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Accessory Dwelling Units (ADUs) By Jeff Stewart, CCIM

Accessory Dwelling Units

Looking for an Austin real estate investment with solid returns? What about something that has the capability to generate enough cash flow that it might be possible to recoup the initial investment in less than ten years?  Perhaps less?  This opportunity might be as close as your back yard . . . literally.

ADUs, or Accessory Dwelling Units, have become the rage during the COVID pandemic.  Formerly known by the less than flattering handle of a “Granny Flat,” ADUs are now designed more for the Airbnb crowd.  Short-term rentals are regulated differently in almost every community, but where allowed, they provide a real opportunity to generate a surprising amount of revenue. Not long ago, I sold a home for friends and clients that had a great secondary unit in the back.  The rental unit was a well-furnished, attractive, single bedroom with a small bath. Patrons had easy access down a sidewalk beside the main house.  I was stunned to learn that they had been earning $20,000 or more each year.

Mindful of permits and city regulations, a number of firms specialize in everything from site-built units to prefab structures. Some look like they jumped off the page of Architectural Digest, yet are actually quite practical in their simplicity ands design.

In the past, this type of set up was usually most common as a garage apartment near campus and occupied by college students.  The advent of social media and an abundance of short-term rental websites has changed all that.  As Austin continues to grow as a vacation destination with SXSW, UT games, ACL & F1, the demand for short-term rentals has soared.

Again, most communities have strict policies regarding ADUs and most homes are not a fit; but for the right situation, this might be an opportunity for a small but rewarding investment.



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