ADU Rental for Passive Rental Income
Always think of an ADU unit as an investment. Not only do they provide you with additional living space but they also boost the value of your home. ADUs are also one of the most popular ways to earn a passive income, particularly by renting out your ADU. ADU rental income is simply one of the top ADU benefits.
If you plan on building an ADU for rent but aren’t sure where to start, this short ADU rental guide will help you learn all you need to know!
Long Term ADU Rentals
You can rent out your property long-term to tenants. This involves a longer period of occupancy, typically for over a month. But if you are looking for long-term rentals, you will want to make sure your ADU rental looks the part. So, invest in quality flooring, countertops, wall paint, furnishings and amenities to ensure their stay is comfortable.
These types of rentals are quite similar to how apartment rentals operate. You will establish a long-term lease or agreement with your tenant. This way, you can enjoy a passive income for the next few months.
Short Term Rentals
If your property lies in an area popular with tourists, you may want to consider turning the ADU into a short-term rental instead. Short-term rentals allow tenants to reside in your property for a few days or weeks.
The only downside is that you won’t always have tenants available and this may become a limitation to your consistent income. It may also prove to be slightly inconvenient, with all the additional cleanups you will need to pay for between bookings.
Consider State ADU Requirements & Regulations
Another thing to consider is your property’s regulations surrounding ADUs. Some states prohibit offering short-term rentals (typically for occupancy of less than 30 days). Others may demand that you exclusively live in your primary residence and rent out your ADU unit (not the other way around).
How Much Should You Be Charging for Your ADU Rental?
When determining how much rent you will be charging for your ADU rental, you must consider a number of different factors.
Start by assessing the rates for similar ADU homes near your property. Rental listing services such as Zillow and ApartmentList may help you get a rough idea of what to expect.
Next, consider the amenities you are offering in your ADU rental. The more facilities you offer, such as home furnishings, in-unit laundry facilities and additional parking spaces, the more rent your tenant may be willing to pay. Make sure you take them into account when deciding on your rental price.
So, is it worth it to build an ADU? The answer is, Yes!
Should You Work With A Property Management Company?
If you plan on renting your ADU house but have no prior experience as a landlord, you can always choose to work with a property management company.
Services such as AirBnB have helped streamline this process and take over much of the hefty work. They will help you find tenants, secure bookings and process payments. All you need to do is keep your property in tip-top shape. Some property management companies will offer you a variety of services ranging from light assistance to complete concierge-level services.
However, you will have to pay a portion of your monthly retinal income to such companies in return for their services. This will take away from your total ADU rental income as a landlord. Ultimately, it all comes down to what is convenient for you!