Passive Income
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Chattanooga Building Co

Can I Use My ADU For Rental Income?

Nobody wants to work two shifts or constantly worry about paying the bills. That’s why in 2022 it’s crucial to think of creative solutions for extra income. Renting your ADU is one of them. In fact, many people build them for this exact reason.

Truth is, ADUs are a great opportunity for making rental income. However, you need to be thoroughly prepared before embarking on this adventure. 

Read our guide below to learn all the important information before turning your ADU into a passive income paradise. 

What To Consider When Building A Rental ADU?

When building an ADU as a way to make income, it’s advisable you cover all the important aspects early on. This includes setting a realistic budget, permitting your build, learning the rental laws in your city, as well as consulting local realtors and contractors.

You also need to think practically! Research market trends and carefully consider what to include in your ADU. Ask yourself what your future renters would be willing to spend more for! Is it a fully equipped kitchen, an extra bedroom, or a small private patio? You can research ROI statistics to see which projects will pay off the most.

Is Renting Your ADU A Good Idea?

Yes, renting an ADU is a good idea, especially when you consider the additional monthly income it will bring. Depending on the size of your ADU and your location, in Chattanooga you can make rental income from $1,000 to over $2,500. In most cases, that is enough to cover the mortgage and save some money on the side as well. 

However, don’t forget that Chattanooga has regulations when it comes to building and renting an ADU. Here are some important rules you should know:

  • An ADU must not be larger than your primary property 
  • An ADU can have a maximum of 2 stories and 700 sqft
  • An ADU must follow the exterior design of your primary property
  • You can’t build an ADU if It requires eliminating your parking space
  • You can’t list your ADU on Airbnb
  • The minimum lease for an ADU is 30 days 

Short Term Vs Long Term Leases

Depending on your preferences, you can rent your ADU short or long-term. Whatever you choose, it’s crucial you create a contract that satisfies your needs and doesn’t put you or your property in jeopardy.  If you rent out your property to people you know and trust, a long-term lease is a great option. However, if you are new at this or want to only rent out the space during the summer, we suggest starting with short-term leases. 

Other Benefits Of Building An ADU

Besides rental income, building an ADU can bring many other benefits. Read below to discover the most important ones.

Higher Property Value

Because dwellings will increase your square footage, they will also increase your home value. Of course, this depends on how you build and plan to use the property in the future. To get the most out of your home addition and learn the housing market trends, we suggest you consult with professional real estate agents and contractors. 

Support For Friends And Family

Having an ADU is a great way to support your friends and family in need. You can help your kids settle when they start life as adults or you can house your senior parents and relatives. If you opt for the last, you can even apply for assisted living insurance coverage which provides an average of $4,220 per month in Chattanooga.

Increased Privacy & Comfort

Many homeowners get dissatisfied with the size of their homes, especially after the pandemic lockdowns. Building an ADU is a superb solution to many practical issues such as expanding your family or lack of storage and privacy. It’s the surest way to increase privacy and comfort. 

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