Building a Rental Unit on Your Property

A good lifetime-earning investment is something that anyone will welcome. If you are a homeowner with extra space in your property, and if you live in the suburbs or in a city that is not congested and has a relatively low cost of living, you have the potential to build one right beside you. You can set up and rent out an accessory dwelling unit (ADU).

The ADU has many names, such as a granny flat, in-law suite, guest bungalow, backyard cottage, converted garage, accessory apartment, or secondary suite. It is a smaller residential space in the same property as a stand-alone single-family home. It must be completely independent, with an entrance, parking, toilet-and-bath, kitchen, and one or more bedrooms.

It can be an internal ADU that is a converted portion of the main house. For instance, if the first floor of the house is partitioned off into an ADU with a separate entrance, it becomes an internal ADU. You can also have a new unit attached to the main house or a new unit detached from the main house.

Check Local Policies

You must first check, though, on the guidelines in your area. Some states like California and Vermont permit the building of ADUs outright, with certain conditions. Other states encourage their cities and counties to implement tolerant zoning regulations for ADUs. The usual requirements are for the owner to occupy either the main house or the ADU, minimum lot sizes, design and dimensional standards that are compatible with the neighborhood, off-street parking, and limits on the number of bedrooms and occupants.

Other cities and counties, however, require that the ADU can only accommodate family members or domestic employees. In this case, you cannot use the ADU as a rental unit.

Why This Is a Good Business Decision Right Now


The housing market is booming these days but there are too many buyers and too few available homes for sale. Newly constructed houses are not able to keep up with the demand. According to the National Association of Realtors (NAR), the number of homes for sale across the country was at a record low of 1.03 million at the end of February 2021. This was 30 percent fewer than the inventory in February 2020.

The economics of the situation resulted in soaring housing prices. According to NAR, the national median selling price of a single-family home increased by about 15 percent from October to December 2020 to $315,900, which is four times the U.S. median family income of $77,774. Real estate website Redfin states that for the first time in U.S. history, the average house is selling up to as much as 107 percent more than its listed price. Prices continue to rise as Redfin notes that median home prices in 310 counties rose by at least 10 percent from February 2020 to February 2021.

NAR adds that first-time buyers are being eased out of the market by high prices. Whereas they usually comprise 40 percent of buyers, their numbers have dipped to only one-third of the market. These are mostly millennials from 25 to 34 years old who just got married or are starting a family with children.

Your new ADU rental comes as an option for many of these potential homebuyers who cannot afford to buy a house yet with the current steep prices. Many of these people are looking for areas that are not crowded and where they can have access to a yard for fresh air.

Make sure that your ADU provides such a yard. No matter how small your front yard is, it will benefit from landscaping design and maintenance services to be more attractive and welcoming.

Maintaining Your ADU

Since you intend the ADU to be a lifetime-earning investment, you must ensure its proper maintenance. Inspect it regularly for any repair needs. It is cheaper to do smaller repairs than to wait until it becomes a larger problem.

Keep an eye especially on the heating, ventilation, and air conditioning system. Regular cleaning and maintenance extend the life of the equipment and postpone the need for replacement.

After each tenant leaves, check if the property still looks its best or if it needs a fresh coat of paint. The better it looks, the more the prospective tenant will find the rent reasonable. Hire a professional service to do deep cleaning throughout the unit.

Value for Money

Eventually, your tenants will improve their finances and move out to become homeowners themselves. You do not have to worry because you will find that there will be no scarcity of new couples or young families to rent your place.

Building an ADU for rent on your property will not only provide you with a regular monthly income, but it will also increase the value of your property. It is an investment that gives immediate returns while continuing to grow in value in the long term.

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