How To Make Extra Money with an Accessory Dwelling Unit

An Accessory Dwelling Unit (ADU) is a secondary residential unit on the same lot as your primary home, often called a granny flat, in-law suite, or backyard cottage. ADUs offer a fantastic opportunity to generate extra income while increasing your property’s value and functionality. Based on the context of the 345 Village St, Millis, ADU plan and current trends in ADU usage, here are actionable strategies to monetize your ADU, tailored to maximize profitability while adhering to local regulations and sustainable design principles like those in the 2021 International Energy Conservation Code (IECC).

1. Rent Out the ADU for Long-Term Income

Renting your ADU to long-term tenants is one of the most reliable ways to generate steady income. Depending on your location, rental rates can vary significantly. For example, in high-demand areas like Los Angeles, a studio ADU can fetch $1,200–$3,000 per month. Research rental market rates to set a competitive price, likely in the $1,200–$3,000+ range for a well-designed, energy-efficient unit compliant with the 2021 IECC.

• Tips for Success:
  • Ensure the ADU has a separate entrance, kitchen, and bathroom to appeal to tenants seeking independence.
  • Highlight energy-efficient features like LED lighting or high-efficiency HVAC to attract eco-conscious renters.
  • Check local zoning laws in Millis to confirm long-term rentals are permitted, as some areas restrict ADU usage.
  • Set aside a portion of rental income (e.g., 10–20%) for maintenance, as ADUs require upkeep like any home.
• Potential Earnings: Assuming a conservative $1,800/month rental, you could earn $21,600 annually, offsetting construction costs (typically $30,000–$300,000) over time.

2. Offer Short-Term Rentals for Higher Profits

If the municipality allows, listing your ADU on platforms like Airbnb or Vrbo can yield higher nightly rates than long-term rentals, especially if near tourist attractions or urban centers like Boston. For instance, a well-designed studio ADU could rent for $100–$200 per night. One homeowner reported earning $22,000–$27,000 annually from a studio ADU rented 10 months a year at $140–$165/night, with minimal overhead due to its small size.

• Tips for Success:
  • Furnish the ADU with modern, durable furniture and include amenities like Wi-Fi and a smart TV to attract travelers.
  • Incorporate sustainable features like solar panels or a greywater system to market the ADU as eco-friendly, appealing to environmentally conscious guests.
  • Use dynamic pricing tools on rental platforms to adjust rates based on demand, maximizing income during peak seasons.
  • Verify Millis zoning regulations allow short-term rentals, as some municipalities impose restrictions or require permits.
• Potential Earnings: At $150/night for 200 nights annually, you could earn $30,000, though cleaning and platform fees (typically 3–5%) will reduce net income.

3. Use the ADU as a Home Office or Studio

If you’re a freelancer, small business owner, or professional (e.g., therapist, artist, or tutor), if allowed converting the ADU into a home office or studio can generate income indirectly by supporting your business. This avoids tenant-related hassles while leveraging the ADU’s separate space for tax-deductible business expenses.

• Tips for Success:
  • Design the ADU with ample natural light and soundproofing, compliant with IECC standards, to create a productive workspace.
  • Equip it with high-speed internet and modular furniture to accommodate various professional needs.
  • Consult a tax professional to understand deductions for home office use, which could offset ADU construction costs.
  • If not in use, you can repurpose the space for rentals later, maintaining flexibility.
• Potential Earnings: Income varies by profession, but a home-based business could save $5,000–$10,000 annually on external office rent, plus tax benefits.

4. House Family Members to Save on Care Costs

Using the ADU to house aging parents or adult children can save significant expenses compared to assisted living facilities ($4,500/month on average) or off-site rentals. This approach indirectly “earns” money by reducing family caregiving costs while keeping loved ones close.

• Tips for Success:
  • Design the ADU with accessibility features like ramps or wide doorways, ensuring compliance with local codes and IECC efficiency standards.
  • Use durable, low-maintenance materials to minimize upkeep costs, as outlined in sustainable ADU designs.
  • Plan for future rental use by including standard amenities (kitchen, bathroom) to retain income potential when family no longer occupies the unit.
• Potential Savings: Saving $4,500/month on assisted living equates to $54,000 annually, far exceeding typical rental income.

5. Increase Property Value for Long-Term Gains

An ADU can boost your home’s resale value by 10–30%, with some regions like the Midwest seeing up to 54% increases. For a $500,000 home, this could add $50,000–$150,000 in value, making it a worthwhile investment even if not rented immediately.

• Tips for Success:
  • Ensure the ADU meets 2021 IECC standards to appeal to buyers prioritizing energy efficiency.
  • Work with a local appraiser familiar with the area to understand how ADUs impact home values in the area.
  • Obtain proper permits to avoid code violations, which could force costly modifications or demolition.
• Potential Earnings: A 20% value increase on a $500,000 home yields a $100,000 gain upon sale, minus construction costs.