Can I use my ADU for short-term rentals?

Many cities prohibit or restrict short-term rentals (under 30 days) in ADUs. Check your local ordinance and planning portal before marketing for STRs. {{verify locally}}

Do I need a separate address or meter for renting my ADU?

Addressing and metering rules vary by city and utility. Some allow shared meters; others require separate. Confirm with your utility and planning department. {{verify locally}}

Will rental income count toward my loan?

Lenders may count a portion of projected or actual ADU rent in underwriting. Policies vary by product and lender; align with your loan officer and appraiser. {{verify locally}}

Do I need a business license or to collect taxes?

Some jurisdictions require landlord registrations, rental inspection programs, or local taxes. Verify requirements with your city and state revenue departments. {{verify locally}}

Financing

ADU Rental Income (2025): How Much Can I Charge?

Price with confidence: find comps, estimate net income, and sanity-check payback and DSCR so your ADU helps—not hurts—your cash flow.

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Quick table of contents

Backyard ADU with a for-rent sign and couple walking

Start with apples-to-apples comps (studio/1-bed, sf, parking, laundry, location). Estimate gross rent, then subtract vacancy and realistic expenses to get net. Use net to check payback and DSCR with your lender’s terms.

Key stats (2025)

📈 $1,500–$2,100/mo typical 1-bed ADU rent (CA markets)
💰 DSCR minimum: 1.20× preferred by lenders
🏠 6.5–8 years typical ADU payback

Find true comps (not fantasy comps)

Match unit type (studio vs 1-bed) and square footage (±10–15%).
Match location (same neighborhood or school zone; avoid freeway/noise outliers).
Check features: parking, laundry, AC/heat type, outdoor space, privacy from main house.
Look at actual leased prices, not just asking prices; note time-on-market.
Adjust for utilities included and furnishing (if offering furnished).

Pro tip: Five good comps beat twenty random listings. Screenshot each comp with date and URL for your lender/appraiser file.

350–800 sf
common ADU sizes

30–60 days
refresh comps regularly

Price band sanity checks

By square footage

Studios (≤400 sf): market often clusters in a tight $ band; premium for separate entry & laundry.
1-Beds (401–650 sf): broader $ band; layout efficiency matters more than raw size.
Large (651–800 sf): diminishing $/sf; comps shift toward small apartments or cottages.

By inclusions

Utilities included → higher gross, lower variability; price with an expense add-back if metered together.
Furnished → shorter vacancy but more turnover; charge a premium and set a cleaning schedule.
Parking → strong driver where on-street supply is tight.

By policy

STR restrictions common for ADUs; many allow only 30+ day leases. {{verify locally}}
Local rent caps/registrations can apply; understand renewal rules. {{verify locally}}

Implementation Strategy: Rent Estimation Steps

Find your gross rent from local comps.
Apply 5–10% for vacancy + expenses.
Subtract utilities + insurance/taxes.
Compare net income to loan payments (DSCR ≥ 1.20×).

Net income calculator

Expected monthly rent ($) Vacancy & maintenance (%) Utilities you cover ($/mo) Insurance + taxes add-on ($/mo)

Net ~ $1,524/mo (rough). Take this to the payment calculator next.

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These numbers are planning placeholders. Always validate with comps and your lender. For underwriting, lenders may apply their own vacancy/expense factors. {{verify locally}}

DSCR & payback (fast checks)

Monthly debt service ($) Net income from above ($/mo)

DSCR ~ 1.17× (≥1.20× preferred by many lenders). Payback rough math below.

All-in ADU cost ($) Net income ($/mo)

Payback ~ 6.6 years (ignores financing & taxes; use detailed calc next).

Optimization Tips: Best Practices

Check comps quarterly to avoid underpricing.
Always run net-income before applying for DSCR loans.

Case study: 1-bed ADU rents in 10 days

Modern backyard ADU with cedar and dark panel siding, for-rent sign — 520 sf, 1-bed/1-bath, laundry in unit, mini-split HVAC, private patio.

List price: $2,050/mo → signed at $2,000
Vacancy/maintenance: 7% → effective $1,860
Owner-paid utilities/ins/tax add-on: $110 → Net ≈ $1,750/mo
DSCR vs $1,350/mo payment ≈ 1.30×

Run the full payment calculator

FAQ

Can I do short-term rentals (Airbnb/VRBO)?

Many cities limit STRs in ADUs. Long-term (30+ days) leases are usually safer. Confirm your ordinance and zoning notes before marketing. {{verify locally}}

How often should I update my rent price?

Check comps monthly when vacant; during tenancy, follow any local cap/notice rules for increases and renewal timing. {{verify locally}}

Do I need a landlord registration or inspection?

Some cities require rental registrations, lead-safe certificates, or periodic inspections. Check city housing portals. {{verify locally}}

Should I include utilities?

Bundling utilities simplifies billing but hides usage. If shared meters, consider a fixed utility add-on. Separate meters improve fairness but add upfront cost.

What about pets?

Pet policies should be clear in the lease. Consider pet rent or deposit; follow fair-housing guidelines and service animal rules. {{verify locally}}

Next steps

Start your RFQ Check your lot’s rules Explore financing options