ADUs: A Gateway Real Estate Investment

Have you thought about dipping your toes into purchasing an investment property? A house with an existing ADU (Accessory Dwelling Unit), or a second unit, is a common starting point for local Boise real estate investors.  

What are the advantages of an ADU?

Not only does an ADU add value to your property, it also allows for long-term income and it may boost buying power. Sometimes, it will cost less per month to own a second unit (after it’s rented) even though the initial purchase price or loan balance is higher. That is due to the rental income which offsets the monthly payment. 

In addition, down payment minimums and interest rates often run lower for owner-occupied properties than for investment properties, so living on site and renting a portion of your property is a great starting point for real estate investors.

ADUs carry value and they provide flexible use options, for either a short-term or long-term rental, or if you eventually decide not to rent it, they can serve as a home office, mother-in-law suite or guest room. Be mindful of giving up garage space to convert it an ADU though, unless you go above it. You’d be losing some equity through the loss of a garage if you converted it to living space.  

Sample Cost Savings of an ADU

Sample home sold 1/25/2024 for $539,000

$3,570/month payment with no rental income*

$2,653/month payment after rental income totaling $11,000/year for the second unit in that purchase.

That lower payment is roughly the same as a payment on a $400,000 home, or $139,000 less.

Given the flexibility of an ADU and the potential investment income, they are a great option for first time real estate investors who can live on site and rent out portions of the property to help offset costs. We’re happy to help find the perfect property for your Boise real estate investment and get you set up to start your investment journey.

*5% down payment, 6.5% interest, price-based estimates for taxes and insurance