Can I Rent Out My ADU in California?

Abodu Unit


July 24, 2023Investing

The short answer is yes, you can rent out your ADU in California. As we’ll explore in this article, the laws and regulations for renting an ADU depends on your specific location, your backyard, and what kind of rental you’d like to have.

We’ll explore rental laws, what you should consider when building an ADU, what renters are looking for, and how to rent out your ADU.

But first things first: what exactly is an ADU? An ADU is an accessory dwelling unit that is either attached or detached to a main home. All ADUs must have their own sleeping area, kitchen, and bathroom to be considered an ADU, if it doesn’t have those things, it’s a shed and is not a habitable space that can be rented out.

Rental Laws ADUs

The rental laws in California will vary from county to county, and include various things like limitations on short-term rentals and rent control.

Can I rent out my ADU as a short-term rental?

Many counties in California limit the short term rental period to 30 days or more as a way to encourage homeowners to provide long-term housing instead of vacation rentals.

Some cities and counties have rules that limit homeowners to only renting out either their ADU or their main home at one time, so homeowners must choose which property to rent.

Some municipalities waive this requirement, however if your city or county requires these types of agreements, you will likely need to agree to it prior to being issued building permits, so it’s an important thing to consider now, before committing to building your ADU.

Short-term rental platforms like Airbnb and VRBO allow listers to set minimum rental periods so you can comply with whatever laws are in place in your location.

You can also set up a “master lease” with a company that manages corporate housing for groups like military, healthcare and other professionals. In most situations, these lease terms are for 30+ days and you can establish a rental contract prior to your ADU being complete so you can begin renting it out immediately.

ADUs Rent Control

Rent control laws vary from city to city, and include many factors, like how old the unit is, if your main home will be owner occupied or rented, etc.

California State law dictates that a landlord may only increase the rent to either 5% plus inflation or 10% per year, whichever is lower — but this doesn’t apply to all rental properties. The rent control state law depends on many factors, the most relevant of which is if the unit is more than 15 years old.

A new ADU probably wouldn’t be covered by rent control laws, however if you rent out your main home as well, then rent control law could impact the single-family home that’s on the same lot as a new ADU, if the main home was built more than 15 years ago.

Renting out your ADU ultimately creates more legal obligations for a homeowner as a landlord, and it’s important that before you begin your ADU build, you’re well versed with local laws that will impact you.

What factors should I consider before building an ADU to rent?

There are a few factors to consider before building your ADU to rent, which include understanding the rental laws and regulations you’ll need to abide by as a landlord, but also property valuations and how to optimize the design of the ADU for renting.

In general, your property value will increase when you add an ADU. The assessed value of your main home will remain the same, however the assessed value of your ADU will be added to the overall value of the property, also known as a “blended assessment.”

When the value of your property increases, in general, so will your property tax.

You also need to consider how you build your ADU to accommodate renters, and to consider how it will impact your privacy should you occupy your main home while you rent.

ADUs are generally a small footprint compared to a main home, so to make a smaller space more appealing to renters, make sure to choose a design that’s optimized for storage and livability. Also consider the orientation of your unit in relationship to your main home to optimize privacy for both you and your renters in spaces that could be shared.

What are renters looking for in an ADU?

When you consider what renters are looking for in an ADU, think about what would make a place feel comfortable to you as a renter:

  • Privacy: Probably the most important aspect to both you and your renters is privacy. No one wants to feel like they’re living “on top of” each other, so consider how you can create physical and visual barriers between the main home and the ADU. You could do this by adding a wall, hedge or tree line.

  • Access to a full kitchen: in general, people prefer the ease of use like a full kitchen with a large sink, full size fridge, plenty of storage and a dishwasher.

  • In-unit laundry: Having an in-unit or onsite laundry makes living more convenient and allows you to charge higher rental rates for the added convenience.

  • Private outdoor spaces and access to unit: Making areas that feel comfortable and are easy to access will increase the livability of your ADU. Considering where tenants will park in comparison to the entrance to the ADU, as well as making the entrance easy to access makes for a better living experience.

How do I rent out my ADU?

The first place to start when considering how to rent your ADU is checking with your HOA, local municipalities, cities, and state laws, and making sure your current utility systems (like water and septic) can support the additional load.

Become well versed in local rental laws and responsibilities you’ll have as a landlord and decide whether or not you’d like to do short, medium or long-term rentals — all of which will depend on what is allowed in your area.

Next, you’ll need to obtain the required building permits, and then you’ll coordinate an inspection once the building is complete from the city or county you reside in.

Building a New ADU Rental Unit is Easy with Abodu

If you’re ready to begin the next step in your ADU rental journey, Abodu makes it easy with prefab, turn-key ADUs. Not only are Abodu ADUs beautiful and designed by world-renowned architects, our customer service is unparalleled.

When you work with Abodu, you know you’re in great hands. Get started by submitting information on your home and find out if Abodu is right for you — it’s free to get started and there are no strings attached. Get started.

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