Best Tips on Finding Tenants for Your ADU Rental
After you build an ADU, the best thing you can do is rent it out. Here’s how to find perfect tenants for your ADU.
If you’ve decided to start your new year with a big project and build an ADU, it probably crossed your mind what you’ll do with it after it’s finished. Some single-family property owners build accessory dwelling units (ADUs) in order to have some extra space for themselves. They use them as home offices, living spaces for their elderly relatives, or simply as guest houses.
ADUs can also be great sources of additional income. They make for excellent rentals. An ADU in your backyard allows you to become an instant landlord without having to do much.
Your rental property is literally in your backyard, so you don’t have to go out of your way to maintain it. On the other hand, you’re not renting out a part of your home to anyone, thus sacrificing your privacy.
ADU Rentals 101
Given that ADUs have emerged as a potential solution to California’s affordable housing issue, more and more people are quick to build one in their backyard. The government is more than happy to give incentives for people willing to build an ADU and use it as a long-term affordable rental unit. Not to mention, the rules and regulations regarding building ADUs are changing in homeowners’ favor.
Now that’s all fine and dandy, but what do you do once you actually have an ADU in your backyard? Building one might seem like a big project (and it is), but to some people, finding potential tenants and doing tenant screenings seems like a much more daunting task.
That’s why today, we’re going over the best tips on finding tenants for your ADU rental!
ADUs Are Money Makers
More than half of existing ADUs in California (51%) serve as rental properties. According to the research done by the Center for Community Innovation (CCI) at UC Berkeley, only 8% of those are used as short-term rentals.
That’s great news for you. Renting your ADU as a short-term rental might make more money, but it’s also a huge commitment. It requires more energy and effort on your part (not to mention more money that goes toward maintenance).
So, the fact that people are interested in renting ADUs as long-term rentals is excellent.
And, if you’re wondering just how much money you can make by renting out your ADU, here are some numbers for you:
- On average, the rent for a California ADU is around $2,000
- However, the rent is steeper in some areas (for example, it’s about $2,200 in the San Francisco Bay Area) and lower in others (just $1,925 in the Central Coast region)
- Overall, the median cost of a rental ADU per square foot is $3.68
But Only If You Do It Right
So, it seems as if you can make a lot of money just by having an ADU in your backyard. The numbers don’t lie, right? If you rent out your ADU for $2,000 every month, you’ll earn $24,000 in a year. Of course, we can’t forget that you still need to maintain the property as well as invest in it in the first place.
So, clearly, you probably won’t have over twenty thousand dollars of profit by the end of the year. However, you’ll definitely turn a profit.
To ensure that happens without any hiccups on the way, you must do everything right. It sounds like a huge hassle, but no one said being a landlord is easy.
To have a fully functional rental unit, you have to:
- Determine the rental lease terms
- Figure out how much you’ll charge for rent
- Keep up with your landlord duties
The First Steps to Becoming a Landlord & Finding Tenants for Your ADU Rental
The best thing about being a landlord is setting your own rules. Of course, those rules can’t be discriminatory. So you can’t reject tenants based on their race, religion, sexual orientation, disability, marital status, etc.
But, all other rules, including when rent is due, how long the lease will last, as well as additional rules regarding utilities, pets, and smoking, are up to you. We strongly suggest that you determine these rules before you even list your ADU for rent.
Figuring out how much you should charge for rent might be a bit trickier. Make sure to browse other units in your area to figure out the median price. Then, consider the amenities you have to offer (a washer and dryer, for example, or something like a month-to-month lease might make your property a hot commodity that people are willing to pay more for).
Finally, don’t forget about your landlord duties. You might dream about passive income, but you have to know that just sit back and relax while cashing checks every month.
As a landlord, you’re responsible for anything that goes wrong in your unit. So, you’re essentially the electrician, plumber, gardener, exterminator, etc. You’re the one who has to fix all issues when they arise.
So, take that as well as the potential cost of it into consideration when forming your rental price.
How to Find the Perfect Tenants for Your ADU Unit
There isn’t one perfect way to find a tenant that’s a good fit for you. Although that might dishearten you, it really shouldn’t. It just means you have plenty of options.
Sometimes the easiest way to find a tenant is to ask around. Perhaps some family member is in need of a new rental. Or maybe one of your friends is looking to move.
Generally speaking, renting out to someone you know is a good idea. That way, you’ll already have someone you’re familiar and comfortable with in your backyard instead of a stranger.
Don’t Dismiss Word of Mouth Marketing
Even if your family and friends don’t necessarily need a new rental, perhaps they know someone who does. Word of mouth is still the most powerful marketing tool. So, use it to your advantage.
Mention to people around you that you have an ADU for rent and see if they have someone they’d recommend for you as a potential tenant. That means that, while you’re still renting to a stranger, it isn’t someone you know nothing about. There’s someone who can vouch for them.
If you’re a first-time landlord, that will probably make you less anxious.
Social Media Might Be Your Friend (Or Your Enemy)
Advertising your ADU rental on social media is a great idea. You’ll have a considerable reach and be able to connect with more potential applicants than you would via any other medium.
However, be careful. Social media can be tricky since you never really know who you’re actually talking to. Don’t get catfished.
If you’re looking for a way to get tenants without actually p0utting in a lot of effort, you can always use a property manager. Local property managers that you can easily connect to can
look for and screen potential candidates for you.
Given that they have more skill and experience than you, it might be easier and more effective to let them do the grunt work (for a fee, of course).
Go Old School (Bulletin Boards and Newspaper Ads)
Even though we live in a digital world, you hsouldn’t dismiss analog means of advertisement.
Putting an ad in the local paper or on bulletin boards in local community centers might just get you what you need — tenants who are locals and can thus appreciate the neighborhood.
You can attract potential tenants by holding an in-person or a virtual open house. That will allow you to connect with people while giving them a chance to see just what makes your property amazing.
Rental Listing Sites
If you’re looking to rent out your ADU as quickly as possible, it’s best to try as many mediums as you can. Listing your property on rental listing sites will help you reach many potential tenants. Finding good tenants for your ADU isn’t easy, so you better be patient.
If All Else Fails — Make a Sign
If you’re not in a hurry, make a “for rent” sign and plop it into your front yard. People walking by will see it, and, who knows, maybe your perfect tenant just happens to walk into your yard and fall in love with your ADU.
Cedar Dwellings Make for Excellent Rentals
Being a landlord isn’t easy. However, ADUs offer a way to minimize the obstacles of being a landlord while providing a steady passive income.
Of course, to be able to rent your dwelling unit, you first need to find your tenants. You can do that by:
- asking friends and family if they need an affordable rental unit
- allowing word of mouth to do your work for you
- publishing rental ads on social media, rental listing websites, and bulletin boards
- putting ads in the paper
- holding an open house
Of course, just finding applicants isn’t enough. After you get a few (dozen) applications, you have to actually sift through them and screen the potential candidates. Only then will you be able to make your choice.
If that sounds like a daunting task, don’t worry; the Cedar Dwellings team has your back. Aside from building turn-key ADUs and handling the entire process (from getting the permits to finishing touches) without any hidden costs, we also offer renter help. We’ll help you find perfect candidates and process rental applications.
So book your consultation today and start the journey to getting that extra income! Find perfect tenants for your ADU!