ADU Rental Income: Plan Right to Maximize Your Asset

The building code provides information needed to build and be in compliance with local and state laws. To be a successful investor you will need to know what yield you can get on each unit that you are adding. We invite you to consider key characteristics from the configuration of your ADU to evaluating competitive apartments for lease to give you an idea on the rental amount you could earn (of course you could ask us too).

The configuration of your ADU will have a large impact on the future rent-ability as well as the yield you can expect. Keep in mind that one of the attractive aspects, for many renters, is that an ADU or even Jr. ADU (more on this below) is that these units aren’t like large traditional apartment complexes. Keeping inline with your neighborhood appeal as well as the architecture of the main house is critical to not only pass through the permitting process but also to attract the best possible renters.

Building an ADU in Long Beach or Lakewood as part of your single family residential property is a great way to capitalize on the updates to the building code as well as the demand for affordable rentals in great neighborhoods.

With sizes of ADUs being allowed to 800 sq ft in some cities this gives you the option to create an ADU that is a large 1 bedroom or even a 2 bedroom property. This square footage also provides you the opportunity to provide popular features such as inside laundry. When you are evaluating the option to build an ADU keep in mind that the square footage as well as the configuration (i.e. studio, 1 bedroom, or 2 bedroom) will impact the rent you can receive. Take time to consider what will fit best on your lot and what will help you to maximize the return on your investment.

An update for the building code for 2020 includes the ability to add a Jr. ADU. This means that along with adding an ADU, you could effectively add 2 units to your single family residence. The Jr. ADU does have a few unique requirements to consider. While there are more consider the following:

• 500 sq ft max
• Must be within a proposed or existing single family dwelling structure
• Must meet efficiency kitchen guidelines

One of the first key elements to consider is that of the size. The size of 500 sq ft max means the layout will most certainly be a studio unit. Studios continue to be a popular option in Long Beach and even parts of Lakewood as the rental amount can be affordable for a wider range of renters.

Whether you decide to complete only an ADU or an ADU + Jr. ADU you will have to identify the configuration of your decision when you work with your architect in order to get it approved through the planning process. Prior to meeting with an architect we would encourage you to evaluate the nearby rental market (of course you can call us) to see what comparable rentals are going for. While comparing other ADU units is a challenge a great way to compare is evaluating apartments that are currently listed for rent.

With new developments in Downtown Long Beach it offers a wealth of data to analyze. Consider a few of the following studio examples.

• 603 sq ft with a range of rent of $2,213-$2,832
• This means a lease price per sq ft: $3.66 - $4.69
• 525 sq ft with a rent of $2,203
• This means a lease price per sq ft: $4.19

When it comes to deciding what the size and configuration of your ADU + Jr. ADU should be there are many items to consider. With our knowledge of the rental market we can help you to evaluate your opportunity. Call us today at (562) 888-0247 and let us know you’d just like to discuss building an ADU and/or a Jr. ADU and we will be happy to help.