The Financial Benefit of Owning an ADU or Backyard Tiny Home in San Jose
A Case Study of ADU Ownership in San Jose
As housing prices continue to rise and the demand for affordable living spaces grows in California, building an ADU (Accessory Dwelling Unit) in your backyard has become an attractive option for homeowners looking to generate rental income. At Perpetual Homes ADU, we’ve seen firsthand how ADUs can provide significant financial returns, especially in high-demand markets like San Jose.
One of our recent projects—a 2-bedroom, 2-bath ADU built in a San Jose backyard—provides a perfect case study on the potential financial benefits of owning an ADU.
Strong Rental Income in a High-Demand Market
In San Jose, where housing is both scarce and expensive, the demand for rental properties is incredibly high. For our 616 sq. ft. 2-bedroom, 2-bath ADU, we projected a monthly rental income of $2,500. This is a conservative estimate given the current rental market in San Jose, where comparable units often rent for even more.
Financing the ADU
While the total cost to build this ADU, fully loaded with all features, came in at around $250,000, the financing options available to homeowners can make this investment much more accessible. By financing at 90% Loan-to-Cost (LTC), you can spread out the cost over 30 years, resulting in a manageable monthly loan payment of approximately $729.
Monthly Cash Flow
After accounting for the monthly loan payment, increases in property taxes, insurance, and other minor expenses, the net return on this ADU is projected to be around $1,144 per month. That’s over $13,700 in annual income—just for utilizing part of your backyard!
A Win-Win Investment
The beauty of building an ADU in a city like San Jose is the combination of high rental demand and the relative affordability of financing. Even after taking into account the costs associated with building and maintaining the unit, homeowners stand to make a substantial monthly profit. And beyond the immediate financial returns, adding an ADU also increases the overall value of your property, making it an excellent long-term investment.
Why Choose Perpetual Homes ADU?
At Perpetual Homes ADU, we specialize in making the ADU installation process as smooth as possible. We handle everything from design to construction, ensuring that your ADU is built efficiently and to the highest standards. We also understand local regulations and can help you navigate the permit process, saving you time and hassle.
If you’re a homeowner in San Jose and have been considering building an ADU or backyard tiny home, now is the perfect time to take action. The rental demand is high, and financing rates remain favorable. By working with Perpetual Homes ADU, you can turn your backyard into a source of steady income and long-term value.
Please Note: All sizes and dimensions are nominal or based on approximate builder measurements. 3D Tours and photos may include dealer and/or factory installed options. Perpetual Homes reserves the right to make changes due to any changes in material, color, specifications, and features at any time without notice or obligation. Homes may require optional features to be eligible for financing, consult with your retailer for more information.
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Perpetual Homes representations and the actual look of your ADU may vary. The measurements provided will make up the floor plan approximating the length and width from exterior wall to exterior wall. We will continue to invest in our product and process improvements. Our models, floor plans, specifications, dimensions, features, materials, appliances, furniture, and availability displayed on our website and/or other marketing platforms are subject to change.
The project timelines and schedules provided are based on our research and knowledge but it does not account for unforeseen city, town, county, state and/or other municipal agency (collectively the Government) processes such as, but not limited to, appeals, special permits, or processing delays. The portions of the timelines relating to the Government can and will change without notice. The project timeline/process is based on the assumption that the customer will be available and able to make quick decisions. Perpetual Homes cannot guarantee and/or be responsible for the time it takes the Government to complete its checks and verifications. Construction timelines are estimates and cannot be guaranteed by Perpetual Homes.
For the avoidance of doubt, Perpetual Homes is not a licensed general contractor. All of the construction jobs associated with the project which require a licensed general contractor will be performed by a licensed contractor who will engage with the property owner directly with applicable law.