ADUs In Scottsdale: Rules, Costs, And ROI

Thinking about adding an accessory dwelling unit to your Scottsdale property for rental income, a guest suite, or future multigenerational living? You’re not alone. ADUs are gaining traction across the Valley, but the smartest projects start with a clear read on rules, costs, and realistic returns. In this guide, you’ll learn what to verify with the city and your HOA, how to budget, and a simple way to model ROI so you can move forward with confidence. Let’s dive in.

Start with zoning and permits

Before sketching a floor plan, confirm that an ADU is allowed on your specific lot and what standards apply. Scottsdale’s Planning & Development Services (PDS) and Building Safety teams publish the governing rules and manage permits. Private covenants can be more restrictive than city rules, so review HOA documents early.

What to confirm with the city

• Zoning district eligibility for ADUs on your lot. Single-family zones are commonly eligible, but standards vary by district.
• Maximum unit size and height. Many cities cap square footage and set one- or two-story limits.
• Setbacks and separation from the main home. Check side, rear, and any required distance between structures.
• Lot coverage and impervious-surface limits that can constrain footprint.
• Parking requirements and whether on-site spaces must be added or replaced if you convert a garage.
• Owner-occupancy rules. Some places require an owner to live on site.
• Utility setup. Whether separate meters are permitted, or if the ADU must tie into the primary service.
• Occupancy and use limits, including whether short-term rentals are allowed for ADUs.
• Building code and life-safety standards such as egress, fire separation, and mechanical systems.
• Permit path and fees, including plan check, building permit, and any impact or utility connection fees.
• Conversion versus new-build standards. Converting an existing garage may follow different rules than a detached new build.

HOA and private rules

• Review CC&Rs and design guidelines. Many HOAs prohibit ADUs or require architectural review and specific materials or setbacks.
• Confirm neighborhood overlays or historic districts that could add design or review steps.

Permits and timeline

• Expect plan review and building inspections. Timelines vary depending on scope and submittal quality.
• Connect with utilities early to understand capacity and any connection or upgrade fees.

Tip: City codes evolve. Confirm current standards directly with Scottsdale PDS and speak with an ADU-experienced design professional before committing to a plan.

ADU costs in Scottsdale

ADU budgets are driven by site conditions, size, finish level, and utility hookups. Conversions of existing space usually cost less than ground-up detached units. Prefab or modular solutions can shorten schedules, but site work and permits still matter.

Cost components to include

• Pre-design and soft costs: survey, soils (if required), architectural/design fees, plan check, permits, impact fees.
• Site and civil: grading, drainage, retaining, driveways, patios, sidewalks, landscaping.
• Foundation and structure: slab or pier, framing.
• Building envelope: roofing, windows, exterior finishes, insulation.
• Interior systems and finishes: plumbing, electrical, HVAC, cabinets, counters, flooring, tile, appliances.
• Utilities: water, sewer or septic adjustments, power service upgrades, gas lines, trenching.
• Life-safety and accessibility features required by code.
• Contractor fees: overhead, profit, and a contingency. Many owners set 8 to 15 percent for contingency.
• Financing costs: interest during construction, origination, lender reserves if required.
• Property taxes: reassessment after improvements.

How costs vary

• Conversion of existing space: often the most cost-effective path when structure and utilities can be reused.
• New detached unit: mid to higher cost, especially with larger footprints or premium finishes.
• Prefab/modular: potential schedule gains, with site work and utility scope still significant.
• Phoenix-area per-square-foot ranges vary widely. Competitive local bids are essential.

Ways to manage the budget

• Right-size the program. A well-planned studio or one-bedroom can meet most needs at lower cost.
• Favor simple forms and standard spans. Complex rooflines and structural changes add cost.
• Optimize utility runs. Placing the ADU near existing laterals can reduce trenching. n- Select durable, mid-range finishes to balance appeal and cost.
• Get at least 2 to 3 bids and request alternates for value engineering.

Financing options

Consider the funding path early and share your ADU plan with your lender so underwriting aligns with scope and timeline.

• Cash funding. Simplifies approvals and avoids interest carry.
• Home equity line of credit or home equity loan. Secured by existing equity.
• Construction-to-permanent loan or renovation loan. Funds construction, then converts to a long-term mortgage.
• Cash-out refinance. Taps equity and resets your first mortgage.
• Portfolio loans for investors. Useful for non-owner-occupied projects.
• FHA/VA paired programs. Some loan programs allow ADUs with primary mortgages. Confirm current rules with your lender.
• Tax effects. Expect reassessment that can increase annual property taxes. Contact the Maricopa County Assessor for details.

Site and design factors

Your lot’s shape, access, and utilities often drive feasibility more than the floor plan.

• Lot size and shape. Narrow or irregular lots can limit footprint and placement.
• Setbacks, easements, and utilities. Side-yard easements or alley utilities may constrain the location.
• Construction access. Tight side yards and limited truck access increase cost and time.
• Topography and drainage. Sloped sites may require grading, swales, or retaining walls.
• Existing structures. Converting a garage can save, but verify replacement parking rules.
• Parking and circulation. Ensure safe, clear access for both units if required.

Desert climate tips

• Orient for shade. Reduce west glazing and add covered entries or patios.
• Insulate and seal. Quality windows, air sealing, and insulation improve comfort and lower bills.
• Plan for efficient HVAC. Right-size systems and consider heat pumps.
• Shade landscaping. Trees, pergolas, and screens improve privacy and thermal comfort.
• Solar readiness. Conduit and roof load capacity can future-proof for panels.
• Universal design. No-step entries and wider doors support aging-in-place.

Operating rules and rentals

Policy influences revenue and use. Review city rules and your HOA documents before marketing any rental.

• Short-term rentals. Some cities regulate STRs or require registration. Confirm Scottsdale’s current STR policies for ADUs and verify HOA allowances.
• Long-term rentals. Clarify lease terms, insurance, and whether any owner-occupancy rules apply in your zoning district.
• Utilities and parking. Decide if tenants pay separately or if you will include utilities in rent. Verify on-site parking requirements.

Build your ROI model

Instead of chasing headline returns, build a conservative pro forma. This helps you understand sensitivity to cost and rent.

1. Market rent analysis. Pull comps for studios and one-bedrooms near your property. Speak with a local property manager about achievable rent and vacancy.
2. Gross income. Multiply monthly rent by 12 and apply a vacancy factor aligned with local data.
3. Operating expenses. Budget insurance, maintenance, reserves for replacements, utilities if owner-paid, and management fees if applicable.
4. Property taxes. Add the estimated incremental tax from the improvement.
5. Net operating income. Subtract expenses from gross income.
6. Capital and financing. Add all project costs, interest during construction, and your cash invested. Note loan terms if financing.
7. Returns and sensitivity. Calculate cash-on-cash, payback period, and run best and worst cases for rent, vacancy, and cost overruns.

Simple pro forma template

• Monthly market rent: [enter]
• Expected vacancy rate: [enter]
• Gross annual rent: [auto-calc]
• Owner-paid utilities: [enter]
• Insurance and taxes: [enter]
• Maintenance and reserves: [enter]
• Management fees: [enter]
• Net operating income: [auto-calc]
• Total project cost: [enter]
• Loan terms and interest during build: [enter]
• Cash invested: [enter]
• Cash-on-cash return and payback: [auto-calc]

Action plan checklist

1. Verify zoning, setbacks, and owner-occupancy rules with Scottsdale PDS. Confirm HOA restrictions and any neighborhood overlays.
2. Order a preliminary site feasibility. Include a survey and utility locate if placement is tight.
3. Talk to utilities about capacity and connection options. Note possible fees.
4. Gather rental comps and speak with a local property manager about demand and vacancy by unit size.
5. Obtain 2 to 3 design and construction bids for your preferred path: conversion, detached stick-built, or prefab.
6. Consult lenders about HELOC, construction-to-perm, or refinance options and prequalify.
7. Build a conservative pro forma. Include contingency and potential property tax increases.
8. Align design choices with budget and target renter or family use. Finalize plans and submit for permits.

How a local advisor helps

If you plan to build an ADU to support a future sale, a purchase, or long-term holding, it pays to align the design and timing with your broader real estate goals. A Scottsdale-focused advisor can help you evaluate neighborhood acceptance, gather relevant rental and sale comps, and understand how a permitted ADU could impact resale value. You also gain a calm, experienced partner to coordinate the right steps in the right order so your ADU supports your lifestyle and financial plan.

Ready to discuss your property and goals in detail? Let’s connect for a private consultation. Contact Marianne Bazan for a confidential market evaluation.

FAQs

Are ADUs allowed on single-family lots in Scottsdale?

• It depends on your zoning district and any private HOA rules. Confirm with Scottsdale Planning & Development Services and review your CC&Rs before proceeding.

How much does it cost to build a Scottsdale ADU?

• Costs vary widely based on size, finishes, site work, and utility hookups. Get 2 to 3 local bids and include soft costs, contingency, and expected tax impacts in your budget.

Will an ADU increase my property taxes in Maricopa County?

• Yes, improvements are generally reassessed. Contact the Maricopa County Assessor to estimate the change based on your scope.

Can I use my ADU for short-term rentals in Scottsdale?

• Policies can change and may differ by HOA. Confirm current Scottsdale short-term rental rules and your HOA’s position before operating an STR.

Do I need separate utility meters for an ADU?

• Not always. Some jurisdictions allow shared service while others permit or require separate meters. Verify metering options and fees with local utilities.

Is converting my garage the cheapest ADU option?

• Conversions are often the most cost-effective because structure and utilities may be reused, but you must meet code and address any required parking replacement.