Financial Planning Tool
Building an Accessory Dwelling Unit (ADU) is one of the safest investments in California real estate. Use our calculator to estimate your rental income, property value boost, and payback period instantly.
ADU ROI Calculator
Calculate the return on investment for your ADU project in real-time
| Year | Rent | Operating Costs | Net Income | Cumulative Return |
|---|---|---|---|---|
| Year 1 | $28,500 | $4,725 | $23,775 | $23,775 |
| Year 2 | $29,355 | $4,768 | $24,587 | $48,362 |
| Year 3 | $30,236 | $4,812 | $25,424 | $73,786 |
| Year 4 | $31,143 | $4,857 | $26,286 | $100,072 |
| Year 5 | $32,077 | $4,904 | $27,173 | $127,245 |
| Year 6 | $33,039 | $4,952 | $28,087 | $155,332 |
| Year 7 | $34,030 | $5,002 | $29,029 | $184,361 |
| Year 8 | $35,051 | $5,053 | $29,999 | $214,360 |
| Year 9 | $36,103 | $5,105 | $30,998 | $245,358 |
| Year 10 | $37,186 | $5,159 | $32,027 | $277,385 |
How to Use the ADU ROI Calculator
Follow this step-by-step guide to accurately calculate your ADU investment return and make informed financial decisions.
Enter Investment Details
Start with your construction cost, ADU size in square feet, and current home value. These are the foundation of your investment calculation.
Set Rental Income Expectations
Enter your expected monthly rent and occupancy rate. Research local rental rates in your area for accurate projections.
Add Operating Costs
Include annual maintenance (typically 1-2% of construction cost), property tax increases, and insurance costs.
Configure Growth Rates
Set expected annual growth rates for rent (typically 2-4%) and home value (typically 3-5%). Adjust based on your local market.
Review Results
Analyze your ROI, payback period, cash flow projections, and cumulative returns. Results update in real-time as you adjust inputs.
Research Local Market Data
Use our city pages to find actual rental rates and home values in your area. Real market data leads to more accurate ROI calculations.
Consider All Costs
Don't forget to include permit fees, utility connections, landscaping, and any site preparation costs in your construction budget.
Be Conservative with Estimates
Use slightly lower occupancy rates (90-95%) and account for potential maintenance issues. Conservative estimates help avoid surprises.
Compare Multiple Scenarios
Try different construction costs, rental rates, and growth assumptions to see how they impact your ROI. This helps you plan for various outcomes.
Return on Investment (ROI) for an Accessory Dwelling Unit measures the profitability of your ADU project by comparing your total investment against your returns over time. A well-planned ADU in California typically generates an annual ROI of 8-15%, making it one of the most attractive real estate investments available to homeowners.
Our calculator factors in multiple revenue streams: rental income from tenants, property value appreciation from the added square footage, and tax benefits from depreciation. It also accounts for operating expenses including maintenance, property taxes, insurance, and vacancy periods.
The payback period shows how long it takes to recover your initial investment through rental income. Most ADU investments in California pay back within 7-12 years, with high-demand areas seeing faster returns. The cumulative ROI demonstrates your total return over the investment horizon, combining both income and appreciation.
Monthly cash flow represents the net income after all expenses, helping you understand the immediate financial impact. Positive cash flow from day one is possible in many California markets, especially in high-rent areas like San Francisco, Los Angeles, and San Diego.
Remember that ADU ROI varies significantly by location, construction quality, and local market conditions. Use this calculator as a starting point, then consult with ADU builders in your area for project-specific estimates and financing options.
Why Invest in a California ADU?
California's housing shortage has driven rental rates to historic highs. By building a second unit on your existing lot, you leverage land you already own—eliminating the biggest cost in real estate development.
- Generate Passive Income: Monthly rent from a 1-bedroom ADU in Los Angeles can range from $2,200 to $3,500.
- Increase Property Value: Appraisers are increasingly attributing value to legal ADUs, often adding 20-30% to the home's resale value.
- Flexibility: Use it for aging parents (Granny Flat), adult children, or long-term tenants.
Methodology: How We Calculate
Frequently Asked Questions
Expert answers about ADU finance and construction
We use a 'Cash-on-Cash' return model. This compares your annual net cash flow (Rental Income - Expenses) against your total upfront cash investment. In California, where land values are high but construction costs are fixed, ADUs often yield higher ROI than buying a separate rental property.
Ready to start planning?
Now that you know the numbers work, check if your property qualifies for an ADU.