Accessory Dwelling Units or ADUs are a secondary housing option on a single-family lot. They include converted basements or garages, home additions, or a detached dwelling on the property. Renting out an ADU can offer you a secondary income, but you should know what you’re getting into first.
What to Know Before Renting Out Your ADU: Understand the Financials
First and foremost, you need to understand the cost associated with an ADU. Building one can have many costs as you need to consider the building costs, utilities, interior finishings and more. Once the ADU is finished, you also need to consider the costs of renting it out. You will be responsible for the maintenance costs and making sure you provide a quality dwelling. When you rent out your ADU, you will need to negotiate several costs with your tenant including how they will cover the cost of utilities. Have a clear plan for your ADU.
Your tenants will be living on the same property as you and you will likely see them quite often. Before renting your ADU out, you want to make sure you thoroughly screen tenants. Otherwise, you could end up with loud tenants, disruptive tenants, or even destructive tenants. Background and credit checks can help weed out bad tenants. You can learn more about their history and see if they are reliable. Additionally, you can hold interviews to really get to know the people beforehand. Whatever your process is, make sure it is thorough enough, so you don’t end up with bad tenants.
What to Know Before Renting Out Your ADU: Have a Clear Lease Agreement
Before you rent out your ADU, you need to create a very clear lease agreement. This will lay out everything you are responsible for as well as what you expect from your tenants. It’s important that this agreement be easy to follow. If you use too much legal jargon or make it confusing, tenants can use that as an excuse for not following the agreement. Additionally, you need to make sure your lease agreement is fair. Do some research to know what you can and cannot include in your lease agreement.
When you rent out an Accessory Dwelling Unit, it gives you an additional revenue stream. However, before you go through with renting out your property, you need to make sure you think everything through. Understand what it means to own and rent an ADU and prepare accordingly.
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