How Much Does an ADU Add to Property Value in Los Angeles?

Elizabeth Deo
Nov 19
2 min read

The ADU Boom Across Los Angeles

Over the past few years, ADUs (accessory dwelling units) have gone from niche backyard projects to mainstream value boosters in Los Angeles. As housing costs climb and the city continues to push for more density, homeowners are discovering that a small guest house, garage conversion, or backyard studio can be one of the smartest investments they can make.

But how much value does an ADU actually add to a home?The short answer: a lot....when done right.

Average Return on Investment

Several studies from California Housing Finance Agency and local appraisers show that homes with legal, permitted ADUs can increase in value by 20 %–35 % compared with similar properties without one.

Depending on design and location, appraisers often value legal ADUs at roughly $150,000–$400,000 above comparable properties without one.

What Affects the Value Increase?

Not all ADUs create the same return. Appraisers and buyers look closely at:

Zoning & Lot Size: R2 or RD-zoned lots usually appraise higher since they legally allow two units.
Design & Quality: A unit that looks and feels like part of the main home (similar materials, finishes, and landscaping) always commands more value.
Permitting: Unpermitted ADUs may sometimes be rented informally, but doing so violates city code, exposes owners to fines, and provides no appraised value benefit.
Parking & Privacy: A private entrance, sound insulation, and some outdoor space matter more than people realize.

The Rental Income Multiplier

Beyond resale, manyADU's can generate $2,000 – $3,500 per month in stable rent in many Los Angeles neighborhoods. At that rate, the additional income can offset a mortgage by 30 % or more. Investors often use a “capitalization rate” approach: annual net rent ÷ property value.Adding a $2,500/mo rental stream can raise a property’s effective value by roughly $300,000, even before resale premiums.

Financing and Cost vs Return

Building costs vary widely:

ADU Type	Typical Cost	Common Added Value
Garage conversion	$120k – $180k	$150k – $250k
Detached studio (400–600 sq ft)	$180k – $250k	$250k – $400k
Full 1-bed detached unit (700+ sq ft)	$250k – $350k	$350k – $500k

Financing options include home-equity loans, cash-out refinance, or ADU-specific construction loans.

Several lenders now underwrite based on projected ADU rental income — making it far easier to finance than in the past.

Resale Impact

When your ADU is fully permitted and separately metered, appraisers treat it as a second unit. Buyers see a flex space that can offset mortgage payments or house family members long-term.That emotional and financial flexibility adds real market power to your listing.

Final Thought

A well-planned ADU is not just a construction project or quick return, it’s a long-term wealth strategy. If you’d like to discuss ADU potential on your lot or see examples of homes that sold with ADUs, schedule a consultation with me, Elizabeth Deo.

Disclaimer: This article is for informational purposes only and should not be considered legal, tax, or construction advice. Always verify zoning and permit requirements with the Los Angeles Department of Building and Safety and consult appropriate professionals before making real estate decisions.