ACCESORY DWELLING UNITS (ADUs)
”As a homeowner who chooses to build an additional structure on your property, you are not only making a sound financial investment, you are also creating a solution for our state’s housing challenges.
ֿAs of January 2017, a new state law took effect that encourages homeowners in the state of California to build Accessory Dwelling Units, also commonly referred as “granny flats”, “in-law units”, “back houses”, “guest houses”, or “secondary units”. The law is a major step toward solving our housing crisis.
There is no question that with today’s rental prices, homeowners who build ADUs have the potential to generate substantial income. While vacation rentals provide the opportunity for increased profitability, they are also subject to some inconsistency due to seasonality and changing local regulations. Planning to lease your ADU as a long-term market rate rental will generate strong returns that are predictable.
California needs housing more than ever before and ADUs arguably provide the clearest path to add housing in cities across the state. With over 11,500,000 single family households throughout the state, ADUs present Californians with the opportunity to collectively build millions of homes within our existing neighborhoods.
The new laws supporting ADU development on single family properties present homeowners with an opportunity to maximize the income potential of their properties and contribute to the housing supply at the same time.
In most areas of Southern California it is really a no-brainer to add an ADU as an income property. Since the cost of land is irrelevant (since you already own it), the construction cost is simply your cash investment or monthly financing of payments covering the ADU itself.
Building an ADU with 1-2 bedrooms in your backyard can increase a property’s value by 10-30%. Also, homeowners can earn about $1,750 to $3,500 a month for a 1 bedroom ADU and about $2,250 to $5,500 a month for a 2 bedroom ADU in passive rental income (varies by location).
A NEW TREND
Many homeowners are deciding to build ADUs and rent their main residence as a long term rental. This creates a large income stream while minimizing expenses tremendously. New families, people of retirement age and single professionals alike are finding reasons to live more simply in ADUs and earn passive income in the downsizing process.