Interested in Investing in Real Estate? Start With an ADU

By Brian Johnson
2021 President
Santa Barbara Association of Realtors

Have you wondered about buying real estate as an investment? Have you looked at the steadily increasing prices of properties recently and thought it was beyond you? There could be a simple solution right in front of you or more appropriately right under your feet. If you own a home there is a chance you could add an Accessory Dwelling Unit (ADU) to your property and rent it out for investment income. An ADU is another residence on the same property as the primary house. It can be an existing part of the house, connected to it or a separate structure. ADUs were often referred to as “granny units” and “mother in law” units in the past.

The state of California has been making it easier for homeowners to add an ADU to their property in an effort to battle against the housing crisis we currently face. Previously, the laws at local levels did more to prohibit ADUs. Now, the state is making it harder for municipalities to deny them if they meet legal design standards. That has resulted in an explosion of ADU permits across the state. Permits are being issued quicker and easier and homeowners are able to bring a new housing unit to completion in less time. That saves money and makes them more affordable to build. There are still size and design guidelines that homeowners have to comply with but it makes it possible for more people to build them.

With the median price of a home well over a million dollars in Santa Barbara it makes sense for homeowners to add an ADU when possible. This makes for a more affordable entry into the world of real estate investment as there are a lot more people that can afford a $100,000 ADU than a $1 million investment property. It is also a lot easier to be a manager of one unit when just starting out. Additionally, by adding an ADU you are increasing the value of the property overall. When you sell your property, you will easily recoup that original investment.

Brian Johnson is a California licensed real estate agent and the Managing Director of Radius Commercial Real Estate. Brian handles all types of commercial real estate transactions but has a special focus on multifamily investments. He can be reached at 805-879-9631 or bjohnson@radiusgroup.com