How To Maximize Rental Income From An ADU

An accessory dwelling unit (ADU) is a great way to begin your journey in the real estate business. However, in Long Beach, CA, an ADU can only be listed as a long-term rental, meaning you can’t list it on applications like Airbnb. That said, much like any rental, you will want to maximize the income you can gain from said ADU.

Below, we will share a few tips to help you optimize how to increase your bottom line with an ADU.

Maintain Property Condition

An ADU, by its nature, sits within your property. This means you cannot allow the ADU or the main home to fall into disrepair. Keeping the rental property in excellent condition is essential for attracting and retaining tenants. The greatest factor in ensuring you're maximizing income is to have tenants. For this reason, you should regularly inspect the property and address maintenance issues promptly. When a property is well maintained, it will enhance its appeal and allow you to justify charging higher rates. Properties that are well maintained also give tenants the confidence and the peace of mind that the property won't cause any issues, and if an issue arises, you, as a landlord, will quickly take care of it.

Screen and Vet Your Tenants

Your tenants will be the ones paying the rent. Therefore, finding tenants who can do so consistently is incredibly important. For this reason, it is best practice to screen and vet potential tenants before the lease is signed. Ensure a thorough tenant screening process, including background and credit checks, employment verification, and landlord references. Thoroughly vetting potential tenants minimizes the risk of issues with timely payments, property damage, or evictions. While you may not find the perfect tenant, at the very least, it's in your best interest to find a reliable one with good references.

Competitive Rental Rates

When renting your ADU, your first instinct may be to charge as much as possible. This may work in some cases, but it's essential to understand that the market can change, requiring you to adjust your rental rates to be more competitive. While a lower rent may result in less income than you desire, having a vacant rental is much worse for your finances. When deciding on your rental rates, consider factors like location, ADU configuration, amenities, and the market demand for an ADU like yours. You can understand its worth by researching apartments with similar amenities and living spaces. The goal is to find a tenant rather than leave the rental vacant. A vacant rental generates no money and often costs money to maintain while not generating income.

Secure Your Property Against Tenant Damage

There are many ways to protect your property from potential damage. This includes tile or hardwood flooring over carpets. While the initial installation may be more expensive, tenants can easily damage, stain, or tear the carpet. Avoid the cost of constant repairs by not using carpets. Natural wear and tear is to be expected. However, prohibiting some home modifications in the lease agreement can significantly reduce the amount of repairs you may need to do once a tenant moves out. This can include not allowing anything heavier than a picture frame to be mounted on a wall. Televisions, towel racks, and shelves are often mounted onto studs, which, if not repaired correctly, can lead to additional damage down the line.

Managing an ADU to maximize your rental income can be a tall task for some. However, this doesn't have to be the case. If you need help with your rental ADU or are looking for a full-service property management company with experience managing rental ADUs, we invite you to call us today at (562) 888-0247 or fill out our Owner Application online.