Apartment ADUs are an excellent way to add additional value to your property at every level. These additions to your property will help to increase the profitability of your property as well as the overall property value. This can be enormously helpful for getting the most bang for your buck out of every square foot you own.
Why not use your property to the fullest extent after all?
How Do Apartment ADUs Increase Property Value?
Apartment Adus can increase your overall property value in many ways. First and foremost is that the additional livable units added will add to your property’s appraised value. Not only would this add to your property value it could also funnel into your other methods of generating income from your rentals. Now rather than having 25 units generating your regular rent you could benefit from an additional 10 units. This would earn you additional profit with little additional overhead costs after the construction process is complete.
How Do Apartment ADUs Increase Rent?
Accessory dwelling units can increase the rent that you bring in every month by creating additional living spaces as mentioned previously. Being able to make more money with the same amount of space is an excellent way to create some more profit on top of your expenses.
How To Rent Out Your ADU?
Renting out your apartment ADUs will be very similar to renting out normal apartment spaces. Some ADUs might have specific requirements or different amenities such as no parking or slightly smaller living spaces. Because of this Accessory Dwelling units are usually cheaper in rent than your current living spaces, but this is by no means a strict rule.
How Much Can I Rent My ADU For?
Very high-quality ADUs can be rented out for top dollar by apartment owners. Likewise, some smaller ADUs without certain amenities that other living spaces would enjoy might rent for less than your current apartments. It all depends on what is demanded in the market and what value you are providing to your renters. So like most things, this value will vary greatly from apartment to apartment complex.
How Does An ADU Affect Property Taxes?
Many people are worried about exactly how building an ADU might affect their property taxes. Will it increase my property taxes? Are ADU expenses tax deductible? In this section, we will cover everything that you need to know about how your ADU changes will affect your property taxes.
Does Building An ADU Increase Property Taxes?
Let’s tackle the first question, will building an ADU increase your property taxes? The answer is that yes it will, however, the effect might be smaller than you would assume. In long beach and California as a whole property taxes are assessed at 1% of the property value. So if you added on a couple of ADUs that increased the value of your property by $500,000 then you could expect to see an increase in your property taxes of $5,000.
Is Building An ADU Tax-Deductible?
Accessory dwelling units themselves are not tax-deductible, but how you use them could become a deduction. Using an ADU as a rental can afford you some deductions as well as other uses that you will be able to note on your taxes.
How Do I Appraise My ADU?
In order to get your ADU appraised, we recommend hiring a professional to help you understand the value of your accessory dwelling spaces.
Will My whole property Need to be reassessed?
In most situations, Accessory dwelling units will be assessed separately from the rest of your property in what is called a blended assessment. This is convenient because you will not have to worry about the rest of your property undergoing an assessment in your construction process.
How To Calculate The Value Added By Accessible Dwelling Units?
In order to calculate the value of your Accessory Dwelling Units we will need to know several things:
- Approximate Rentable Price
- What is the profit you will be making from your ADUs
- The overall cost of the construction project (Provided by construction quote)
- How Many ADUs will you add
With this information we can calculate the approximate monthly value-added from your new units in this formula below:
Approximate Rentable Price X Number of new units = Value Added Monthly
These details you can find from various quotes, appraisals, and the overall market demand for apartments in your area. If you are looking for a quote for your apartment complex or Multifamily dwelling we would be happy to provide you with a quote free of charge. Please just email us the details of your project at [email protected] and we will follow up with you promptly.
Conclusion: Are ADUs A Good Investment?
Accessory Dwelling units might require a large upfront cost, but the overtime benefit can be monumental for your property’s long-term value. Whether you are planning to keep your property for many more years or sell it soon, having the added value from ADU units can be a real game-changer.
These units can push property from being unprofitable to earning a nice dividend each month. They can also increase an already profitable property to being very profitable. No matter what group your apartment building falls into there is a large room for benefit from building more ADUs.
We hope that this helped you to better understand the costs and benefits of accessory dwelling units. If you have any questions or concerns please email us at [email protected] and we would be happy to walk you through all aspects of your project.