Adding ADU Apartments to Multi-Family Properties is a Wise Investment

Are ADUs a Good Investment

In California, with the new ADU laws enacted in 2020, owners of multi-family residential structures have an incredible opportunity to maximize earning potential by building multiple dwellings on their property.  It can help maximize the earning potential for an investor, without requiring to undergo a long and messy construction process or purchase a new property.

Things to Consider Before You Add ADUs to Multi-Family Property

But before you plan to diversify your investments and increase your income quickly, you must know that two kinds of ADUs can be built on a multi-family property.

  1. Detached ADUs: A detached ADU is a completely free-standing structure that is unattached to the main multi-family structure;
  2. Conversion ADUs:  In conversion ADUs, an investor can convert the existing “non-livable space” of the main multi-family building into an ADU (e.g. a passageway, storage room, boiler room, basement, attic, or garage). 

There are a few things you’ll have to keep in mind before you decide to add an ADU to your multi-family property. These include:

  • What is a Multi-Family Property: A multi-family property must have a structure like a duplex or an apartment building with two or more units that are attached. Two homes on one property are not considered multi-family in most areas in the United States. 
  • Zoning and Local Regulations: Adding a multi-family ADU apartment requires the property to be in a residential area. Also, there are sizing restrictions as well as the number of ADUs that can be added to a multi-family property is different depending on the area. So, it is best to know the rules in your area before making any plans. 

Top 5 Reasons to Invest in Multi-Family ADUs

Now when you have made up your mind to invest in the multi-family ADUs, let’s talk in detail about the reasons an investor should invest in the ADUs

1. Investment Diversity

Adding a dwelling unit is not only an easy way to increase the value of your property but also helps bring in more revenue. The best thing is that it won’t require the waiting time and mess of on-site construction. All you have to do is- get the permits in place, pour a foundation, and wait for your dwelling unit to be craned into place, and you’re ready to rent it out and reap the benefits.

2. Reliable Income

Depending on the rules and regulations in your area, you can easily rent an ADU out nightly or monthly. ADUs increase your property value and investment diversity, and it also brings in steady revenue as well. 

3. Return on Investment

As the cost of an additional dwelling unit is relatively feasible, the rental income begins to make up the cost and adds value to your property instantly. This way the cost of any dwelling unit is quickly returned after you have it added to your multi-family property. Soon after the rental income completely pays for the ADU, an investor starts seeing a profit from the investment that benefits them in the future.

4. Leverage for Future Investments

The addition of a multi-family property ADU has the added benefit of increasing the property value. Should you decide to borrow money for a future property or business endeavor, the increased holdings act as an added benefit. In simple words, the more assets you own, the stronger your position will be as an investor to make investments in the future.

5. Tax Advantages

One of the prime benefits of owning and managing a multi-family rental property is deductions. This includes the addition of an ADU, which you can usually make a deduction for based on operating costs if you are bringing in any revenue. 

Get Expert Advice At Beach Front Property Management

The financial benefits of building an accessory dwelling unit to your multi-family property will pay off for years to come. This is the best time to make this addition and enhance your investments as well as revenue. To do it the right way,  check our website or talk to our consultants at BFPM. 

At Beach Front Property Management, we have experts who can make the process faster and easier and can navigate the rules and regulations in your area for you. We can help you get the permits and look into the rules about ADUs in your area. That way, you can focus on managing your property, and make the ADU addition without any hassle or confusion. 

Trevor Henson

Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…
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