Should You Add an ADU or Invest in Real Estate?

Due to the pandemic, it can be very difficult to figure out what investments you should make and how you should use your money wisely. A lot of people believe that it is smart to invest in real estate right now, and while in some regions it might work, for the most part it can be risky.

An ADU on your existing property offers several advantages over purchasing investment real estate: no need for a second mortgage, no property management headaches, and no risk of buying in an unfamiliar market.

Cost comparison: A Bay Area ADU costs $150,000–$400,000 to build. A comparable rental property in the same area would cost $800,000–$1,500,000 to purchase.

Cash flow comparison: ADU rental income of $2,500–$4,500/month with minimal expenses vs. investment property rental income that's often offset by mortgage payments, property taxes, and maintenance.

Risk comparison: You already own the land, you can oversee the property yourself, and if the rental market softens, the ADU still adds value to your primary residence.

ADORE Homes helps homeowners make informed decisions about ADU investments with transparent pricing, realistic rental projections, and expert guidance.