3 Rental Ideas for Your ADU in California

We'll be generally talking ADUs around the Los Angeles area so these rental computations are based upon West LA. This is just to give you kind of an example so you can do your own numbers based on whatever area your property is located in. These examples show the different scenarios you could apply to either a Garage Conversion or a ground-up ADU in the backyard but clearly, the detached ADU going to be more cost-effective to build.

1. Live in the primary dwelling and rent the ADU unit out

If you have a family or you wanted to live in the bigger half, you could live in the main residence and rent the ADU out. This would be approximately 400 square feet, like your average two-car garage, you could do a one-bedroom or you could do a studio with that. If your house is in West or East LA, certain parts will get your $1,600. Meanwhile, in the greater part of LA, you can get at least $1,500 for those ADU rentals. So this scenario generally applies for a family who would do the common setup of living in the main house and renting our the ADU. If you want to live in the front house and make some extra income, you might want to rent out your garage ADU and create a good stream of your monthly cash flow.

2. Live in  the ADU and rent the primary house out

The second option would be to live in the ADU and rent the main house out. That would be a good scenario for someone that wants to pay off their mortgage and possibly create a new source of cash flow, depending on what type of loan you have. If you're going to rent that main house out, let's say you get $3,400 - $4,000 a month (a four-bedroom house) you can essentially—again depending on what loan you have—pay your mortgage and earn a monthly rental income. This a good option because you can also customize the ADU if you didn't want the standard ADU designs. If you wanted California doors, something more customizable, vaulted ceilings, etc., that way you could live in that back unit and design it exactly how you'd like it.

3. Rent both the ADU and the primary house out

The third option would be very common for people who plan to retire soon or homeowners who've found a second home. A lot of people are leaving California and a lot of people have a lot of equity in their home so this would be a common option for someone who wants to keep their property. They could build an ADU again out of the garage or in the backyard and they could not only rent the front house out but also rent the ADU out as well. Again this is a great option for someone that wants some extra income, they can move off to again another state or retire outside somewhere palm springs and still have income property here in California.

So again, these are just three main possible rental scenarios you could do for your ADUs. There are all sorts of ways to rent your ADUs out because there's also a Junior ADU (JADU) option you could do but for now, these are good examples you could do.