What if we told you that buying tiny houses for sale under $15,000 can help you generate a rental income? It’s called accessory unit income.
Assembling accessory dwelling units or ADUs in your backyard is the best way to maximize living space and earn accessory unit income without investing hundreds of thousands of dollars in real estate.
In this article, we will explore the potential of generating revenue by investing in an ADU and how it can help increase your equity. We will also go over ADU laws in different states and how you can have a passive stream of ADU rental income by investing in an Autonomous StudioPod or a WorkPod.
Let's get started!
What Is an Accessory Unit Income?
Also referred to as a granny flat, an accessory dwelling unit (ADU) is an affordable living space that doesn't require investing in real estate as it's assembled on your property.
An accessory unit income is the revenue that comes from renting out the ADU on your property to professionals, couples, or other tenants.
How Much Profit Can You Make from an ADU?
An ADU can cost anywhere between $100-200 per square foot, depending on the quality, features, and other factors.
ADUs are smaller than your average houses, and when you consider their size, the cost makes more sense as they do not require many building materials and labor.
If you're looking to invest in a property and rent it out to generate a stream of passive income, purchasing a prefab ADU is the best and most affordable option.
You can fit it in your backyard (completely detached from the main home) and rent it out on a short-term or long-term basis to earn accessory unit income without stressing over a second mortgage.
Let's take the example of Florida. The housing market in the state is going wild. According to Norada Real Estate Investments, over the last five years, the price of homes has risen by an eye-watering 80%. The same trend is also evident in rental prices in Florida.
A one or two-bedroom prefab accessory dwelling unit in Florida can fetch you around $1,500 to $3,500 a month in rental income, depending on the neighborhood you're living in.
An assembled and fully furnished Autonomous StudioPod could cost you about $26,900. You can either stick with one ADU or add two to make a two-bedroom living space in your backyard that you can rent out.
Depending on how much you invest in ADUs, the payback period before you start to enjoy passive income could be around two to three years.
With the real estate market skyrocketing, it's becoming unaffordable for young professionals to rent or buy a home. Why not capitalize on this opportunity without taking a second mortgage to invest in a property and get an affordable backyard ADU?
An ADU Can Help Grow Your Equity
Assembling ADUs for rent on your property can help you grow your equity in the following three ways:
It Provides Rental Income
Whether you're looking to have a home studio or office pod for rent next to your primary dwelling, an ADU can help generate rental revenue. You can use your office pods for rent on a short-term or long-term basis for additional monthly income.
It Increases Property Value
An ADU adds more square footage to your home without incurring property taxes, making it a great way to expand your living space. This helps add a lot of value while also making your property look more attractive, which is great if you decide to sell it in the future.
You Can Enjoy Reduced Living Expenses
The fluctuation in interest rates each year leads to unpredictability in household expenses. You never know how much money you'll need each month to pay for your bills or groceries.
Having a second stream of income can help pay for your monthly expenses without worrying about your daily budget. You may want to consider the top Airbnb backyard ideas to make the ADUs attractive to potential tenants and start earning passive income.
It Offers Flexibility
ADUs provide a lot of flexibility in terms of how you wish to use them. You can rent one out on a short or long-term basis or use it as guest bedrooms or granny sheds when it's unoccupied by renters
ADU Laws by State
Before investing in ADUs for rental income, it is crucial to research and understand your state laws.
California was the first state to make it legal for homeowners to build ADUs on their property in 1982. However, the law allowed local authorities to impose strict regulations on ADU approval, size, design, and placement. As a result, building ADUs often became impractical and unfeasible.
In 2003, state lawmakers introduced a new law that required local governments to permit ADUs through a streamlined "by-right" process, eliminating the need for lengthy permit discretionary procedures that involved public hearings. This law aimed to simplify ADU construction and remove unnecessary barriers.
In 2016, the state adopted additional laws to accelerate ADU construction. These reforms included the following:
- A reduction in parking requirements for ADUs.
- The allowance of both detached and attached ADUs.
- Elimination of owner-occupancy requirements.
- The introduction of "junior" ADU units within the primary residence's structure in specific cases.
Although the laws in the state have made significant progress since 1982, local government regulations continue to pose barriers to building ADUs consistently across California.
However, in Los Angeles, ADU construction has experienced a significant surge since 2017, with one out of every four homes now having an ADU.
While challenges persist, California has taken steps toward promoting the development of ADUs. The government aims to address housing shortages and encourage diverse and flexible living options throughout the state.
There are eight states that broadly allow homeowners to build ADUs on their property in the country, and these include California, Utah, Maine, Connecticut, New Hampshire, Vermont, Washington, and Oregon.
The laws regarding ADUs vary widely among these states. Let's explore the legality of ADUs in these eight states before you decide to invest in one for the purpose of generating accessory unit income.
As previously mentioned, California passed laws in 1982 to legalize the construction of ADUs in the state. The legislation also prohibits owner-occupancy requirements and overrides parking requirements for ADUs located near transit.
Under the law, localities are not allowed to conduct discretionary review processes and must permit the construction of ADUs through a by-right process. The state permits both attached and detached ADUs.
Utah legalized the construction of ADUs in 2021. The state does not impose bans on owner-occupancy requirements or parking requirements for ADUs.
However, there is no by-right process for constructing ADUs, and homeowners must undergo a discretionary review process to obtain a permit. The state only permits attached ADUs.
Maine enacted laws to legalize ADUs in 2022, making it one of the two most recent states to permit the construction of secondary dwelling units. The state does not prohibit owner-occupancy requirements, but there are parking requirements that residents must adhere to.
Homeowners can construct ADUs through a by-right process, and the state permits both attached and detached ADUs.
Connecticut is the second most recent state to broadly legalize ADUs. The state does not impose bans on owner-occupancy requirements or parking requirements for ADUs.
Residents can construct ADUs through a by-right process, and the state permits both attached and detached ADUs. Residents can invest in an ADU for the purpose of generating accessory unit income.
New Hampshire has the least favorable ADU laws among the eight states. The state allowed for the construction of these units in 2017. There are no bans on owner-occupancy requirements or parking requirements for ADUs.
However, homeowners must obtain permits through a discretionary review process. Additionally, the state does not allow for both attached and detached ADUs.
In 2020, Vermont passed laws to legalize the construction of ADUs, and there are no bans on owner-occupancy requirements or parking requirements for secondary dwelling units.
Whether the state permits ADUs through a by-right process depends on the localities. Each locality must apply the regulations they have for single-family homes to ADUs.
ADUs became legal in Washington in 1997, and the state prohibits owner occupancy and parking requirements for accessory dwelling units.
However, the state does not follow the by-right process, meaning you must apply for a permit and go through a discretionary review process. The state permits both attached and detached ADUs.
Like California, Oregon also has ADU-friendly laws that the state passed in 2017, and it bans owner-occupancy and parking requirements for ADUs.
Depending on the locality, you may be able to construct an accessory dwelling unit through the by-right process. It is important to note that this can vary depending on your locality, as certain areas may have local laws that require you to go through a discretionary review process.
Fortunately, the state allows for both attached and detached ADUs.
Earn Accessory Unit Income with Autonomous Studio and WorkPods
The Autonomous StudioPods and WorkPods are great investments if you're looking for an accessory dwelling unit for rental income for many reasons, including the following:
These innovative ADUs offer a hassle-free and ready-to-use solution, eliminating the complexities and delays often associated with traditional renovations.
Their plug-and-play functionality ensures a seamless experience for tenants and landlords, maximizing the potential for generating steady ADU income.
The StudioPod and WorkPod have all the necessary sockets and connections for climate control, electricity, and mood lighting. Tenants can move into these fully functional living spaces without the need for expensive renovations, making the entire rental process smoother and more attractive to potential renters.
You can have the StudioPod or WorkPod up and running in just a few days, significantly reducing the time between purchase and occupancy. This quick turnaround allows you to generate ADU rental income quicker, allowing you to maximize your return on investment.
Weather Resistant and Waterproof
These Autonomous StudioPods and WorkPods are weather-resistant and waterproof, making them an excellent option for individuals looking to rent ADUs and generate ADU rental income.
It provides durability, comfort, and peace of mind for landlords and tenants alike. The ability of the ADUs to withstand various weather conditions ensures a safe and secure living or working environment, making them an attractive option if you're seeking accessory dwelling units for rent.
By leveraging the build quality of these Autonomous ADUs, you can maximize your rental income potential while providing the tenants with a reliable and resilient living space.
Versatility and Multi-purpose Use
The Autonomous Home StudioPod and WorkPod are versatile and have a multi-purpose use. These innovative ADUs offer a flexible and adaptable living space catering to various tenants' needs, maximizing the potential for generating ADU rental income.
Whether tenants are searching for a home office, an additional living space, or a temporary accommodation option, the StudioPod and WorkPod deliver exceptional versatility. These ADUs are thoughtfully designed with the option of being fully furnished with all the necessary furniture.
The multi-purpose nature of these ADUs opens up various income-generating opportunities. Renting out a StudioPod or WorkPod as a home office space, for example, can attract remote workers or entrepreneurs in need of a professional and distraction-free environment.
Quick Assembly and Shipping
These ADUs come with quick assembly and shipping. The faster turnaround time allows you to generate income from your accessory dwelling units for rent in no time.
It eliminates the need for lengthy construction projects and complicated renovations. These Autonomous Pods are easy to install, and with the help of professionals, you can have them assembled within two days. It can save time while minimizing disruptions to your rental plans.
When it comes to building ADUs, permit requirements can vary depending on local regulations and zoning restrictions. Navigating through the permit process can be daunting and may involve technical drawings, documentation, and coordination with local authorities.
We understand these challenges and offer permit assistance to simplify this process, ensuring a smoother and more efficient experience.
If you're living in a state that requires a permit for ADUs, we can help you expedite the permit approval process. Our professionals can save you valuable time and reduce the delays in generating ADU income.
By ensuring that the ADU meets all local regulations and permits, you can offer legally compliant and safe living space to a potential tenant. This gives them confidence in their decision to lease the ADU, contributing to longer-term rental agreements and a steady stream of ADU rental income for you.
Whether you're looking to invest in furnished home studio pods or office pods for rent, both offer fantastic opportunities to generate accessory unit income and are great living spaces for potential tenants.
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