Before 2020 an accessory dwelling unit was only allowed on single-family properties, and not at all on multi-family properties. With new laws finally in place, property owners can now reap all of the financial and personal benefits that multi-family property ADUs have to offer.

Installing an additional dwelling unit on your multi-family property will maximize your earning potential, without requiring you to undergo a long and messy construction process, or to purchase a new property. It’s a smart way to diversify your investments and increase your income quickly. Just be sure to do your research and consider our tips to avoid any issues.

Why a Multi-Family Property ADU is a Wise Investment

Investment Diversity

Adding a multi-family property ADU is an easy way to increase the value of your property and bring in more revenue. Best of all, it won’t require the waiting time and mess of on-site construction. You get the permits in place, pour a foundation, and wait for your ADU to be craned into place. At that point, you’re ready to rent it out and reap the benefits.

Reliable Income

An additional dwelling unit not only increases your property value and investment diversity, it also brings in steady revenue as well. You can easily rent an ADU out nightly (depending on the rules and regulations in your area) or as a monthly rental unit.

Return on Investment

The cost of an ADU is quickly returned after you have it added to your multi-family property. Because the cost of an additional dwelling unit is relatively feasible, the rental income begins to make up the cost and adds value to your property. After the rental income completely pays for your ADU, you’ll see a profit from your investment that will benefit you in the future.

Tax Advantages

Deductions are a benefit of owning and managing a multi-family rental property. This includes the addition of an ADU, which you can usually make a deduction for based on operating costs if you are bringing in any revenue.

Leverage for Future Investments

Increasing your property value with the addition of a multi-family property ADU has the added benefit of increasing the holdings that you have. This is convenient should you decide to borrow money for a future property or business endeavor. Simply put, the more assets you own, the stronger your position will be when you want to make another investment in the future.

Security and Space for Loved Ones

When you aren’t renting out your ADU, it provides additional space where friends and family can stay. Invite a loved one to visit for the weekend, or give a family member some security while they are looking to make a new move in life. It’s a great fallback that you can use to provide support to your favorite people whenever you would like to.

Things to Consider When Adding an Accessory Dwelling Unit

There are a few things you’ll want to keep in mind should you decide to add an ADU to your multi-family property. These include:

What is Considered a Multi-Family Property

A multi-family property must have a structure with two or more units that are attached. Two homes on one property are not typically considered multi-family in most areas. A structure like a duplex or an apartment building qualifies a property as multi-family.

Zoning and Local Regulations

In most areas, adding a multi-family ADU requires the property to be residentially zoned. The number of ADUs that can be added to a multi-family property is different depending on the area. Some areas only allow one, while others might allow multiple. With this in mind, it is best to know what the rules in your area are before making any plans. There are sizing restrictions to consider as well.

Getting Help to Avoid Issues

It can make the process faster and easier on your end to work with a company that can navigate the rules and regulations in your area for you. They will obtain the permits and look into the rules about ADUs in your area. That way, you can focus on managing your property, and make the ADU addition without any of the hassle or confusion.

The financial and personal benefits of adding an accessory dwelling unit to your multi-family property will pay off for years to come. This is the perfect time to make this addition and increase your investments and revenue.