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How One Couple Built An ADU That Earns $4,500/Month In Rental Income

How One Couple Built An ADU That Earns $4,500/Month In Rental Income
How One Couple Built An ADU That Earns $4,500/Month In Rental Income

A couple in the Los Angeles area hit a home run when they converted their two-car garage into a luxury accessory dwelling unit (ADU), in 2021. Today, they earn $4,500/month in rental income, representing an annual return of over 15% on their original investment of $354,000. If success stories like this become more common, it could lead to a new boom in new rental units in Los Angeles.

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It's no secret that apartment rents and property values skyrocketed in most of America's major cities for the past decade. Many real estate industry analysts agree that a lack of inventory is one of the main contributing factors to this price explosion. The result is an ever-increasing number of Americans who are having to stretch their budgets well past the point of sustainability just to pay their monthly housing bill.

That scarcity in housing availability is a big reason why ADUs are having a moment right now. To be certain, ADUs are hardly a new concept and they were a relatively common feature in American housing in the early 20th century. The original ADUs were usually small bungalows built in the backyard of a larger single-family home and they were the perfect place to house relatives from out of town or adult children.

Other examples of ADUs included finished basements, carriage houses, or even garages that were converted to provide extra space for the homeowner.  However, as most big cities modernized, their political leadership instituted building and zoning codes that banned ADUs or heavily restricted their construction. Many of those rules came into effect during the FHA-fueled housing booms of the 1940s, 50s, and 60s.

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Back then, there was plenty of space for everyone in the outlying suburbs, and buying homes was so affordable that there was no real need for ADUs. Fast-forward to 2024, and the picture has changed radically. Many of the same cities that adopted restrictive building codes that prevented multi-family housing or ADUs are now desperately short of available units.

Consequently, cities like Los Angeles and Boston began easing their restrictions on ADU construction or even encouraging it. That's when LA area architects Jooyung Chung and En Yang decided to convert the garage of their Eagle Rock area home to a two-bedroom apartment. Their professional know-how served them very well. They created a nice apartment that attracted dozens of prospective renters when they put it on the market in 2021.

The conversion was not cheap, but their attention to detail and commitment to creating a quality space has paid off. Their first tenants occupied the space for nearly three years before moving to Michigan, and the new tenants could not be happier. Like any landlord, Chung and Yang are pleased to earn $4,500/month in rent from the new tenants. More importantly, the tenants are pleased with their new space.

That's certainly not cheap rent, but Eagle Rock is one of Los Angeles' most highly sought-after neighborhoods and Zillow says the median rent for the area is a whopping $3,600. However, the fact that Chung and Yang have been able to command so much more than Eagle Rock's median rent speaks to the overall quality of their design. They included numerous tenant-friendly features, such as built-in storage units and climate-resistant insulation.

It's certainly true that Chung and Yang's design know-how and professional experience helped them create a high-quality living space earning top dollar on the open market. However, their success could also pave the way for more ADU construction in areas suffering from a pronounced shortage of housing inventory. That's why so many people hope that relaxed ADU construction laws will be a win-win situation for tenants and landlords.

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