As a real estate investor, maximizing your income requires having all of the right tools in your tool belt. Although PadSplit hosts already earn an average of 2.5x more than with short-term or long-term rentals, there are many ways to still maximize their revenue, specifically with ADUs.
Accessory dwelling units (ADUs) have emerged as a game-changer in the real estate industry. They not only increase revenue opportunities but also give investors a chance to transform more of their rental properties into income-generating spaces. The core idea behind ADUs is to leverage unused space, typically in the backyard, on the same property as the main dwelling.
When it comes to solving the affordable housing shortage, ADUs are also extremely useful for providing housing to low-income earners with unused space on lots that aren’t currently generating income. This expands hosts’ reach and the impact that they make in the local community for essential workers. Instead of providing affordable housing to an average of four or five individuals, they can now help an average of eight people.
“ADUs offer more housing options and also allow for other opportunities for legacy residents to stay within their communities,” says Will Johnston, founder of MicroLife Institute.
Unleashing the power of ADUs
Pavan Iyer, founder of Backyard ATL and a PadSplit host in Atlanta, Georgia, has experience showcasing the demand for ADUs. His two-bedroom ADU has been swiftly booked and consistently occupied since it was listed on PadSplit in December 2023.
”I liked how easy and quick it was to find a renter with ADUs,” says Pavan. Currently, he charges $375/week for an ADU. “ADUs can attract renters who are willing to pay a little more for additional privacy, adding more diversity to the lot.”
Better ROI on backyard space
ADUs present a unique opportunity for investors to generate revenue from underutilized backyard spaces. The compact footprint of these units means minimal land requirements, making them a lucrative investment in urban areas where space is at a premium. The only requirement is easy access to the backyard and if the municipality has made them legal.
ADUs not only generate more revenue per square foot compared to traditional apartments but also contribute to an increase in the overall value of the property. This dual benefit makes ADUs an attractive investment for property owners. The idea is similar to adding sleek rims to a car—it’s a stylish upgrade that transforms the look and boosts performance.
“Some people also choose to rent out their main home and move into the back into an ADU to take full advantage of the property,” says Pavan. “Something that’s not generating revenue can now generate revenue.”
While constructing an ADU may take more time than retrofitting a house, averaging six to 12 months, the increase in revenue outweighs the investment. Costs vary based on city and market conditions, ranging from $75,000 to $250,000.
Flexibility and additional space
Two PadSplit members looking to pay less can choose to share the ADU and still have a comfortable living space that doesn’t include sharing a wall with the primary house for added privacy. It means sharing the kitchenette and stacked washer and dryer with fewer people compared to the main house on the property. The added rooms are rented out in the same way that other PadSplit rooms are rented to members on PadSplit’s marketplace.
PadSplit’s platform streamlines the rental process, making it easier for PadSplit hosts to find suitable tenants. The efficiency and reduced vacancy rates contribute to cost savings and a hassle-free experience compared to traditional listing platforms.
Privacy and an enhanced living experience
ADUs range in size from 200 to 750 square feet, offering an array of housing options depending on the lot size and investor’s budget. The smaller units, like Pavan’s 200-square-foot studio, can be rented at competitive rates, providing added privacy and a more personal living space compared to shared accommodations.
Reducing security risks
Occupied ADUs also act as a deterrent to potential security issues, minimizing the risk of property targeting. Homes with empty backyards are more likely to be targeted than occupied spaces where a tenant is present.
ADUs present an exciting avenue for PadSplit hosts to maximize their income, enhance property value, and provide affordable housing options. Join the ranks of forward-thinking hosts who are elevating their hosting game by embracing the transformative potential of ADUs in their PadSplit backyards.
