ADUs as income property

Is real estate a good investment?

Done right, real estate investing can be a great step towards financial freedom and wealth. Andrew Carnegie is attributed with saying that 90% of all millionaires become so through owning real estate. Here are some things that make real estate a good investment:

-It’s accessible–easy to purchase and easy to understand what you’re investing in

-Financing is available, which means you can make an investment even if you can’t pay cash

-It lets you use other people’s money to make money

-Real estate tends to grow in value

Read more about investing in real estate, here.

Will an ADU make money?

The biggest advantage of investing in an ADU is immediate positive cash flow. Cash flow is the extra money a property produces in profit every month. Once you’ve paid the mortgage, taxes, insurance, maintenance, and property management fees, whatever is left over is your positive cash flow. Let’s say you invested in an ADU for $100,000 and put 20 percent down. You take out a loan for $80,000, which will cost about $400/month for a 30-year loan.

Case Study 1: The long-term rental investment.

After paying property taxes and other expenses, you profit about $850/month from your long-term renter. $850 x 12 = $10,284 per year. (At the time this article was written, The average rental price in Vancouver, Washington was around $1,357 per month for an apartment,  find updated rental information, here.)

So after one year, you’ve made $10,284 in positive cash flow. (Assuming a 2,000-hour work year, this is like getting a $5.14 an hour raise, what could you do with that extra income?)

The best part is this is passive income, income that requires little to no effort to earn and maintain.

Case Study 2: The short-term rental investment.

After paying property taxes and other expenses, you make a profit of about $2000/month from your short-term rental. $2000 x 12 = $24,000 per year. (At the time this article was written, The average daily rate for a short-term rental in Vancouver, Washington was $114 per night, with a 75% occupancy rate, find more information on short-term rental prices, here.)

So after one year, you’ve made $22,000 in positive cash flow. (Assuming a 2,000-hour work year, this is like getting an $11 an hour raise, what could you do with that extra income?)

The best part is this is passive income, income that requires little to no effort to earn and maintain.

Why an ADU?

At the time this was written the median home price in Clark County, Washington was $388,756, at that price point, finding a renter that would even cover costs would be tough. With units starting under $100K My ADU is an accessible real estate investment. Already own rental income property? Wonderful, why not add an ADU and turn your one-income property into a dual-income property.

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