Renting out your additional dwelling unit (ADU) can be a great way to generate extra income or provide a living space for loved ones. However, we recommend taking the time to educate yourself on the regulations and requirements of renting an ADU in your area first. In some locations, renting out your ADU can be a rather straightforward process, while other locations may have more hoops to jump through.
Below, RnD Builders Inc takes a look at the four key factors that we advise our clients to keep in mind when considering renting out their additional dwelling unit.
Renting Out Your Additional Dwelling Unit: What to Know
Local Ordinances and Laws
Depending on where you live, there may be certain zoning laws that could prevent you from renting out your ADU. You should check with local government agencies to make sure that what you want to do is allowed under zoning ordinances. Additionally, some cities have rent control regulations that might affect how much you can charge for rent. Make sure you know about these before putting your unit up for rent.
If your ADU meets all legal requirements and is properly zoned, you will need to secure insurance for the rental property. Homeowner’s and landlord insurance policies may be able to cover your ADU, but it is best to compare rates and coverage first.
Safety and Habitability Requirements
Most cities also have safety and habitability requirements that must be met before renting out an ADU. These might include having a working smoke detector, being up to building code requirements, and providing necessary exits in case of a fire. You will need to have these safety features checked by an inspector or qualified professional before allowing tenants into the unit.
Clear Rental Agreements
Another important thing to consider is making sure your rental agreement outlines clear expectations for the tenant. This should include:
- Details about when and how the tenant will pay rent
- What shall prove expected of the tenant in terms of maintaining the unit
- And any rules or regulations about noise or other activities not allowed on the property
Tax Implications
You may also need to consider the tax implications of renting out your ADU. Depending on the rental income you receive, you may find yourself required to file a tax return or report this income to the IRS. Make sure you understand the tax requirements for your area before renting out your ADU.
By taking time to research and educate yourself about renting out an ADU, you can ensure that everyone involved has a positive experience – and that you can enjoy a reliable stream of mostly passive income.
Choosing the Right Builders for Your ADU
Once you have educated yourself on the legal requirements for renting out an ADU and determined that it is a good idea for you, the next step will be to choose the right builders for your project. Make sure to research their references and work history, as well as their experience with building ADUs specifically. Ask detailed questions about their process and timeline to make sure they prove the right fit for your project.
By following these steps, you can be sure that you have all of the information and resources necessary to successfully rent out an ADU in your area. Doing a bit of research up front will save you time and money down the line – and hopefully provide you with a reliable stream of income.
Schedule Your Consultation With RnD Today
Finding yourself interested in building an accessory dwelling unit, whether to rent or to use yourself? We invite you to schedule a consultation with RnD today. We can provide expert advice and resources to help you through the process step by step. Contact us today to take the first step and see what it looks like to work with an experienced building company!
