The Top 4 reasons to Invest in ADU Real Estate

 

 

1. Affordability and Lower Taxes

On average, tiny homes can be built for as little as $50,000. With a 25% down payment, an initial investment for a tiny home can be as little as $12,500. ADUs also offer many tax advantages. The full value of the investment is depreciated, which unlike traditional real estate does not remove the land value from the depreciable property value.

2. Tiny Homes Appeal to Many Buyers

ADUs have the unique ability to appeal to multiple buyers because they offer many unique features at an affordable price. The latest trend in the market is the growing number of retirement developments. As baby boomers continue to hit retirement age it is expected that tiny home retirement communities will continue to grow because of their affordable retirement housing solutions. Tiny homes also appeal to millennials, young families, and first-time home buyers because of their low cost, flexibility, and eco-friendly features.

3. Tiny Homes are Easy to Manage

A typical tiny home transaction is fairly simple. First, the investor funds the development of an ADU on a homeowner’s land or within a community, then the investor pays a small fee to the homeowner for using their land, then the investor profits from the tiny home rental or the tiny home community and is then able to invest in multiple ADU’s. The process of investing in tiny homes is easy for investors because the resources are already established. Investors do not have to worry about purchasing land, building, or planning communities and finding additional resources like electricity or water. Instead, all that is required is an initial investment and the investor can choose their level of involvement in the development.

4. More Units and High Yields

The low initial investment amount required for ADUs allows investors to purchase more tiny home units over a shorter period. With tiny homes, investors can increase inventory and increase profits at a faster rate compared to traditional real estate. This allows for higher yields over time for tiny home investors

The Numbers Speak For Themselves 

 

 

Let’s say two investors make a long-term investment. One investor buys a 10-unit building and the other only buy individual ADUs. The first investor can acquire one additional 10-unit building after 6 years and 4 months, while the ADU investor can invest in an additional ADU after 2-8 months.  After 10 years, the effective yield of the first investor is 10.524% and the yield for the first ADU investor is 16.738%. The premium earned from the compounding, after the 10% bet yield is taken out, is 0.524% for the first investor and 6.738% for the ADU investor. The ADU investor also owns 45 units and the first investor only owns 2 10-unit complexes.

Investment Opportunities in Atlanta

 

 

      

 

 

 

 Backyard Cottages                                                                                                                                              The goal of the Backyard Cottages project is to create rental housing in pre-established dense residential areas. The program offers an affordable solution to building and owning backyard cottages to homeowners without requiring them to invest the capital needed to build a tiny home in their backyard. Homeowners lease their backyards, and investors and their teams build the outdoor cottage and rent them to long-term tenants at an attainable market rate. The investors keep all the profits and are only required to pay the homeowners a small fee for their land. The Backyard Cottages project is currently seeking investors to help fund the development of these tiny homes.

East Point and Clarkston                                                                                                                                        Two tiny-home developments in Atlanta that are looking for investors are East Point and Clarkston. These communities will be neighborhoods consisting of small homes and other features including parks, walking trails, and aquatic facilities. Each development offers flexibility and scalability for each investor, because of the variety of designs and sizes offered. Both subdivisions have already met the zoning requirements required by the city of Atlanta and have been approved for development. Both the East Point and Clarkston developments are currently seeking investors.       

Atlanta’s first Tiny Home developments Clarkston and East Point