It could raise your property taxes
Adding an ADU to your property could increase your property taxes. After all, you are adding to the value of your property, and the local accessor will see that as an opportunity to raise your taxes. One way to get ahead of this is to reach out to the assessor's office in advance to find out what your potential liability could be. You will want to make sure that the rent you can earn will offset the additional costs you may incur.
While you will need to pay taxes on any rental income you earn, there are also tax benefits to operating a rental property. You can potentially deduct some of the costs associated with the upkeep of the ADU, but if the ADU is located on the same property as your primary residence you will likely only be able to deduct some costs on a percentage-use basis.
You may not be able to earn income from it the way you want to
Many people put an ADU on their property to earn additional income, either through long-term tenants or by listing their unit on a short-term rental site. However, cities including Los Angeles are now cracking down on how homeowners can use their ADUs. The city made the move to keep the ADUs available for long-term renters, and other municipalities may follow suit. After all, the reason that cities relaxed zoning laws in the first place was to help ease rental vacancy rates.
The growing rent reform movement may also restrict what you can charge and how you can evict tenants. There can be a lot to learn, especially if you are a new landlord. Having an ADU on your property may also mean that your tenants will knock on your door anytime something goes wrong. You will also lose privacy because you may have to share your outdoor living space with your tenants.
ADUs may be part of how cities cope with growing housing needs
It's likely that in 2020 more cities will relax rules on adding a second dwelling, paving the way for more ADU adoption around the United States. Some areas are incentivizing homeowners through special programs that promise a reduced cost of construction if the homeowner agrees to rent the property to a low-income tenant. In 2018 Portland, Oregon, launched a pilot program to test this out, and other cities have launched similar initiatives. Cities are also creating programs with lists of preapproved ADUs to speed up the process of approval for homeowners.
The bottom line is that while installing an ADU can take time, it can also add value to your property over the long term. As cities continue to explore ADUs as solutions for the housing crisis, many more homeowners may take advantage of the opportunity to add an income-generating addition.