Thinking of building an ADU in your backyard? Here are some pros and cons.

• Backyard tiny homes are increasing in popularity, especially in California.
• There are state programs that help fund a portion of the construction costs.

Interest in tiny homes is growing as towns, cities, and some states loosen local zoning laws.

If you live in a place that allows building these accessory dwelling units, or ADUs, you may have asked yourself: should I build one too?

Insider has talked to several ADU owners who have raved about their experience with owning an ADU, but it's not for everyone. It can be pricey and can take up a lot of backyard space.

If you're considering building a tiny home in your yard, here are some pros and cons to consider. And, be sure to check your state's or town's guidelines as well.

Pro: ADUs increase the value of your home

Adding a tiny home to your backyard could increase your property's value by 35% depending on location, according to a 2021 study by the National Association of Realtors.

California resident Glenn Robinson told Insider that after he helped his father build an $185,00 ADU in his backyard in Redwood City, California, that's exactly what happened.

"It's a win-win because it helps my parents financially, significantly, and increases the value of the property," Robinson previously told Insider.

Pro: Building a tiny home in your backyard can bring in additional income

A popular use of tiny homes is for additional income, according to California Housing Works.

San Jose homeowner and ADU advocate Joyce Higashi rents her backyard home to traveling nurses for $3,000 per month, she previously told Insider. It's an easy way to rake in extra funds, she said.

Eugene Chu built an ADU on a rental property in San Diego to add more bedrooms to the lot, he previously told Insider. Now he makes thousands more renting the same property as a result of the ADU.

Pro: Tiny homes can allow a child or elderly parent to remain nearby

Multigenerational living is becoming increasingly popular.

"The share of the U.S. population living in multigenerational homes more than doubled over the past five decades," the Pew Research Center stated in 2021 report.

ADUs, sometimes called "granny flats," have been touted as convenient extensions for adult children or elderly parents to live in.

A 37-year-old non-profit executive, her husband, and her retired parents were all able to afford to stay in the Bay Area, because they split the cost a single-family home and the cost to build an ADU in the backyard.

In Sonoma, California homeowners Cindy Loughridge and Seth Restaino built an ADU in their backyard that serves as a guest house, where their adult children and their friends stay when they visit.

Con: Tiny homes can be difficult to finance

In California, which has more relaxed laws around ADUs than any other state, these tiny homes can cost from $100,000 to over $400,000. The cost of a typical home in the Golden State is around $796,000 as of June, according to Redfin.

Still, financing for these units is hard to find, experts say. So, if you don't have cash, a home equity line that will support it, or access to another loan, it can be difficult to build, a report from the Terner Center for Housing Innovation at the University of California-Berkeley said.

"Though many homeowners want to build an ADU, they are often prevented from doing so because they have difficulty financing the upfront costs," the report said.

Affluent homeowners are more likely to build ADUs for that reason, the report said.

Con: Tiny homes can be hard to build

While Higashi said she loves her ADU, she was initially discouraged because she originally thought she needed a custom-built one and nobody could give her estimates on time or cost she said.

Selma Hepp, chief economist at CoreLogic, previously told Insider she ran into many challenges when building her ADU. "I have a Ph.D. in housing, and it was still so complicated, confusing, and stressful for me," she said. "I just can't imagine what it's like for other folks."

Ultimately, Higashi worked with Abodu, a prefab ADU company in California that handles most of the process for their clients. There are other companies, such as Villa, Casata, Cosmic, and Cover, that do this in certain regions.

Con: You'll have to sacrifice part of your backyard, and may need to share your property

Of course, an additional unit on your property inherently requires homeowners to sacrifice some of their property.

If you plan to rent it out, use it a permanent home for a family member, or as a short-term rental, you may also lose a bit of your privacy.

"An ADU has the potential of completely disrupting your privacy," says George Beatty, a Philadelphia-based real estate consultant told Realtor.com.

Have you built a tiny home in your backyard? We want to hear from you about what your experience was like, and whether you'd recommend it. Reach out to the author of this story at kneubauer@insider.com.