Adu Gets Higher Rent than Apartments or Multifamily?

[Diane Tycangco]

Hello everyone, I just came from an ADU fair in Sacramento and the presenters were saying that ADUs rent for more money than apartments or multifamily. Is this true?

They said don't base your numbers on Rentometer.  They said to go to Zillow, remove apartments from your filters and put in the # of bedrooms. 

Personally, I wouldn't pay more to rent an ADU vs an apartment.

Their example was for a 1b1b standard quality 400-750 sq ft ADU costing $200k would rent for $2700!

What have you guys experienced?  I am skeptical. 

Thanks!

[Noah Laker]

No, that's not right at all. I manage and own multifamily, and I own a property with an ADU.

They probably were referring to cash-on-cash return. As a broker I tell my clients to purchase multifamily in Sacramento, or the occasional SFR. You can also construct an ADU if you desire but real properties make more than manufactured backyard homes... obviously!

[Chris Seveney]

@Diane Tycangco

I would disagree with that statement. Also when at conferences I take certain things with a grain of salt, an adu conferenfe routing adu’s are better than every other form of real estate….

As mentioned they may technically perform better cash on cash because your not considering land value into the investment as you already paid for that.

[Diane Tycangco]

Actually, they put in actual rent to expect as $2700 for a 1 bedroom in Sacramento which I think is absurd. 

Thanks for your input guys! 

[Ben Howard]

Variables could make a significant difference. For example, if a tenant values an ADU because:
the ADU is fully self contained vs. multifamily with shared walls/other tenant in unit above

better parking with an assigned space vs line of cars at an apartment complex

crime which may be lower in a neighborhood of single family homes

assigned schools which may be rated higher

age of ADU vs. multifamily as many ADUs are being constructed via favorable CA legislation

more premium finishes in an ADU vs multifamily

perception of better landlord with an ADU vs. apartment complex management

ADU may be located at the back of a residential lot vs. apartments which may be near a street/complex parking lot

ADU may have use of a yard vs. an apartment which doesn't

[Scott Scoville]

Whether it's an ADU or Apartment, the same applies.

1. Great Location is Key 

2. Level of Rehab (Nice Finishes) / Stay Away from Cheap Flips

3. Furnished Units Typically Rent for More

4. Get Professional Photos of Property

5. Build Your Reviews & Reputation for Providing Top Notch Rentals

Best of luck and don't hesitate to reach out!