If you’re a homeowner and wish to make passive income, an accessory dwelling unit (ADU) may be the right choice. ADUs can help you enter the real estate world without purchasing an entirely new property. It's a great investment option for homeowners looking for additional income yet unsure if they’re ready to own and manage an independent rental property.
Below are a few considerations when designing your first ADU to maximize rent income.
There are a few ways to build an ADU, and its size will directly impact the rent you can request. You can have three additional units in California if the proper requirements are met. These include one attached ADU, detached ADU, and Junior ADU (JADU). In Long Beach, however, you are limited to two: an attached or detached ADU and a JADU. For the JADU, it’s required for property owners to live on the property permanently. While this may initially sound limiting, building an ADU is a massive step to earning passive income and entering the real estate market.
In Long Beach, CA, a JADU is allowed a maximum size of 500 sq ft, while a standard ADU is allowed to be 850 square feet. JADUs typically are limited to a single bedroom and bathroom (1/1). Whereas for an ADU 850 sq ft, you’ll typically see a 2/1. Though with an efficient design, it's possible to fit a 2/2, which can help earn a greater yield on rent. Having a second bathroom in your rental may not seem too important at first glance, though it cannot be understated how much more desirable a 2/2 is. A 2/2 can be significantly more profitable and reach a broader market.
When designing your ADU, there are a few considerations you’ll want to make before finalizing your build. Refrain from designing the ADU as if you were creating a stand-alone house. It's more advantageous to approach design and build the ADU like you were constructing a duplex.
Remember your tenants, especially when choosing the main entrances to the property and the ADU. For example, many tenants may feel uncomfortable if their main entrance is directly in sight of whoever lives in the main house. For this reason, many homeowners build the ADU to have its entrance hidden by landscaping features or at an angle that allows for more privacy.
Parking for an ADU in Long Beach is only required if the ADU is built further than half a mile from mass transportation. Public transit is quite robust in Long Beach, so this is rarely a requirement. However, providing at least a single parking space for your tenant can significantly increase the visibility of your ADU in the rental market.
Another excellent selling point when renting an ADU is to provide a dedicated washer and dryer. This is a key feature that many tenants look for and adds minimal expense with a potentially large monetary yield.
Entering the world of real estate is a big step forward for anyone trying to be self-sufficient. Suppose you need help understanding your local laws relating to building an ADU or are looking for a property management company to help with your properties. In that case, we invite you to call us today at (562) 888-0247 or fill out our
Owner Application online.
