Rental Income Potential: Turning Your ADU into Passive Cash Flow

Did you know that in fast-growing rental markets like Atlanta, an accessory dwelling unit (ADU) can generate between 30% and 50% of a property's total rental income? To help you learn more about renting out an ADU in Atlanta, GA, we've discussed a few important insights. 

So, stick around to learn more about everything from how much passive income from an ADU can be had, how to rent out an ADU in Atlanta, and building an ADU for rental income with us at SmartSpaces ADUs.

Is It Legal to Rent Out an ADU to Long-Term Tenants?

If there is one thing you need to know about earning passive income from an ADU in Atlanta, it's whether it's legal. Fortunately, we're happy to tell you that you won't be breaking any laws by renting out an ADU to long-term tenants as long as your ADU is fully permitted and built to code. 

This is something SmartSpaces ADUs can help you with if you decide to explore rental ADU opportunities in Atlanta. However, you should be aware that, although legal, there are specific rules that must be followed to ensure the rental remains compliant. 

For example, some areas in Atlanta require that the owner – you – live on site, either in the main home or the ADU. Additionally, other areas have specific rules surrounding lease terms and occupancy limits, so it's always a good idea to find these things out before you get too excited about extra rental income from an ADU in Atlanta. 

How Much Can You Actually Earn From An ADU Rental In Atlanta?

Based on local data, one-bedroom units often fall between $1200 and $2500, depending on the area, so it's possible you could make extra income that falls within this range. Annually, this means you could earn $25,000 or more, and you can use this extra money to fund home improvements, help pay off your mortgage, or build savings. We don't know about you, but our team at SmartSpaces thinks this is a compelling reason to consider an ADU investment. 

However, making money with an ADU rental in Atlanta depends on several key factors, including location, size, design, and amenities, which determine your potential earnings. Unsure what we mean? Think of it this way, a well-designed one-bedroom ADU with its own private entrance and modern finishes will earn you more monthly than a small studio ADU. 

How To Rent Out Your ADU: The Steps You Should Take to Rent Your ADU Legally

To legally generate rental income from your ADU after you've built it, there are several key steps you must take. To help make the process as easy as possible to understand, we've briefly touched on a few of the first things you should do before putting up your ADU for rent: 

1. Confirm Your Zoning: You need to make sure your property is located in an area that allows ADU rentals. The last thing you want to do is build an ADU for extra income, only to learn that you might need to tear it down because it's not allowed by the city. 
2. Ensure Proper Permits: A permitted, code-compliant ADU is required for legal rentals. It might be tempting to skip the permits, but that will only come back to bite you in the rear end when you're fined or told to tear it down. 
3. Check for Rental Licenses: Some municipalities require a business license or property inspection if you want to rent out an ADU. So make sure you check with your municipality about acquiring a rental license if it's needed. 
4. Determine Fair Market Rent: You don't want to be that landlord who overcharges their tenants. We recommend you compare similar rentals in your area to establish competitive rates that remain fair.
5. Draft a Lease Agreement: Before you rent, draft a lease agreement and have a lawyer review it. You should also ensure that you include rent terms, deposits, and tenant expectations.
6. Screen Tenants Carefully: A reliable tenant ensures your rental income remains passive and stress-free, so screen your tenants thoroughly before signing a contract and handing over the keys. It can become difficult to evict someone when they are on your property. 

Can an ADU In Atlanta Be Used as a Short-Term Rental?

Before you turn an ADU into a rental property in Atlanta, you need to know a little more about short-term rentals. Short-term rentals, such as Airbnb and Vrbo, are permitted only in certain areas and typically have specific regulations governing them. 

For example, you may need to register your ADU rental, obtain a license, and pay local hotel or occupancy taxes. Additionally, while short-term rentals can earn a higher nightly rate, they require frequent cleaning, guest management, and coordination of bookings. 

As a result, many homeowners opt for long-term tenants to ensure consistent income and minimize day-to-day involvement. It will be up to your zoning rules and preferences to determine which one you prefer.

What Factors Affect How Much Rent I Can Charge?

When you're interested in turning an ADU into cash flow, you're likely eager to learn what factors affect how much you can charge tenants. We briefly touched on how certain factors can influence pricing, but here's a more in-depth – but still brief – look into things:

• Build quality and design: If your ADU features stylish finishes, private outdoor areas, and convenient features like in-unit laundry, it adds value and means you can charge more. 
• Size and layout: If your ADU is on the larger side and features a full kitchen and spacious living quarters, it typically means you can charge more for rent. 
• Location: ADUs that are situated near parks, schools, and public transport are often more appealing to tenants, meaning you can usually charge more for rent. 

These are just a few of the factors that can influence the amount of rent you can charge, and we can help you understand these factors before you build with us. 

Turn Your ADU Into Cash Flow With a SmartSpaces ADU

So, is an ADU a good investment? We'll let you decide, but in our opinion, an ADU is a powerful tool for creating long-term financial security and increasing the value of your property. 

With the right design, amenities, and strategy, your ADU can become a steady source of monthly income. SmartSpaces ADUs specializes in building legal, rent-ready accessory dwelling units. If you're ready to explore the types of ADUs we can build and want help choosing the best option to capitalize on a rental opportunity, you can contact us here. We would love to help you and your family!