Should You Buy a House with a Mother-in-Law Apartment?

When I was growing up, we often went to visit my grandparents at their big farmhouse in Ohio. I remember, at my youngest, that we were allowed to go upstairs into my aunts’ and uncles’ old bedrooms—but during one visit when I was a little older, that changed. The upstairs had been sectioned off and we were no longer allowed up there. My grandpa was a property manager and landlord, and had decided to turn the upstairs of their home into a mother-in-law apartment. There was a stranger up there now, renting the place from my grandparents.

I was too young at the time to really understand why we weren’t allowed upstairs anymore. But after my grandpa died and my grandma went to sell the house, I remember wondering what would become of that apartment upstairs. Who would buy it, and was it a good investment? Well, if you’re in the market for a home and find one with a mother-in-law apartment, here’s what you should know.

In-law apartments originally became a thing when aging family members needed care but wanted to remain independent. Homeowners would create a full apartment within their dwelling or on their property, complete with a private entrance, kitchen, bathroom, and all the other amenities you could expect from a rental unit. The family member would move in, and they’d be close by but still separate.

The term “mother-in-law apartment” is pretty antiquated—typically they’re called accessory dwelling units now—and these days, most people either use them as a guesthouse for friends, rent them out to tenants, or use them for short-term rentals on Airbnb or similar platforms. You find a lot of them in resort communities, like around the Great Lakes or up in the Finger Lakes.

According to Amy Rosen, a real estate agent with Ruth Gale Realty in the Catskills, in-law apartments come with a slew of benefits. It’s a nice extra space for guests or for a family member who needs a little more room, and if you’re able to do so, it can bring in extra money from either a tenant or a short-term rental.

“There is a great deal of demand for these homes,” Rosen says. “It’s potentially a sound investment versus not having [an in-law apartment]. If you find a single-family home that has one and you personally see benefit to it, I see mostly nothing but pros.”

In-law units do have costs homeowners need to be aware of. The apartments can increase utility bills since, customarily, the utilities for that apartment are wrapped up in the main home’s costs. Plus, if the apartment is a true accessory building, you’ve got to consider upkeep. It’s a whole other roof, another set of walls, extra landscaping—these are all things that take time and money to maintain. Plus, if you want to rent it out, you’ll have to look into landlord insurance and other restrictions when it comes to operating a rental.

The most important thing for a potential buyer to do when looking at a home with an in-law apartment is to head down to the county office and check whether the apartment is a legal second dwelling or not. Many of them are not—and buyers must do their due diligence to find out.

“Your agent can guide you but the buck can’t stop with them when it comes to it being legal,” Rosen says. “Multifamily homes have different legal requirements. If the buyer wants to rent it out but it’s not a legal dwelling and they haven’t done this research, they could be in for some bad surprises.”

All in all, homes with in-law apartments can be a great investment—but carefully think through (before you buy) what you want to do with the space and find out any legal ramifications.