Buying a home can be full of difficult decisions, and as housing prices climb, maybe even more difficult financial planning. For people looking for a different way to help pay for their mortgage every month, choosing a home with an attached rental unit might just provide the monthly bump that makes that payment a little easier to accomplish.
What is an attached rental unit?
An attached rental unit, formally called an Accessory Dwelling Unit (ADU), is typically a smaller living space adjacent to a main home. It might be a tiny house in the backyard, or something more like self-contained mother-in-law quarters attached to the house. It can even be a small apartment over the garage. There aren’t a lot of rules about what an ADU has to be, except that it should be fully autonomous.
The reason for autonomy is that this is what it takes to really have solid rental income potential from a secondary dwelling on a regular lot. Imagine if you were renting an apartment somewhere, you’d certainly want to have your own kitchen and bathroom, wouldn’t you? It’s difficult to rent units without these features, so typically, they’re part of any successful ADU.
Benefits of an ADU.
Having a rental can be a lot of work, but there are also a lot of benefits to having an ADU on your lot. Not only does the rent from an ADU help pay the mortgage every month, it can also act as flexible space for whatever life might throw your way in the future.
For example, when you first buy your home, maybe you really need help with the mortgage payment, so you use the ADU as a long-term rental unit with a tenant who has signed a year-long lease. This tenant not only pays the utilities for that unit, but they also help out with the mortgage by paying rent. It’s a great situation while you’re trying to pay down your mortgage and ramp up your income.
As time goes by, you might get tired of having a long-term tenant, but you can still use that unit for short-term tenancy, if allowed by your neighborhood and city. Airbnb, for example, gives you the option to rent by the day or week, so you never have to stick with a tenant for too long. You can turn off being a landlord for a few weeks and go on vacation yourself without having to worry.
ADU can also be used by your college-aged child or aging family member. Remember, these are essentially self-contained apartments, so they should provide a great deal of privacy and autonomy to anyone living inside.