Do you have a land that is unused or underutilized? Give it up and increase the value of your property while earning extra income!

Use an ADU (Accessory Dwelling Unit) - For family members or for rental purposes
 

If you have free space on your land, one of the best options for using it is to build an ADU. These units are a great solution if you need to provide housing for family members or want to earn passive income through rentals. An ADU will allow you to earn income from your property while also increasing its market value.
However, as we mentioned in the article How much can I earn renting out an ADU? , an ADU can be used for both short-term and long-term rentals.

Model situation: How much can you earn?
 

Let’s imagine that you decide to build a 2-bedroom ADU on your land. Here’s an example of what it might look like in numbers:
• Cost to build and furnish an ADU (2 bedrooms): The average cost to build and furnish a 2-bedroom ADU in Los Angeles is around $200,000 to $250,000. These costs can vary depending on specific requirements, materials, and permits.
• Construction Mortgage: If we take out a 30-year mortgage (the most popular in the US, as they offer the lowest monthly payments), with an interest rate of around 5%, the monthly mortgage payment on a $225,000 home would be around $1,200 to $1,300.
• Rental ADU: A 2-bedroom ADU in Los Angeles can bring in an average monthly rent of around $2,500 to $3,500, depending on the location and amenities. So we can assume that the monthly rental income will be around $2,800.

10-Year Property Appreciation

Assuming that the price of real estate in Los Angeles increases by 5% per year for 10 years, the value of your property, including the new ADU, could increase by 50%. This means that the value of your property can increase by $112,500 (if the price of the property before the ADU was $225,000).

So how much can you earn?

After 10 years, taking into account the cost of the mortgage and the increase in the value of the property, you can earn $186,000 in rent and $112,500 in the increase in the value of the property, which together means $298,500. This profit will depend on various factors, but it is still a very attractive option to increase the value of your land and earn passive income at the same time.

Choosing the right general contractor

Of course, building an ADU is not a simple matter and involves a lot of administrative and construction steps, from obtaining the necessary permits to the construction itself. For this purpose, it is very important to find an experienced general contractor who will take care of all the details. This process can be complicated, especially when it comes to Los Angeles building codes, which are constantly changing.

If you decide to take advantage of this opportunity and start building an ADU, contact us. We will help you find the right professionals to take care of the entire process and ensure that everything runs smoothly and efficiently.