Grow Your Rental Income with Accessory Dwelling Units

Looking to boost your rental income without buying a new property? An ADU unit could be the right option for you. An Accessory Dwelling Unit (ADU) is a small, independent living space built on the same lot as your main home. You can use this additional unit to generate steady rental income. This ADU unit can be: 

• A small, detached house in the backyard
• An attached small living space that extends from your main house 
• A basement apartment 
• An apartment over your garage 
• A garage converted into a small, comfortable living space 

Understanding Accessory Dwelling Units 

Also known as ‘granny flats’ or ‘mother-in-law units,’ ADU homes can house a family member or be rented out for additional income.   

Accessory Dwelling Unit Plans 

While ADUs may be attached or detached from a house, they usually use the same electrical and water connections from the primary house. Governed by different zoning rules and regulations, ADU homes have a type, size, design, and style limit levied on them depending on which state you reside in. Also, the owner of the primary house must live on the property.  

What Are Accessory Dwelling Units’ Legal Requirements? 

In many localities, you can get legal rental income from ADU housing. The following points describe the legal requirements for a structure to be classified as an ADU: 

• Only one ADU unit is allowed on the land parcel of a primary single-unit dwelling.  
• The ADU building must be smaller in size than the primary unit. 
• The Accessory Dwelling Unit must have a separate entry/exit, sleeping area, functioning kitchen, and bathroom facilities. 
• The ADU should also have fire detectors, water sprinklers, and carbon monoxide detectors.   

Legally, since an ADU is a part of the same property as the primary home, it cannot be sold or bought separately. The owner of the primary home remains the owner of the ADU. 

Smart Tips for Successfully Renting Out Your ADU 

1. Price Your Rental Strategically 

Start by setting a competitive rental rate. Research similar ADUs in your area to gauge pricing based on size, location, and amenities. Several tools can help you analyze trends and align with market demand. 

Include perks such as private entrances or laundry facilities in your pricing strategy. A slightly lower-than-average rate can attract renters faster while keeping your income goals on track. 

2. Understand Zoning and Local Regulations 

Before listing your ADU for rent, check local zoning rules and restrictions. Some areas have simple guidelines, while others may limit the number of people who can live in the unit or require special permits.  

Contact your local planning office to ensure you are in compliance with California’s Accessory Dwelling Units. Following the rules from the start can help avoid fines or delays. 

3. Decide on Short-Term or Long-Term Rentals 

Decide whether your ADU for rent will cater to short-term or long-term renters, as both offer unique benefits. Short-term stays can bring in higher monthly income but demand more time and management. They are great for tourist-heavy areas. 

Long-term rentals offer predictable income and less turnover, making management easier. Consider your location, your time commitment, and how involved you want to be. 

4. Protect Your Investment with Homeowners’ Insurance 

Standard homeowners’ insurance often does not cover rental scenarios. Homeowners’ insurance is designed for rental properties and typically includes coverage for property damage, liability claims, and lost rental income. 

Be sure to notify your insurer about your ADU’s rental status. A little extra cost can go a long way towards protecting your peace of mind. 

5. Write Clear, Fair Lease Terms 

Create a rental lease that clearly defines expectations. Specify the lease term, rent amount, due dates, pet and smoking policies, and which utilities are included. Mention any parking rules or extra fees. 

Clear lease terms protect your interests and set the stage for a smooth homeowner-renter relationship. 

6. Advertise Effectively and Screen Tenants Carefully 

A great listing helps your ADU stand out. Use high-quality photos and highlight features such as a detached layout, walk-in closet, or garden access. 

Post on rental websites and local platforms. Once inquiries roll in, use a consistent screening process, run background checks, verify income, and speak to references. Good screening leads to great renters. 

7. Follow Fair Housing Laws 

Complying with fair housing laws is essential. These laws prohibit discrimination based on race, gender, disability, family status, and other factors. 

Follow the same screening process for all applicants and be prepared to provide reasonable accommodation for renters with disabilities. 

8. Build Strong Renter Relationships 

Good relationships lead to long-term rentals. Respond promptly to questions and repair needs. Schedule routine check-ins or maintenance to keep the space in top shape. 

A respectful, responsive approach encourages renters to stay longer, reducing turnover and vacancies. 

ADU Development Standards: 

The development standards for ADUs vary from state to state and even city to city. While some local zoning laws limit the size of the ADU to under 500 square feet, others allow it to go up to 1,000 square feet. Depending upon the city/state, ADU height, width, and length restrictions are also applicable. 

In some cities, ADU development standards are also applicable to the lot. While the zoning laws in some cities require the land parcel to be at least 3,200 square feet, others do not have any specifications about the lot size. Once again, it all boils down to the building codes and the state and local laws. 

Accessory Dwelling Unit Pros & Cons: 

Before you reach out to ADU builders to start constructing on your property, here are a few pros and cons you should consider:  

PROS: 

• Extra income! Whether you host a full-time resident or use your ADU as a vacation rental (part-time renter), it is a great source of extra income. 
• If you decide to sell your property, an ADU will add value to your home, especially in housing markets with limited affordable housing. 
• An ADU gives you more usable space. As mentioned earlier, you can rent or use it as a guest suite, home office, permanent home for an elderly family member, adult child, etc. 

CONS: 

There are no cons per se, but you do need to consider the construction cost and the interior design expenses.   

Choose Beach Front Property Management Inc. to Increase Your ROI 

An ADU is an excellent way to grow your rental income. If your necessities are the bare minimum and you enjoy a minimalist lifestyle, you can rent out your primary dwelling and live in the ADU yourself! That would provide a lot of flexibility in your finances. To determine the best rental amount you can earn from your ADU, you can contact Beach Front Property Management Inc. We evaluate the market to suggest the best rental rates and provide services such as property inspection and reviewing rental policies. To do it correctly, check our website or talk to our consultants at BFPM Inc.