ADU Cost & Rental Payback Calculator
Example: ADU build cost: 180000 $ · Expected monthly rent: 1800 $ · Monthly expenses (utilities, upkeep): 350 $ · Current home value: 500000 $ · Property value added by ADU: 25 %
| Years to pay back build cost | 10.34 |
| Annual net rental income | $17,400 |
| Cash-on-cash return | 9.67% |
Worked example
Building a $180,000 ADU that rents for $1,800 a month against $350 of monthly expenses nets $1,450 a month, or $17,400 a year. Dividing the $180,000 cost by that net income gives a payback of about 10.3 years, a cash-on-cash return near 9.7%. On top of the rent, the unit is estimated to add about 25% — some $125,000 — to a $500,000 home, so the equity boost can shorten the true payback further.
Frequently asked questions
What is an ADU?
An accessory dwelling unit is a secondary, self-contained living space on the same lot as a house — a detached cottage, a converted garage, or a basement or attached apartment. Many cities have loosened rules to encourage ADUs as a form of gentle-density housing.
Does an ADU add to my property value?
Usually yes. A legal, permitted ADU can add meaningful value because it produces income and expands usable space, though the exact lift depends on local demand and appraisal practices. This tool lets you estimate that percentage separately from the rent.
What financing is available for an ADU?
Options include cash, a home equity loan or HELOC, a cash-out refinance, a renovation loan, or specialized ADU financing in some areas. Borrowing costs affect the true return, so compare the payback here against the interest you would pay to build.
What are the risks?
Construction can run over budget, permitting can be slow, and you take on landlord responsibilities and vacancy risk. Local zoning, owner-occupancy rules, and short-term-rental limits can also constrain how you use the unit — confirm them before you build.