Investment Case: ROI of Building an ADU in Austin
Is building an ADU a smart financial move? We analyze rental comps, property value increases, and cash-on-cash returns for Austin ADUs.
ADUs as an Investment Asset
In Austin's competitive real estate market, an Accessory Dwelling Unit isn't just extra space—it's a high-performance asset. Let's look at the numbers.
Rental Income Potential
Short-term rentals (Airbnb) and long-term leases both offer strong returns, though regulations differ.
Long-Term Rental Estimates (2025)
- East Austin (78702): $2,000 - $2,600/mo
- South Congress (78704): $2,200 - $3,000/mo
- North Loop (78751): $1,700 - $2,200/mo
- South Austin (78745): $1,500 - $1,900/mo
Property Value Increase
Historically, ADUs didn't always appraise for their full construction cost. That is changing. As ADUs become common, appraisers are starting to value them closer to the price per square foot of the main house.
A recent study showed that homes with ADUs in major metros sell for 35% more on average than comparable homes without them.
Sample ROI Calculation
Let's say you build a $180,000 ADU financed with a HELOC at 7%.
- Monthly Loan Payment: ~$1,200
- Monthly Rental Income: $2,000
- Net Cash Flow: +$800/month
That's an extra $9,600/year in your pocket, plus the tax benefits of depreciation, all while your property value grows.
The "House Hacking" Strategy
Many young buyers are purchasing properties with the specific intent to build an ADU, live in the back, and rent the main house to cover the entire mortgage. It's one of the few ways to live for "free" in Austin's expensive market.
Curious what you can build?
See if your Austin property qualifies for an ADU in seconds. We check zoning, lot size, and more.
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