Is Adu Fever Coming? Axis Team Opens up a New World for You!
- Marketing Alpha
- May 1
- 4 min read
Is ADU fever coming? Axis team opens up a new world for you!
It has been proven that buying a house and building an ADU in Southern California can generate super high cash flow from monthly rentals!
The emergence and development of ADU
Accessory dwelling units (ADUs) are an innovative, affordable, and effective option for alleviating California's housing shortage.
In recent years, California has faced a severe housing shortage, leading to soaring housing prices and a shortage of available housing. This has forced many people to seek housing far from their workplaces. Against this backdrop, ADUs have emerged as an alternative housing option, and the government has actively promoted the improvement of relevant policies and regulations.
Since 2016, California has seen ADU permits increase from just over 1,000 per year to over 24,000 by 2022, representing 19% of new housing permits. Los Angeles ADU permits have increased from fewer than 100 to over 7,000, representing 30% of new permits citywide.
(Number of ADUs allowed in California)
Aside from being smaller, ADUs are virtually identical to regular homes, contributing to their rapid growth in a tight housing market. According to reports, homes with ADUs sell for significantly more than standard homes, with an expected 20% to 30% increase in property value. In California, this increase is even higher , depending on the quality of the ADU.
ADU in Southern California
In the two years since the first statewide law passed, nearly half of all ADU permits were in the Los Angeles area , which has built a robust ecosystem around ADU production.
Compared to Northern California, Southern California boasts lower land and construction costs, making the initial investment in ADUs relatively low . This is a significant advantage for investors looking to increase income through the addition of additional units. Furthermore, Southern California's more developed tourism industry, particularly in areas like Los Angeles and San Diego, makes ADUs well-suited for short-term rentals like Airbnb , helping investors generate higher rental income.
As an investment, many ADUs in the Los Angeles, San Diego, or San Francisco metropolitan areas rent for $4,000 to $5,000 per month . This represents a significant investment opportunity for the homeowner or their children, who can now build a 1,000-square-foot house for $350,000, instead of the $900,000 they would have paid for a similarly sized property.
This year, San Jose became the first city in California to allow owners to sell their ADUs , further demonstrating the government's commitment to ADUs and their potential for both investment and residential use. Many cities, such as Berkeley, are also interested in allowing ADU sales. With Northern California already taking action, is Southern California far behind?
Favorable policies for ADU
In order to actively support ADU construction, California legislators have also continued to pass relevant laws.
California has passed some significant ADU laws over the past few years. Bills like AB 68 and AB 881 eliminated many restrictions imposed by local agencies and created rules that benefit homeowners statewide. These changes have made building ADUs much simpler.
In September 2024, Governor Newsom signed three additional ADU bills (AB 2533, SB 1211, and SB 1077), which will take effect on January 1, 2025.
Among them, SB 1211 is of great significance. Specifically :
1. Define the term "habitable space." It states that "'habitable space' refers to the space within a dwelling that is used for human habitation, including living, sleeping, eating, cooking, or sanitary facilities."
2. Increase the number of detached ADUs. Existing multifamily lots can have up to eight detached ADUs, or the number of detached ADUs equal to the number of principal dwelling units on the lot, whichever is fewer . SB 1211 does not change the number of ADUs that proposed multifamily lots can have—they will still be limited to two detached ADUs.
3. Flexible Use of Space. Prohibit local agencies from requiring replacement parking spaces when removing surface parking spaces or replacing them with ADUs.
In simple terms, SB 1211 quadruples the number of stand-alone ADUs allowed in multi-family homes, from two to eight, while allowing homeowners to replace carports or driveways with ADUs without replacing parking spaces.
This flexibility will allow property owners to better utilize vacant portions of their properties, unused parking lots, and other underutilized land to build more ADUs.
Southern California ADU real case study
The project our team completed in Fullerton this year is an ideal ADU investment example.
The property was originally purchased for $715,000 , and our team recognized early on that the square shaped lot had great potential and was perfect for an ADU.
The main house has been renovated and is currently rented out, generating $3,610 in monthly rent . The renovation cost $80,000, making it a very cost-effective investment. However, the real boost to the property's value lies in the $ 150,000+ investment in the ADU on the land .
The project includes a detached ADU (1,524 sqft, 4b2.5b) and a small 2-story ADU (783 sqft, 2b2b). Upon completion, each of these ADU units is expected to generate $2,700/month in rental income.
With the completion of these ADUs, the property's estimated after-rehabilitation value (ARV) is $2,200,000. Combined with the rented main house, the property's annual rental income will reach $156,120 , significantly increasing return on investment and cash flow.
Unlike regular independent real estate agents, our team boasts a full-time, all-in-one team of professionals , including marketing experts, experienced real estate agents, transaction coordinators, and team assistants. We not only help you purchase a property, but also leverage our expertise and extensive experience to provide you with a comprehensive real estate investment plan, building a steadily growing portfolio and increasing your wealth!
Combined with SB 1211 , as long as the land is used properly, doubling cash flow through ADU is just around the corner!
ADUs are a novel living model that can increase your property's value and generate regular income, whether for your own use, future development, or investment. Contact us and let our professional real estate team help you invest in and build an ADU, saving you significant money and effort!
Whether you're in Northern or Southern California, we have a dedicated team to serve you. If you're interested in building an ADU, or have any questions about it, please scan the QR code below to contact us! Our team will take you on property viewings and be happy to assist you!
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