Build an ADU in the backyard or Buy a SFH in another state

[Kim Leduff]

Hi BPers! im just curious of your opinion on which would be a better investment assuming both options would cost about 150K? building a 1 bedroom ADU in my backyard in CA or buying a Single family home in another state. Is there a good way to analyze these two choices?

[Paul Dashevsky]

My personal opinion is that it depends on risk vs return. I've chosen to build ADUs on several of my properties in Los Angeles for the following reasons : 1) I understand the local market, 2) I already own the land, so building an ADU is an incremental cost, 3) owning a property locally makes it easier to manage and I don't have to pay for property management, 4) I'm getting really good rents without a major increase in expenses.