Accessory dwelling units — ADUs — have become one of the most talked-about topics in Arizona real estate. Whether you are looking to generate rental income, house a family member, or increase your property's long-term value, an ADU can be an excellent investment. But before you break ground, there is a lot to understand.
An ADU is a secondary, self-contained residential unit on a single-family lot. It has its own entrance, kitchen or kitchenette, living space, and bathroom. ADUs come in several forms:
In 2022 and 2023, Arizona passed sweeping legislation that significantly loosened local restrictions on ADUs statewide. HB 2721 prohibits cities from requiring owner-occupancy, capping the number of ADUs per lot at one, or imposing aesthetic requirements beyond what applies to the primary dwelling. This was a major shift that opened up ADU development across the Valley.
That said, local jurisdictions still have authority over setbacks, height limits, lot coverage, and utility connection requirements. Always verify with your city or county before proceeding.
Arizona's 2023 ADU reforms removed many of the barriers that once made backyard cottages impractical. But local zoning still matters — know your jurisdiction before you design.
A realistic budget for a detached ADU in the Phoenix metro area typically falls between $180,000 and $350,000 for a 600–1,000 sq ft unit, depending on finishes, site conditions, and design complexity. Garage conversions tend to be less expensive — often $60,000 to $120,000 — since the structure already exists.
Cost drivers include:
From initial consultation to certificate of occupancy, a typical detached ADU takes 8 to 14 months. A garage conversion can move faster — sometimes 4 to 8 months. The biggest variable is permitting, which ranges widely by city.
In most Phoenix-area markets, a well-designed 700 sq ft ADU can generate $1,400 to $2,200 per month in long-term rental income, and more on short-term platforms like Airbnb or VRBO. Actual returns depend on your neighborhood, finishes, and local rental demand.
Factor in the additional mortgage interest (if financing), insurance, and maintenance when calculating net return. Many homeowners find ADUs cash-flow positive within a few years.
Not all general contractors have ADU experience. Look for a builder who understands local permitting, can manage design-build delivery, and has a track record of completed ADU projects. Ask to see examples and speak to past clients.
At Constructed Matter, ADUs are one of our core service lines. We have navigated the permitting process across multiple Arizona jurisdictions and know what it takes to deliver a high-quality unit on time and on budget.
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