADUs can generate liquid cash through rental income, meaning homeowners can see a quick return on their investment.
From a value-added perspective, in-law additions should focus on the versatility of the space. “Resale value can be influenced heavily by the suite’s flexibility,” says Brandon Bently, owner of Southern Hills Home Buyers.
“Buyers often see value in spaces adaptable for home offices, gyms, or private studios, not just as living quarters. Designing the suite with simple modifications in mind can broaden appeal.”
However, there are some cases where an in-law suite won’t add value. This may be the case with poor craftsmanship or if the structure doesn’t have the appropriate permits — hence why you should always perform due diligence when considering an in-law suite.
Should you build one or buy a home that already has one?
The choice for many homeowners is whether they should construct a new mother-in-law suite or buy a house that already has one. Both options can make sense depending on your circumstances.
Here are some factors to consider when deciding.
Cost certainty
The cost of building a new ADU can balloon quickly if you run into unexpected issues. Buying a house with a pre-existing one can be more expensive, but there is less uncertainty.
Time to use
You can immediately start using a pre-existing ADU, but building a new one can take months or even more than a year, depending on construction and permitting needs.
Financing issues
Financing a new construction can be more complex than a regular mortgage for buying a home. On the other hand, building gives you more control over the final product.
Zoning risk
By building your own, you can be sure it abides by all zoning and permitting requirements.
How do you build an in-law apartment?
The costs of building an in-law suite largely depend on whether you are building a completely new structure or converting an existing one into a living structure.
Prefab/modular
Prefabricated and modular ADUs are among the cheapest options and can cost as little as $40,000 to install.[3]
Prefabs are built to local codes and can be transported in one piece to the property, where they’re installed with plumbing, electrical, and other fixtures.
Custom detached
Building is substantially more expensive; adding a custom detached unit can cost upwards of $100,000, depending on where you live. Places with strict zoning regulations and requirements will be more expensive to obtain permits and build.
Garage/basement conversion
Converting an existing space to an in-law suite is by far the most cost-effective method, with average costs coming in at just over $30,000. However, these costs can be significantly higher if you need to make substantial plumbing or electrical changes.
Do you need a permit to build?
Most states allow you to build an in-law suite on your property, but you’ll have to get the right permits. The ease of getting these permits, however, can vary significantly depending on your location.
Permits can cost between a few hundred and a few thousand dollars depending on whether you live in a rural or urban area.
Keep in mind that some HOAs may have rules against ADUs and in-law suites. These restrictions are different from state laws and vary based on the neighborhood.
To find out whether zoning in your area allows for ADUs, you can reach out to your city and code enforcement. ADU laws have been relaxed in many cities in recent years to make construction easier and address housing shortages.
Ways to finance a mother-in-law suite
Below are some of the most common and feasible ways you can finance the construction of a mother-in-law suite:
1. HELOC
A home equity line of credit (HELOC) is basically a loan you take out against the equity of your home. A HELOC is nice because it functions similarly to credit card.
You can borrow from a revolving balance up to a limit and use what you need. However, since your home is collateral, failing to make payments on a HELOC can result in foreclosure.
2. Cash-out refinance
With a cash-out refinance, you acquire a new mortgage that covers the remainder of the previous loan. Your interest rate will change, which could be a benefit or a drawback depending on your current interest rate and market rates.
If your home’s value has risen since you bought it, you can refinance at the new, higher appraised value and use the remainder of the cash to fund the construction.
The downside with a cash-out refinance is you’ll have to pay origination and loan fees for the refinanced mortgage.
3. Renovation loan
A renovation loan is a loan taken out for home renovations. They can be based on the home’s projected value after upgrades.
There are also special renovation loan options, such as an FHA 203(k) rehabilitation loan, that have lower credit and income requirements.
Buying a home with an in-law suite
Given the resources and financing required to construct a new in-law suite, many might think that purchasing a home with a pre-existing suite is the better choice. Traditionally, though, inventory for homes with ADUs has been limited, with the largest concentrations in a handful of states.
However, recent legislative changes in many states have aimed to make ADU construction more feasible, so the number of available units is increasing. These increases are characterized by regional differences, such as homeowners in the Midwest and East Coast favoring attached units.
If you are set on buying, you can talk to an agent to assess your options and see what’s right for you.
Next steps: Talk to a real estate expert
Like any real estate decision, buying a home with an in-law suite can be full of uncertainty. But there are options for assistance.
Using Clever, you can search for top local agents who can help you with finding the best homes for sale with in-law suites, evaluate the potential for resale, and navigate important zoning questions. The assistance can be invaluable for making the best real estate decision for your wallet.