What is an Accessory Dwelling Unit, and How Can You Profit From Having One?

What is an Accessory Dwelling Unit, and How Can You Profit From Having One?

Published On: September 8th, 2022

Accessory dwelling units, or ADUs, are a valuable real estate investment opportunity that more and more investors are starting to recognize. But what are they, exactly, and why are they so valuable? This guide explains the benefits of owning an ADU and explain how you can profit from this investment.

What is an Accessory Dwelling Unit?

An accessory dwelling unit is a secondary living space on a property that can be used for a variety of purposes. Most commonly, ADUs are converted garages or basement apartments, but they can also be stand-alone units built in the backyard or on top of the garage.

Related: The pros and cons of investing in multifamily real estate

Why Are ADUs So Popular?

There are several reasons why accessory dwelling units are becoming increasingly popular investment opportunities. One of the biggest reasons is that they provide a way to earn rental income without having to purchase an entirely new property.

Another reason is that they can be a great way to generate income from selling an investment property. You may be able to:

  • Live in the ADU yourself while renting the main property (and collecting rent)
  • Live in the main property and rent the ADU to a tenant (while collecting rent)
  • Sell the property as an investment for someone else
  • Rent the ADU as a short-term rental property using Airbnb or another vacation rental service

How Much Does it Cost to Add an ADU to a Property?

The cost of adding an ADU to a property varies depending on the size and location of the unit. However, most ADUs will cost between $10,000 and $50,000 to construct.

Related: How to choose the right property to flip

What Kind of Return Can You Get on an ADU?

The return you can earn on an ADU investment varies depending on how you choose to use the unit. For example, if you live in the ADU and rent out the main property, you may be able to earn several thousand dollars each month (taking into account what you pay for your mortgage).

If you choose to rent the ADU as a vacation rental, you could potentially earn thousands per month, too. And if you sell the property as an investment, you could earn high returns, too. (If you’re thinking about selling a property with an ADU, you should definitely talk to a real estate professional who understands how to market it and who can get you the best possible price.)

Related: 5 tips to help you succeed in multifamily property investing

Are You Buying or Selling a Duplex, Triplex or Fourplex in Silicon Valley?

If you’re selling a duplex, triplex or fourplex in Campbell, Cambrian Park, Los Gatos, San Jose, Santa Clara, Saratoga, Willow Glen or another community in Silicon Valley, we’re here to help. Call today or fill out the form below to find out about our innovative marketing plans that can put your investment property in front of all the right buyers.

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