What an ADU actually is, the types you can build here, and how homeowners typically pay for one.
An accessory dwelling unit (ADU) is a smaller, secondary home built on the same lot as a single-family house - sometimes called a granny flat, in-law suite, or backyard cottage. It has its own kitchen, bathroom, and entrance, and can be rented out, used for family, or set up as a home office or studio.
Minnesota doesn't have one statewide ADU law - each city sets its own zoning rules, and they vary widely across the Twin Cities metro. Minneapolis and St. Paul are among the most ADU-friendly cities in the state, having each reformed their codes in recent years to drop owner-occupancy requirements, cut parking mandates, and allow larger units. Suburbs range from similarly permissive to much more restrictive - see the specifics for your city on the City Rules page.
Costs and timelines vary by project - get a personalized quote from a matched local builder rather than relying on a generic estimate.
A standalone structure built in the backyard, fully separate from the main house. Offers the most privacy and design flexibility, but is usually the most expensive and slowest option since it's built from the ground up.
Converts an existing detached garage into living space. Often the most cost-effective route since the foundation and structure are already in place.
Built onto the side or back of the existing house, sharing a wall. Can be quicker to permit since parts of it are treated as an extension of the primary structure.
Converts existing space - a basement or above-garage area - into a self-contained unit. Usually the least expensive option since it reuses space you already have.
Financing options and eligibility change over time - a lender or matched contractor can walk you through what's currently available for your specific project.
| Option | How it works |
|---|---|
| Cash-out refinance | Replace your existing mortgage with a larger one and use the difference to fund construction. |
| Home equity loan or HELOC | Borrow against equity you've already built up in your home, often at a lower rate than unsecured loans. |
| Renovation loan (e.g. HomeStyle, FHA 203(k)) | Bundles ADU construction costs into your mortgage based on the home's projected after-construction value. |
| Construction loan | A short-term loan that converts to a standard mortgage once the ADU is complete. |
| Savings or family financing | Some homeowners fund smaller projects - like a garage or basement conversion - out of pocket. |