ADU Rental Income: Plan Right to Maximize Your Asset

With the real estate market as competitive as it is, many landlords are looking into building an Accessory Dwelling Unit (ADU) or Jr. ADU to improve their bottom line with additional monthly income. While this is a great way to earn more, you need to be sure you’re investing in the right upgrade to your property. Below are some of the key differences between ADUs and Jr. ADUs; this way, you can make the right decision for your property. Differences between Junior ADUs and ADUs On the surface, the primary difference between an ADU and a Jr. ADU is the square footage. However, there are many considerations for each type of ADU , significant differences include costs and build limitations. ADUs are generally seen as a larger and more versatile build when compared to a Jr. ADU. They can be built detached from the main home, converting an existing structure, most commonly the garage. In Long Beach, an ADU can be up to 800 square feet or 50% of the gross floor area of the primary dwelling, whichever is smaller. For reference, an 800 sqft living space can be arranged as a 2-bedroom 1-bath home, though with creative use of the space, many investors have been able to fit 2 bedrooms and 2 bathrooms comfortably. If listing the ADU for rent is the goal, this can produce a higher yield, though at the cost of a higher initial investment. Jr. ADU, on the other hand, can only be a maximum of 500 sqft and must be built attached to the existing single-family home. While you can build an entire new addition to accommodate the Jr. ADU, it's not uncommon for homeowners whose homes are bigger than they need to convert a bedroom into a Jr. ADU in order to have additional income . A Jr. ADU does still require an efficient kitchen. Bathrooms can be shared with the main house, though this can deter some prospective tenants. Additionally, the utilities are oftentimes shared with the main house, which can simplify installation, though it can complicate utility costs with your tenant. When an ADU is Right Being able to build a full ADU provides an entirely separate and private living space, which is more desirable to prospecting tenants. This is the preferred choice for most investors, especially those who have unused space in their property. By being built apart from the main house, an ADU may cause less disturbance to those living in the main house, whether that be yourself or another tenant. In Long Beach, CA. ADUs can’t be listed as short-term rentals on apps like Airbnb; that being said, an ADU can command more in rent because of the aforementioned features. If you’re looking for a long-term investment, ADUs increase your property’s value while generating a consistent cash flow. Finally, if you ever plan on selling your rental property, the additional ADU can improve the appeal of your property to future buyers. When a Jr. ADU is Right While a Jr. ADU doesn’t have the same potential as a full-sized ADU, Jr. ADUs are far more budget-friendly. These are a great option for investors who have limited funds. Since Jr. ADUs generally require less work to be done in less time, allowing you to begin making a return sooner. Finally, if your property doesn’t qualify for a full-sized ADU permit due to the size of the property lot, a Jr. ADU can be built primarily through interior work, which may only require reconfiguring existing interior space. Whether you choose a full-sized ADU or a Jr. ADU, the decision depends on more than just the size of the structure, you’ll have to manage filling the vacancy and managing the new tenant. If you need help choosing which ADU is right for you or you need help managing your Beach City rental property, we invite you to call us today at (562) 888-0247 or complete our Owner Application online .

Summer is a great time of year where people enjoy a number of outdoor activities. Though for landlords, summer brings with it a list of maintenance items and preventative care for their properties. Below, we’ve gathered three of the most important maintenance items to do before summer starts. Service your HVAC System Southern California summers are getting hotter and hotter, if you want to maintain tenant satisfaction you’ll need to have the HVAC or any A/C or cooling system properly serviced . Filters should be cleaned or replaced, and the ductwork should be inspected. For rentals with window units or mini-split systems should also be thoroughly inspected as well for optimal cooling. Doing proactive maintenance can reduce the risk of the cooling system breaking down during peak usage while also improving the system’s efficiency. This can lower utility costs for your tenants while extending the lifespan of your cooling system, saving you money in the long run. Additionally, consider inspecting your window and door seals for leaks. If the seals are broken, it allows hot air into the living space, this increases the cost associated with cooling while adding more load to the HVAC or cooling system. While not directly a part of the HVAC system, ensuring there aren’t any breaks in the seals helps extend the lifespan of your cooling system which is beneficial to your bottom line. Inspect your Roof The condition of a roof is oftentimes ignored since they tend to last over twenty years, and some property owners may not even be sure when the roof was last replaced . A poorly conditioned roof is one of the primary ways for a rental property to drive up the costs of repairs and tenant complaints. A damaged roof can inefficiently insulate a home, making it harder to keep it cool. It can also lead to water leaks during rainfall, which can lead to water damage, stains, and mold growth. While summers tend to be dry, the coastal cities such as Long Beach may see unexpected shifts in weather, which can bring sudden rainstorms or increased humidity. Fixing a small roof leak is relatively inexpensive, however, leaving said leak to grow can result in an emergency repair can cost thousands especially if a tenant has already moved in. A thorough roof inspection is a great maintenance item to do during a vacancy period especially as this can result in a positive experience with new tenants. This can lead to a long term stay with many lease renewals. Check for Signs of Pests Pest infestations are one of the fastest ways to ruin a tenant’s stay while also damaging a landlord’s reputation. Pests such as ants, cockroaches, other bugs, and rodents are common in many beach cities, especially during the warmer seasons. Being in a city, you’ll likely never truly be rid of pests, though, even a single complaint about an excess of bugs or rodent droppings can lead to bad reviews online, service calls, and in severe cases, lease termination. These pests not only create an unwelcome environment for your tenants, but they can also cause real damage to your investment property. Cockroaches are known to damage small wiring in appliances, ants can ruin food and get in everything, while rodents can chew through walls, plumbing, and even electrical wiring. Landlords should schedule regular ppest inspectionsto check for early signs of pest activity before the hotter season begins. Much like everything in this article, preventative maintenance is significantly cheaper than an emergency call, in this case to an exterminator. If you want to keep your tenants happy and your property well taken care of, preventative maintenance is a must. If you’re unsure about the signs to look for when doing routine inspections or you need help managing your Beach City rental property, we invite you to call us today at (562) 888-0247 or complete our Owner Application online .