Every public ADU ROI figure we sampled was one optimistic rent on one cost. This tool runs a tight case, a base case and a loose case on the same cost. Simple, undiscounted, pre-tax, pre-financing.
Three rentson one costBase uses the monthly rent you type. Tight is 85% of that rent with vacancy floored at 12%. Loose is 115% of that rent. HUD FMR belongs on the rent estimator, then you paste it here if you want.
Type a project cost, a monthly rent, a vacancy percent and annual operating costs (tax, insurance, maintenance, not the mortgage).
On a worked $300,000 cost, $2,000 rent, 8% vacancy and $4,000 operating, base NOI is $18,080, a 6.0% cap rate and a 16.6-year simple payback. Tight (85% rent, vacancy at least 12%) is worse on purpose.
None of this is a forecast, a loan decision or tax advice. HyreADU does not invest or lend.
One cost, three rents
Leave a field at 0 and the result will say so. Nothing is emailed.
—Base NOI
—Tight NOI (85% rent, ≥12% vacancy)
—Loose NOI (115% rent)
—Base cap rate
—Base simple payback
What this assumed—
Simple, undiscounted, pre-tax, pre-financing. Not a forecast. Not financial advice. HyreADU does not invest or lend.
The return you are computing is missing its largest term
Rent over cost is a yield on operations. It is not the return on the project, because the project also produces an asset — and the value of that asset is the term almost every ADU return calculation assumes rather than establishes.
Here is the arithmetic almost everyone does. Annual rent, less vacancy, less operating costs, divided by all-in cost. That gives a capitalisation rate, and the number that comes out is usually somewhere a reasonable person would call acceptable.
It is a fine calculation and the tool above performs it three times, on a tight, a base and a loose rent, because a single-scenario ROI is a marketing figure rather than an analysis.
But that calculation values the income and ignores the building. If you spend a large sum and get back rent, the yield is the whole story only if the money is gone.
It is not gone — it is in a structure attached to a property you own, and most people implicitly assume that structure has added roughly what it cost to what the house is worth.
That assumption is doing enormous work, it is never stated, and it is the one with the weakest support underneath it.
Why it is weak: the appraisal rule. Fannie Mae’s Selling Guide B4-1.3-05, Improvements Section of the Appraisal Report (guide dated June 04, 2025) defines an ADU as follows: "An ADU is generally an additional living area independent of the primary dwelling that may have been added to, created within, or detached from the primary dwelling." And on what makes it a unit at all: "The ADU must have basic requirements for living, sleeping, cooking, and bathroom facilities on the same parcel as the primary dwelling."
Then the part that matters for value. The guide keeps ADU living area OUT of the primary dwelling’s finished above-grade square footage, requiring it to be reported and adjusted separately in the sales comparison grid unless it sits within the primary dwelling with interior access and above grade.
That is our reading of the retrieved section rather than a verbatim quotation.
The consequence, in plain terms. So the 800 square feet you built does not simply get added to the house’s square footage and multiplied by a neighborhood rate.
Its value has to be carried by a separate adjustment the appraiser must support with market evidence — and in a neighborhood where few comparable sales have an ADU, that evidence may not exist.
Sit with that for a moment, because it inverts the usual intuition. The more unusual your ADU is for your street — the thing that makes it feel like a differentiator — the harder it is to support its value, because support means comparable sales of houses with ADUs, and if yours is the first on the block there are none.
The value is not zero and we are not claiming it is.
We are claiming that it is contingent on evidence you do not control and probably have not checked, and that putting it into a spreadsheet at cost is an assumption wearing the clothes of a fact.
What we are and are not saying. HyreADU does not design, permit or build accessory dwelling units.
It does not appraise, lend, invest, let property or prepare taxes, it does not rank or refer contractors, and it takes no referral fee from anyone who does any of those things. We are not telling you an ADU does not add value.
We are telling you that the mechanism by which it is recognized is a separate, supported adjustment rather than an addition to floor area, and that this is knowable in advance: an appraiser or an agent in your market can tell you today whether comparable sales with ADUs exist near you. That is a free question and it changes the whole calculation.
About half of surveyed owners were not collecting rent at all
Before you compute a yield on rent, it is worth knowing what people who have actually built these units do with them. The distribution is not what an ROI page would lead you to expect.
A survey of owners who responded, not a census of ADUs, and several years old. Read it as the shape of a distribution rather than as a current rate. It is on this page for one reason: an ROI model assumes the whole population is in the first group.Chapple, Ganetsos and Lopez, Implementing the Backyard Revolution: Perspectives of California's ADU Owners, UC Berkeley Center for Community Innovation, 22 April 2021
The figures
In the owner survey published as Chapple, Ganetsos and Lopez, Implementing the Backyard Revolution: Perspectives of California's ADU Owners, UC Berkeley Center for Community Innovation, 22 April 2021, 51% of respondents reported the unit generating rental income and 16% reported housing a relative at no cost. 8% reported short-term letting.
Read the second figure as a use, not a failure. Housing a parent or an adult child rent-free is a deliberate choice, and for a large share of people it is the entire reason the building exists.
It produces a real financial benefit — the alternative accommodation nobody is now paying for — but that benefit does not appear anywhere in a cap rate, and it is not rent.
Which means an ROI calculation may be the wrong question for you. If the unit will house family, the honest analysis is a cost comparison against the alternative — assisted living, a second rented home, a longer commute — not a yield.
Those are different arithmetic with different inputs, and forcing the family case into a rental model produces a number that looks poor for a reason that has nothing to do with the decision.
Survey caveats, stated properly. This is a survey of owners who responded, in one state, several years ago. It is not a census of ADUs and it is not a forecast of what you will do.
It is here to establish one thing: the assumption that an ADU is a rental asset is an assumption, and a substantial share of people who built one made a different choice.
What that does to the three scenarios above
The tool runs a tight, a base and a loose case because the rent you type is the single most sensitive input, and a one-scenario ROI hides that. The tight case is not pessimism.
It is the case where the market softens, the unit sits empty a month longer than you planned, and you take slightly less than asking to fill it — which is an ordinary year, not a disaster.
Vacancy is where optimism hides most effectively. A single ADU is not a portfolio.
There is no averaging across units: you are either fully let or fully empty, and a two-month turnover is about seventeen per cent of a year gone.
Modeling a low vacancy rate on a one-unit asset is modeling a statistical property that a one-unit asset does not have.
Operating costs are the input people leave at zero. Property tax on the improvement, insurance, maintenance, any utilities you pay, letting fees, and the reserve for the day the water heater fails. None of it is optional and all of it is invisible until year three.
And the tool is pre-financing and pre-tax by design. Interest is not an operating cost and does not belong in net operating income; depreciation, deductibility and the treatment of a rental on your own parcel are tax questions we are not qualified to answer and do not attempt.
Both change the answer materially, and both belong with your own adviser rather than a web page.
Each input, where an honest figure comes from, and how it goes wrong
The last column is the one to read. Every input on this page has a characteristic failure, and the failures do not cancel out — most of them push the answer the same way.
Input
Where an honest figure comes from
How it goes wrong, and in which direction
All-in project cost
A levelled set of bids on your drawings, plus permits, the utility connection charge, and the contingency you will actually spend.
Understated, almost always. Site work, the utility connection and fees are the lines most often left out, and leaving them out inflates every return figure downstream.
Monthly rent
Actual listings for comparable units near you, or a letting agent’s written opinion. A HUD Fair Market Rent as one labeled benchmark beside them.
Overstated when taken from a headline figure. FMR in particular is a 40th-percentile GROSS rent built for a voucher program — FMR is a 40th-percentile policy construct (gross rent including utilities) used for Housing Choice Vouchers. It is not observed ADU asking rent and not ACS median gross rent.
Vacancy
Your own honest view of turnover on a single unit: how long to re-let, how often a tenant leaves.
Understated. A one-unit asset has no averaging. Two months empty is roughly seventeen per cent of the year, which is HyreADU arithmetic and is more than most people model.
Operating costs
Tax on the improvement, insurance, maintenance reserve, owner-paid utilities, letting fees.
Left at zero. This is the most common single error, and it is the one that turns a marginal project into an apparently good one.
Resale value added
An appraiser or agent in your market, asked whether comparable sales with ADUs exist near you.
Assumed equal to cost, silently, and never entered as an input at all. Under the appraisal rules quoted above, it must be carried by a supported adjustment rather than added to floor area.
Time to income
Your own jurisdiction’s decision practice plus a realistic construction program.
Understated. On issued permits in one large California city we measured a median of 162 days from application to issuance alone, before construction. Every month of that is a month of cost with no rent against it.
Financing cost
A written quote from the lender who would actually do it, on the product you would actually use.
Excluded here by design, then forgotten entirely. Interest is not in net operating income, and it is frequently larger than the operating costs.
Tax treatment
Your own tax adviser, on your own facts.
Guessed from the internet. Depreciation, deductibility and the treatment of a let unit on your own parcel are genuinely fact-specific, and we do not model any of them.
Our analysis of how these inputs fail, not a survey of anyone’s spreadsheets. The pattern worth noticing is that cost errors and rent errors and vacancy errors all push the computed return in the same direction, which is why published ADU return figures cluster where they do.
The unit can be legal, quick to approve, and still hard to finance
The gap between planning permission and lender eligibility is what ends ADU projects after approval. Permission is granted by a planning statute. Money is governed by a secondary-market guide that no legislature amended.
These are reported rows in a state reporting system, not a physical census of construction. The direction is robust; the exact rate is a reporting artefact as much as a construction one, and we say so every time we show it.California Department of Housing and Community Development, Housing Element Annual Progress Report, Table A2. Retrieved 2026-09-05.
The eligibility gate. Freddie Mac’s published page on accessory dwelling units states: "ADUs on 1-, 2- and 3-unit properties must be legally permissible by jurisdiction, legal non-conforming or be located in an area without zoning."
And on using the income: "Borrowers may be able to use ADU income to qualify for home financing on their subject 1-unit primary residence (Guide Chapter 5306) or non-subject investment property (Guide Chapter 5306)."
What that gate does. That eligibility sentence is a hard gate, and it is the reason an unpermitted conversion is a financing problem rather than a paperwork problem.
It is also why Maine’s statutory amnesty for units built without municipal approval is more consequential than it first looks: legalizing the unit is what makes it financeable.
Put the two enterprises’ material together and you get the mechanism. Putting the two together: a state can make an ADU legal to build, quickly and without a hearing, and still leave it hard to finance — because the permission is granted by a planning statute and the money is governed by a secondary-market guide that no legislature amended.
That is our analysis of the retrieved material, not a claim either enterprise makes.
Why this belongs on a return page rather than only a financing page. Because a return is a fraction, and both halves of it depend on money being available at the right moment.
If the construction cannot be financed, the project does not happen and the return is not a low number, it is undefined.
If the completed unit cannot be refinanced onto long-term debt, an expensive short-term facility stays in place and the actual cash yield is a fraction of the modeled one. Neither of those failures shows up anywhere in a cap rate.
And the evidence that this is the real blocker. These are reported APR rows, not a physical census of construction.
An unmatched permit may be a unit still under construction, an abandoned project, a unit completed without a reported certificate, or a project whose identifier changed between the permit row and the completion row.
The direction is robust; the exact rate is a reporting artefact as much as a construction one. A meaningful share of permitted units in the reported cohort has no matched completion row.
Some of those are reporting artefacts and some are units still under construction.
Some are projects that were approved and never built, and the reasons people give are overwhelmingly money and utility connection charges rather than planning refusal. The permission was never the hard part.
What to do with this before you build. Ask the lender you would actually use two questions in writing: whether the completed unit will be eligible under their program, and whether the appraisal will have comparable sales with ADUs to work from in your area.
Both are answerable before you spend anything. Neither is a question anybody paid to build the unit will raise with you unprompted.
Twenty square feet can be worth more than a year of rent
The highest-return decision available on most ADU projects is not a financing choice or a rent strategy. It is a line on a drawing, and it is made before anyone runs a return calculation at all.
The threshold
Gov. Code § 66311.5: Impact fees may not be imposed on an ADU of 750 square feet of interior livable space or less (or a JADU of 500 or less). Above 750 square feet, impact fees must be proportional to those for the primary dwelling.
And A unit at 749 square feet of interior livable space and a unit at 751 can differ by five figures of park, traffic and school charges before anyone lifts a hammer.
School fees are a separate statute. School developer fees under Education Code § 17620 are a different statute. Section 66311.5(c)(3) treats an ADU or JADU under 500 square feet of interior livable space as not increasing assessable space by 500 square feet.
Connection charges are a third thing again. Connection and capacity charges are NOT impact fees.
Under § 66311.5(b), an ADU is not a new residential use for connection-fee purposes unless it is built together with a new single-family dwelling — but the utility can still bill a connection or capacity charge, and that bill is outside the impact-fee prohibition entirely.
Three different instruments, three different thresholds, three different bodies billing them. Conflating them is the single most expensive misunderstanding in ADU budgeting, and it goes in the dangerous direction: a homeowner who has read that small ADUs pay no fees has budgeted zero for a charge that is not a fee and is not covered.
Why it dominates the return calculation
Because it is a discontinuity, and returns are usually smooth. Every other lever on this page moves the answer gradually: a bit more rent, a bit less vacancy, a slightly better rate.
The fee threshold does not move gradually. It is a step, and on one side of it a set of charges is prohibited outright.
Against what you give up. The floor area between 750 square feet and whatever you were drawing. On a unit designed at, say, 800 square feet, staying under means losing about six per cent of the interior.
That is real, and for some briefs — a family with a child, a live-work space — it is decisive. For a studio or one-bedroom let, it is frequently a rearrangement rather than a loss.
What we cannot tell you. The size of the charge you would avoid.
We retrieved no municipal or utility fee schedule and we publish no dollar figure for any city’s impact fees, because inventing a magnitude would be worse than publishing none.
What we can tell you is that this is the first question to ask at the counter, and that the answer is a specific number your city already publishes.
And the statutory nuance above the line. Above the threshold, impact fees are not unlimited — they must be proportional to those for the primary dwelling.
So the choice is not between zero and arbitrary; it is between zero and a constrained, computable figure. Ask for both numbers and then decide about the twenty square feet.
What to establish before you believe your own return figure
Seven questions. Every one of them is free, answerable before you spend anything, and capable of changing the answer by more than any refinement of the arithmetic.
Ask an agent or appraiser whether comparable sales with ADUs exist near you
This is the question that determines whether the largest implicit term in your calculation has any support. If the answer is that there are none within a reasonable distance, you have learned something important and it cost you a phone call.
Ask your lender, in writing, whether the completed unit will be eligible
The eligibility language is explicit about legally permissible, legal non-conforming, or in an area without zoning. If there is any doubt about the status of an existing structure you plan to convert, resolve it now rather than at refinance.
Get both utility connection charges in writing before you model anything
Water and sewer, and the electricity provider on panel capacity. These are the utility’s own charges, they sit outside the impact-fee prohibition, and they are the line that most often ends a project after approval.
Ask the city what impact fees apply above and below the size threshold
Two numbers, both already published. The difference between them is the value of the design decision, and it is knowable before you draw anything.
Model the months before there is any rent at all
Design, plan check, issuance, construction, and letting. Then put the carrying cost of the money against those months. A project that pays back in eleven years pays back in eleven years plus the time to get there, and the second part is rarely modeled.
Get your own tax position from your own adviser
Depreciation, deductibility, the treatment of a let unit on your own parcel, and what happens on sale. All fact-specific, all capable of moving the answer, and none of it modeled here.
Write down which number you used for rent, and where it came from
FMR, a listing, an agent’s opinion. Write it in the spreadsheet itself. In six months a lender, a partner or a future you will ask, and the answer needs to be better than a recollection.
The words in a return calculation, used precisely
Net operating income (NOI)
Rent, less vacancy, less operating costs. It excludes financing and tax by definition. If someone quotes an NOI that has the mortgage in it, they are quoting something else.
Capitalisation rate
NOI divided by cost or value. A yield on operations. It says nothing about what the asset is worth on sale, which is the point this page opens with.
Simple payback
Cost divided by annual net income, undiscounted. Easy to compute, easy to compare, and silent about the time value of money and about the months before income starts.
Gross rent
Rent including an allowance for essential utilities. HUD Fair Market Rent is a gross figure, so the comparable number for a unit where the tenant pays their own utilities is below it, not above.
Fair Market Rent
FMR is a 40th-percentile policy construct (gross rent including utilities) used for Housing Choice Vouchers. It is not observed ADU asking rent and not ACS median gross rent.
Declared permit valuation
Declared permit valuation is what an applicant writes on a form so a city can compute a fee. It is not a construction cost, it is not a bid, and it is not what the job was sold for. Where a fee scales with the number written down, the number written down has an obvious direction of error.
Sales comparison adjustment
The mechanism by which an appraiser accounts for a feature one property has and a comparable does not. Under the guide quoted above, ADU living area is handled this way rather than added to the primary dwelling’s finished above-grade area.
Legal non-conforming
A structure lawfully established under earlier rules that would not be permitted today. It appears in the eligibility language quoted above, and it is why the legal status of an existing structure you plan to convert is a financing question, not only a planning one.
Impact fee
A charge imposed to fund infrastructure attributable to new development. Distinct from a connection or capacity charge, which is billed by a utility and is not covered by the statutory ADU relief.
What this calculator cannot do
Six real blind spots. Each one is something a reader might reasonably expect an ROI tool to handle.
It cannot tell you what rent you will get. We hold no dataset of ADU asking rents, achieved rents or lettings, in your city or anywhere.
Every rent in this tool is one you typed. The only published rent figure anywhere on this site is a federal policy construct with a specific purpose that is not this one.
It cannot value the finished unit. We do not appraise, and the appraisal material on this page is quoted to explain a mechanism, not to produce a number. Whether an ADU adds its cost, more than its cost, or considerably less depends on comparable sales in your market that we cannot see.
It is pre-tax and pre-financing, deliberately. That makes the output comparable across people, and it makes it wrong for every individual person. Interest and tax both move the answer materially, and both are genuinely fact-specific.
It does not discount. Simple payback and a cap rate treat a dollar in year twelve as a dollar today. That is a real simplification, it flatters long paybacks, and a proper discounted analysis is a different tool for a different reader.
It cannot model the months before income. Design, plan check, issuance and construction all consume money and produce no rent. These are calendar days from the published application-side date to issuance, on permits that issued.
The statutory 60 days runs from a COMPLETED application, and none of the three extracts marks the completeness determination.
The gap between the two therefore includes every day an applicant spent curing an incomplete set, paying fees, answering plan-check comments, or asking for delay.
A median above 60 days is not, by itself, a finding that a city missed the shot clock.
And it cannot tell you whether this is a good idea. A return figure is one input into a decision that also involves a garden, a neighbor, a parent who needs somewhere to live, and how you feel about being a landlord.
Those are not defects in the arithmetic. They are the parts the arithmetic was never going to reach.
When the honest answer is that the numbers do not work
Almost nobody publishing ADU return figures is structurally able to say this. We are, so we will.
Name the conflict first. The ADU return figures you will find are overwhelmingly published by parties who earn when a unit is built: builders, design-build firms, lenders, and marketplaces taking a fee on the introduction.
HyreADU does not design, permit or build accessory dwelling units. It does not appraise, lend, invest, let property or prepare taxes, it does not rank or refer contractors, and it takes no referral fee from anyone who does any of those things.
That is what allows these tools to conclude that the numbers do not work, that the answer is to keep the garage, or that the honest next step is a question at the planning counter rather than a deposit.
Three cases where the answer is no. First, when the return only works at the loose rent scenario — if the project needs the optimistic case to clear your threshold, it does not clear your threshold.
Second, when the appraisal question comes back saying there are no comparable sales with ADUs anywhere near you, and your model was quietly carrying the building at cost.
Third, when the utility connection charge lands and the whole thing now depends on rent growth you have assumed rather than observed.
The alternatives that are not "do not build". Build smaller and stay under the fee threshold. Wait for a pre-approved plan program if your city is standing one up.
Change the brief from a rental to a family unit and analyze it as a cost comparison instead, which is a genuinely different and often much stronger case.
Or do nothing for two years, which is a real option with a real return: you keep the capital, you keep the optionality, and construction costs and rents both move in the meantime, not necessarily against you.
And one last piece of context on the cost side. The owner survey median spend was $150,000, about $250 per square foot, at the time it was collected.
We carry those medians forward with a published construction cost index, which is arithmetic we performed and label as ours wherever it appears.
Indexation tells you what the same building would cost at today’s input prices.
It does not tell you what anyone would quote you, and the only figure that is a price is a bid on your drawings.
How this calculator works
For each scenario:
gross rent = monthly rent × 12
effective = gross × (1 − vacancy)
NOI = effective − annual operating
cap rate = NOI / cost
simple years = cost / NOI
Base uses the rent and vacancy you typed (vacancy is not floored). Tight multiplies rent by 0.85 and floors vacancy at 12%. Loose multiplies rent by 1.15 and keeps your vacancy. Operating costs stay the same in all three, which is conservative on loose and kind on tight.
Mortgage interest, depreciation, tax brackets and appreciation are all out. Putting any of them in would require inventing a rate or a bracket. The financing tool will amortise a quoted rate if you have one.
What each input means
Inputs on this tool, in the order they appear on the form.
Input
What it is actually asking
All-in cost
What you will actually spend to have a permitted, occupiable unit. A factory invoice without site work is not all-in.
Monthly rent
What a tenant would pay you, not FMR unless you have decided FMR is realistic for this unit. Family use: this tool is the wrong frame.
Vacancy
Share of the year the unit is empty. 0% is a story. Tight floors at 12% even if you type 0.
Annual operating
Recurring costs of owning the rental: extra tax, insurance, maintenance, utilities you pay. Not capital expenditure, not the mortgage.
Worked examples
Including one where the naive answer misleads, which is the example most calculators leave out.
A $300,000 unit at $2,000 per month
Cost $300,000, rent $2,000, vacancy 8%, operating $4,000. Gross $24,000. After vacancy $22,080. Base NOI $18,080, cap rate 6.0%, simple payback 16.6 years. That is the engine test.
Tight cuts rent to $1,700 and uses 12% vacancy: NOI falls. If you need tight to still “work,” say what work means in dollars, not in a headline.
The same unit with FMR pasted in
You looked up a one-bedroom FY 2026 FMR of $1,800 on the rent estimator and typed it here. Base NOI becomes $15,872 at 8% vacancy and $4,000 operating. Cap rate 5.3%.
FMR is a 40th-percentile area rent, not a lease you have signed. If the only way the spreadsheet clears is a rent above FMR in a voucher-heavy neighborhood, you are making a market call. Name it.
The one where a seven-year payback misleads
A roundup that divides $210,000 by $2,500 × 12, ignores vacancy, ignores tax and insurance, and prints “7 years.” On this tool that rent and cost with 8% vacancy and $4,000 operating is NOI $23,600, payback about 8.9 years even before tax and before a mortgage.
Put vacancy at 12% and a more honest rent and the seven-year story is gone. One optimistic scenario is the failure mode this page exists to catch.
What changes the result
Cost is the denominator. An “ADU” that omitted utilities and impact fees looks like a better cap rate because the cost is a lie. Use the cost calculator first.
Rent is linear in NOI. Vacancy is also linear, until tight floors it. Operating costs are a lump; they hurt small rents more than large ones as a share of gross.
Family occupancy is a 0% cap rate if you type $0 rent. That is not a failure of the unit. It is a different job (housing a person) and should be compared to the cost of that person living elsewhere, not to a cap rate.
Local considerations
Rent is local. FMR is local (metro or Small Area ZIP). Tax and insurance are local. None of those are a dropdown on this page that changes a shipped table.
Look up FMR at HUD User, look up listings on the actual block, and type those figures. A state average yield would be a third story.
When not to use this
Do not use this as a loan application, a tax projection, or a reason to skip vacancy. Do not paste a national “average ADU rent.”
Do not use it for a family unit you will not rent. The number you want then is cost versus the alternative housing for that person, which is a different calculator you can run in your head.
Not financial, tax or investment advice. HyreADU does not invest or lend.
Cost structureThe denominator should include site work and utilities.
Intended useRental versus family changes whether ROI is even the question.
Questions this calculator answers
What is a good ROI on an ADU?
There is no national good. Compare the cap rate (NOI / cost) to what else you could do with the same money, after tax, after vacancy, after the work of being a landlord. A blog’s “ADUs pay back in seven years” is usually one rent, zero vacancy and no operating costs.
What is NOI?
Net operating income: annual rent after vacancy, minus operating costs you typed (tax, insurance, maintenance, utilities you pay). It does not subtract mortgage payments. Cash-on-cash after financing is a different number; use the financing tool for interest, then subtract that yourself if you want.
What is a cap rate here?
NOI divided by the project cost you typed. It is a simple yield, not an appraisal. Cost should be the all-in number from the cost calculator, including fees and a contingency you actually spent.
Why three scenarios?
Because one rent is a story. Tight floors vacancy at 12% and cuts rent to 85%. Loose raises rent 15% and keeps your vacancy. If the project only works in loose, it does not work.
Should I use HUD FMR as the rent?
FMR is a 40th-percentile area rent used for voucher payment standards, not a guarantee you will collect it on an ADU. Look it up on the rent estimator, then decide whether your unit, in your neighborhood, can actually lease near that figure.
Is vacancy 8% a rule?
No. It is a field. New ADUs in thin rental markets sit empty. Family-occupied units have no rent at all; this tool is the wrong frame for that use. Put 100% vacancy and look at the cost as housing, not as yield.
Does this include the tax deduction for interest or depreciation?
No. Pre-tax, on purpose. Tax treatment of a rental ADU is a conversation with your own advisor. We will not invent a bracket.
What about appreciation?
Not in this tool. Adding a legal dwelling can change what the property is, and it can also be unrecoverable if the next buyer does not want a tenant. We will not ship an appreciation rate.
Simple payback vs discounted?
This is cost / NOI, undiscounted. A dollar in year 16 is not a dollar today. If you want a discount rate, apply it yourself; a fake 3% “real” rate on a national page would be a second story on top of the first.
Is this financial advice?
No. HyreADU does not invest, lend or prepare taxes. Matching is still being built. The inquiry form is not a broker.
Sources and methodology
Figures dated 26 August 2026. Last reviewed .
FY 2026 Fair Market Rents (HUD User, retrieved 2026-08-26. FMR is a lookup for the rent estimator, not a default in this ROI tool. Effective 1 October 2025 for FY 2026, with later revisions for some areas.)
Home equity and mortgage basics (Consumer Financial Protection Bureau, retrieved 2026-08-26. Cited because financing changes cash yield. This ROI page is pre-financing.)
Selling Guide B4-1.3-05, Improvements Section of the Appraisal Report (Fannie Mae, retrieved 2026-09-05. The ADU definition, the basic living requirements, and the treatment of ADU living area separately from the primary dwelling finished above-grade area. Quoted on this page because it is the mechanism by which an ADU value is recognized on a sale.)
Accessory Dwelling Units (Freddie Mac, retrieved 2026-09-05. The eligibility gate — legally permissible, legal non-conforming, or in an area without zoning — and the use of ADU income to qualify.)
Implementing the Backyard Revolution: Perspectives of California ADU Owners (UC Berkeley Center for Community Innovation, retrieved 2026-09-05. Chapple, Ganetsos and Lopez, 22 April 2021. Owner survey. Cited on this page for the share of respondents reporting rental income versus housing a relative at no cost. A survey of respondents, not a census, and several years old.)