In real estate, ADU stands for Accessory Dwelling Unit, which is a secondary housing unit on a single-family residential lot. An ADU is a separate living space on a property that can be used for personal or income reasons. It is also known as an in-law or mother-in-law unit, secondary dwelling unit, granny flat, or carriage house. An ADU usually has its own kitchen, living area, and separate entrance. It can be attached to a house or garage, or it can be built as a stand-alone unit, but it generally will make use of the water and energy connections of the primary house. ADUs can add value to a property and provide more affordable housing options in residential neighborhoods without dramatically changing a neighborhood’s character. However, constructing an ADU could increase a homeowner’s tax bill, possibly eliminating a significant amount of the profit. The legality of renting out ADUs or guesthouses varies by state and city, and there are specific rules and regulations to follow.