Buying a Home With an ADU — What You Need to Know Before You Make an Offer
ADUs have become one of the most talked-about features in Valley real estate over the last few years and for good reason. A well-built ADU adds genuine value, generates rental income, and gives you flexibility that a standard home doesn't. But there are things worth understanding before you factor one into your decision.
What Counts as a Legitimate ADU
Not all ADUs are created equal. A fully permitted ADU with its own entrance, kitchen, bathroom and separate utilities is a fundamentally different thing from a converted garage with a hot plate and a bathroom that was never signed off. The first one adds value and can be legally rented. The second one is a liability.
Before you make an offer on a home with an ADU, verify the permits. Pull them yourself or have your agent do it through the city. If the work was done without permits, you are inheriting that problem. Lenders will often not finance unpermitted space, and if you ever sell, you'll have to disclose it.
The Rental Income Question
A permitted ADU can generate meaningful income in the Valley. In Sherman Oaks and Studio City a well-finished one-bedroom ADU can rent for $1,800 to $2,500 a month depending on condition, location and what's included. That income can make a meaningful difference to your monthly carrying costs.
Just be aware that being a landlord comes with responsibilities and that California tenant law is protective of renters. Go in with your eyes open.
AB 1033 — The New Rule Worth Knowing
California passed AB 1033, which allows ADUs in participating cities to be sold separately as condominiums. This is still relatively new and not widely understood. It opens up interesting possibilities for investors and for owners who want to extract value from their property in ways that weren't previously available.
If this is relevant to your situation it's worth a proper conversation about whether your specific property and city qualify.
Anj Catalano · The Agency · 310 404 6955 · hello@anjinla.com
