The main photo is courtesy of Ecokit™ which showcases an interior view of their Breakout 527 square feet ADU model.
Having recently published our take on ADU trends derived from HomeLight’s newly published report, Top Agent Insights for End of Year 2021, we follow up with additional findings that highlight the key traits of ADUs that are in highest demand by renters, grouped into the following criteria:
- Features & Amenities
- Design Elements
- Location Qualities
Also see these related articles:
Regional Rental Demand for ADUs
ADUs continue to generate heightened interest from homeowners looking to generate supplemental rental income, as well as renters looking for affordable housing in convenient and desirable neighborhoods. However, be forewarned that the receptiveness of ADUs, especially for use as rental properties, varies dramatically from region to region.
The Pacific and Mountain regions of the United States have the highest ADU rental rates of all regions surveyed. This is a likely result of favorable housing policies that have encouraged both the construction of ADUs, as well as their use as rental units. Real estate agents based in western states of the US, confirmed a wide acceptance of ADU rentals in their local markets, with 90% in the Pacific region and 81% in Mountain states stating that it was legal to own and rent an ADU property.
These rental rates are far above the national rate of 67% and almost double the Northeast rate of 42%, where strict zoning laws prohibit most homeowners in cities and towns around Massachusetts, Rhode Island and Connecticut from adding ADUs to their main property or renting them for supplemental income.
We are hopeful that other regions of the US will gradually follow the lead of Pacific and Mountain states, as ADUs can deliver mutually beneficial solutions to both homeowners and renters.
Questions to Consider for Your ADU Rental Property
If you happen to be in a more permissive region that has opened up its zoning laws to changes in ADU construction and regulation, here are questions to explore to have a highly profitable and desirable ADU rental unit:
- What type of amenities appeal to renters of ADUs within your particular region?
- Which features do you need to add to reap the most return on invest (ROI) from rental income?
- Which features do you need to add to reap the most return on invest (ROI) from the resale of your property?
- Which amenities will allow you to charge the highest rents?
- In which settings will ADU renters be willing to pay a premium?
Features & Amenities that Make ADUs More Desirable & Valuable
How can homeowners maximize the appeal and rentability of their ADUs in order to ensure a high occupancy rate each year?
Preferred ADU Features
- Separate Entrance
- Air Conditioning
- In-Unit Washer & Dryer
- Private Outdoor Space
- Pets Permitted
Not surprisingly, the top feature requested by renters of ADUs is a separate entrance, especially if the ADU is attached or part of an interior conversion. Separate entrances will improve both the resale value of the property and increase rental income according to 84% of agents who responded to HomeLight’s survey.
Additional highly valued ADU rental features are air conditioning and in-unit washer and dryer appliances, according to 77% and 72% agents respectively. Another feature for which renters would be willing to pay a premium would be a private outdoor space, such as a balcony, porch or patio. Allowing pets was another feature that added value for renters with 42% of agents confirming that renters would be willing to be charged for this convenience.
Design Elements that Make ADUs More Desirable & Valuable
Preferred ADU Design Elements
- Durable Flooring
- Natural Light Elements
- High-End Materials
- Name-Brand Appliances
- Universal Design
When designing your ADU, homeowners might regard it as prudent to choose the most durable and cost-effective materials for their rentals. However, to boost resale value and to increase the income from the new property nationally, 55% of agents recommended that waterproof laminate or some other type of durable flooring was the most important design element to improve one’s investment over time.
Oddly, the South Central region had the highest desire for durable flooring at 73% while the Midwest and Northeast appear to be less concerned with each recording a 47% for the level of value add.
Nationally, 53% of agents also recommended designing natural light elements into the newly constructed ADU such as French Doors, skylights or clerestory windows in order to improve one’s ROI picture. This is especially important when building structures in the Pacific region (66%) Mountain (60%) and Northeast (59%) regions.
Although homeowners might be tempted to design kitchens and bathroom with less expensive construction materials, 47% of agents suggests choosing high-end materials, such as granite, porcelain and ceramics, which, although more expensive, are durable and elegant.
Additionally, these same agents suggest adding name-brand appliances to the unit, so as not to sacrifice on quality and function for well-heeled renters. From a regional perspective, the high-end materials and appliances appear to be of most importance to those in the Northeast (55%) and South Central (52%) regions of the US.
Universal design is another design trend that we at Purgula, believe will remain timeless and functional throughout any architecture type, be it an ADU or main residence. For those not familiar, Universal Design is a design concept that allows for flexibility for ALL residents, regardless of age, stature, or disability.
Also known as “barrier-free” design, universal design focuses on making the space safe to the greatest extent possible and will allow occupants to stay in the home throughout any life stage, health ailment or injury.
Judging by the low national number of just 35% of agents who believe in the importance of universal design, we recognize that this design concept has yet to take hold across the nation. The Northeast region, at 44%, appears to understand the need for universal design, as does the Pacific region at 39%.
Per HomeLight’s survey data, ADU owners need to be aware of regional differences that appeal to prospective tenants. A good example of knowing your local market is the Northeast outlier preference for Storage, where 52% Northeast agents recommended having ample storage, compared to the national average of just 38%.
Conversely, ADUs presumably have made open-space studio apartments appealing again, as only a relatively low percentage of agents felt it is necessary to offer a closed-off area for the bed: 39% nationally, with Mountain being the highest at 44%.
Location Qualities that Make ADUs More Desirable & Valuable
Preferred ADU Location Qualities
- Near City Center
- Near College Campus
- Near Body of Water
As expected, ADU renters prefer to be near a city center, per 60% of agents, or in the proximity of a college or university campus, 47%, or in the proximity to a body of water, such as a lake, ocean or pond, 43%. The South Central region, where 60% of agents said that proximity to a college campus tops closeness to the city center, was the major outlier compared to the 47% national preference for increasing an ADU’s rental value.
HomeLight ADU Infographic
ADU Resources & Studies
- HomeLight Top Agent Insights End-of-Year 2021 Report Overview
- HomeLight Top Agent Insights End-of-Year 2021 Report (PDF)
- HomeLight Top Agent Insights End-of-Year 2021 ADU Infographic
- Mother-in-Law Suites on the Rise: How Much Value Do They Add?
- The State for Zoning for Accessory Dwelling Units
- Accessory Dwelling Units are a Good Thing for Connecticut
- Implementing the Backyard Revolution: Perspectives of California’s ADU Owners
- Technical Report: ADU Demographic Analysis in Unincorporated San Mateo County
Related ADU Articles from Purgula
- Does an ADU Add Value to Your Home? Surprising Trends from HomeLight
- Top PreFab ADU Vendors
- Want a Nontraditional House? Here’s How to Finance It!
- Why Homeowners Should Invest in a Prefab ADU
- Choosing Between a Prefab ADU & a Stick-Built ADU
- The Impact of ADUs on Your Neighborhood: Perceptions vs. Reality
- 10 Ways to Monetize Your Home
- How Landlords Can Find The Perfect Tenant
- Never Thought You’d Own Land? Think Again!
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