Accessory dwelling units are known as one of the best sources of passive income nowadays. People construct ADUs not only as an extension to their existing homes but also as a guest house or an ADU rental. An ADU rental unit is a more affordable housing option compared to a primary residence, both in terms of construction and maintenance.
If you have a secondary unit on your property and you want to get additional income from it but don't know where to start, we are here to give some useful tips. Building an accessory dwelling unit for rental purposes will bring more money to your household and utilize empty space in your backyard.
ADU rentals have become widespread as units for residential use by elderly parents and for a variety of other purposes. If you want to get maximum profit out of your accessory unit, read this article and learn how to make your backyard cottage attractive to potential tenants.
Property owners who build an ADU for renting should take special care of positioning their rental property on the housing market. You do not have to be a professional property manager to understand that the first thing people pay attention to is the title of an advertisement.
Rental units might be positioned as residential property with specificities of a particular area in your city. If there are some outstanding qualities of your property, like a huge outdoor space or unique design, they can be discussed in a more detailed description.
In the title of a rental ADU advertisement, focus on specific practical features that can make people looking for a place to rent understand what you offer. In most cities, there are plenty of secondary dwelling unit listings that make a hot commodity for potential tenants. Your task is to make it clear what your ADU represents and how it can fit people's requirements.
Accessory dwelling units are not new on the rental market. With increased housing discrimination, people are searching for affordable residence solutions and comfortable rental lease terms. While this separate living space on your property might be similar to other units in the city, you have to find ways to highlight the features that will make your ADU stand out from other options.
Both attached and stand-alone ADUs should be described by property owners in terms of the following:
You might also want to specify whether you are open to rental applications from pet owners. What is more, specifications on a separate entrance, balcony, porch, and other ADU structures can be included.
The overall tip is to provide a clear description of the rental unit while still including a bit of your personality into it. Finding tenants is easier when you position yourself as a friendly person, especially if you are a first-time landlord.
Renting out your ADU can be as challenging as renting out a whole house. However, even in such small spaces, you have to find something unique and attractive to a potential client. When you first start to build an ADU for rental income, consider adding some special touches to your property.
For example, highlighting a designer's interior can help. Big sources of natural lighting or good storage capacity will also promote your accessory dwelling unit better. Even a convenient location of the lot can be an advantage for people looking for tiny houses.
A rental unit is first sold to your tenants through photos. People fall in love with places by looking at them and clearly seeing what they represent. Taking a photo on your smartphone with bad lighting and no interior setup will surely not work, as nowadays, people are far more advanced in property photography, which gives them an advantage.
To make sure that your photos look nice and attractive to potential tenants, use the following tips:
Finding tenants is easier when you can give them a full vision of what their future small home might look like. You do not have to be a professional realtor to present your place in its best light. Some cool shots of an ADU might drastically increase the chances of attracting more tenants.
If you have a granny flat to rent out, you need to make sure that all the points are clearly specified. Firstly, decide what kind of rental lease you will provide. There are short-term rentals, like vacation rentals, for example. And if you do not like to have different people all the time, there are long-term rentals available. Also, you might want to choose a month-to-month lease, making it more comfortable for tenants to move in or move out for a month-long period.
Second of all, for both long- and short-term rental agreements, payments have to be specified. Your lease agreement will include this information as well. In an ADU listing, make sure to provide the rent price, frequency of payment, and other monetary details that you find important.
Specify whether bills for utility connections will be included in the rent cost or not. If there is any other structure on your lot that a tenant can make use of, state it in your advertisement as well. Local governments often give recommendations on how long-term and short-term rentals should be positioned on the market as well.
In the stages of building an ADU, you might have focused on a particular rental price. However, the housing market is constantly changing, and monitoring rent costs is a necessity for anyone who wants their property to be profitable.
Your price for an ADU should be competitive with other prices for rental ADUs of a similar kind. It can be useful to look, for instance, at prices for rental garage conversions if you have an ADU in the form of garage conversion yourself. Pay attention to similar sizes and proximity types, like detached and attached ADUs.
Also, the period of renting is important to consider. A short-term rental is often more profitable; however, it might not be as comfortable to maintain. See what the average prices for short-term rentals are in your area and decide on your own.
Remember that putting too high of a price only to get more income can lead to failure. On the other hand, a price that is extremely low, compared to other offers on the market, can be perceived as a signal of bad quality or some hidden downsides.
The advantages of your property's location are another important point to state. Proximity to parks and other green zones might be crucial for adults with children and the elderly who are looking for a peaceful life. If younger people would be interested in renting your place out, you might want to emphasize whether there are any entertainment spots, cafes, bars, or cinemas around.
As short-term rentals often attract people who are coming for business trips and work, it can also be beneficial to talk about the proximity to the city center or big office complexes. If you build an ADU for long-term rentals, you might want to specify where everyday necessities, like grocery shops, schools, universities, or shopping malls, are located.
Keep in mind that the Fair Housing Act does not allow you to say directly what kind of tenants you allow or do not allow on your property. It is both unethical and illegal, according to state laws, to emphasize a preference for a particular age, gender, or ethnic group, as it is considered discriminatory.
For any kind of property, some benefits of location can be found. Particular characteristics of the place can be attractive to one or another population group. That is why stating all the possible advantages of your ADU location might be extremely useful.
Clearly stating the application rules will save you from explaining them over and over again each time someone is interested in your property. Here, you might want to specify what kind of proof of income you would like to see or whether their credit score is important.
For any kind of long-term or short-term rental, the status of employment can be asked as well. You should also clarify whether they have experience in renting out accommodation and whether they faced any problems with local and state laws in the past.
All of these specificities will make sure that only those tenants who are seriously motivated to rent an ADU contact you. If you state what is prohibited on your property from the start, the responses that you will get will most likely be satisfactory.
You don't want to be a mystery person that can only be reached once in a blue moon. It is in your best interest to communicate with all the potential renters. Hence why, providing your contacts is quite significant.
Suggest those who are interested in your rental ADU contact you either via mobile call, email, or messenger. Some online platforms, which we will speak about in the next section, also offer built-in chats that allow you to communicate with people without sharing personal contacts right from the start.
Modern software now allows you to reach your ADU listings to a bigger number of people from any point in the world. Services like Zillow, Craigslist, or Airbnb are the most popular for people who want to rent out their secondary units.
These tools are easy to use, and they help you to provide people with all the needed information about your living space. Moreover, you can constantly track all the applications or questions by using mobile versions of these platforms. This means you can build stronger communication with potential future tenants.
In order to successfully rent out your ADU, you need to build it according to all the state and local laws and receive permits for construction from the local government. Zoning laws, HOA regulations, and building codes can be different for local ordinances of different cities, so you must pay special attention to what is allowed in your area.
While many people use ADUs for the accommodation of their adult children, elderly relatives, and guests, renting the place out seems like the most beneficial option if there is no necessity for others. With rental income, you can pay out a part of your property taxes, cover the expenses of ADU construction, or use the additional money for personal purposes.
Whatever your reason for creating a rental unit is, keep in mind the points discussed above. They will help you to successfully find tenants and enjoy all the advantages of having an additional unit on your property.
To get more tenants interested in your property, create an effective listing advertisement for your ADU. Describe it in detail and emphasize all the benefits that make your ADU different from all the others. Clearly state all the requirements and provide you with contacts.
To advertise your rental property, you need to create an informative description and mention all the advantages of the place. Don't neglect taking good photos of your rental unit. Also, place the listing on a variety of housing platforms to reach a wider audience.
Renters can stand out if their ADUs have unique or functional features. Moreover, the benefits of a property's location can attract more tenants. A clear description of the place and lease conditions can also be a boost for your property advertisement.