If you own a single-family rental property in San Diego, you’ve probably heard the buzz about ADUs—accessory dwelling units. And if you haven’t looked into one yet, August is a great time to start. The combination of California’s pro-ADU legislation, San Diego’s tight housing supply, and the current rental market makes adding an ADU one of the highest-ROI moves available to property owners right now.
Here’s what you need to know.
What Is an ADU?
An ADU is a secondary living unit on a residential property—think a converted garage, a backyard cottage, a basement apartment, or an attached unit above the garage. They go by many names (granny flats, casitas, in-law units), but they’re all the same thing: a fully independent living space with its own kitchen, bathroom, and entrance on the same lot as the primary home.
There’s also a JADU—Junior Accessory Dwelling Unit—which is a smaller unit (up to 500 square feet) carved out of existing space within the primary home, like a converted bedroom with a kitchenette. JADUs have even fewer regulatory hurdles than full ADUs.
Why San Diego Owners Are Adding ADUs Right Now
California has made ADU development dramatically easier over the past several years. Senate Bill 9 and a series of related laws removed many of the local barriers that previously blocked ADU construction. In San Diego specifically:
- Most single-family lots are now eligible for at least one ADU and one JADU
- Parking requirements have been reduced or eliminated near transit
- Owner-occupancy requirements for ADUs have been lifted on most properties
- Permit processing timelines have been significantly streamlined
The financial case is compelling. In San Diego’s rental market, a well-built ADU can generate $1,500 to $2,500+ per month in additional rental income depending on size, location, and finishes. That income stream can offset your mortgage, fund property improvements, or simply build long-term wealth—while adding meaningful value to your underlying asset.
Key Considerations Before You Build an ADU
ADUs are not plug-and-play. There are important factors to evaluate before breaking ground:
Lot size and zoning. Not every lot accommodates every ADU type. Your parcel size, setbacks, and existing structures all shape what’s buildable. A pre-application review with the City of San Diego’s Development Services Department is a smart first step.
Utilities and infrastructure. Depending on your property, you may need to upgrade electrical panels, water lines, or sewer connections. These costs can vary significantly and should be part of your feasibility analysis upfront.
Financing. ADU construction is increasingly well-supported by lenders. HELOC (Home Equity Line of Credit), cash-out refinance, and ADU-specific construction loans are all viable options depending on your equity position and credit profile. California also has the CalHFA ADU Grant Program, which has provided eligible homeowners up to $40,000 toward pre-development costs.
AB 628 compliance. Starting January 1, 2026, working stoves and refrigerators are now part of California’s habitability standard. Any new ADU you rent must include functioning appliances—plan for this in your build budget.
Managing an ADU Rental
Once your ADU is built and permitted, you have a rental unit that needs to be treated like any other investment: priced accurately, marketed professionally, and managed consistently. The same Fair Housing rules, tenant screening standards, and maintenance obligations that apply to your primary rental unit apply to your ADU.
At FBS Property Management, we manage ADUs alongside single-family homes and small apartment buildings across San Diego. If you’re adding a unit or already have one you’re not sure how to position in the current market, we can help you get it right from day one.
Thinking about an ADU? Let’s talk through what makes sense for your property.
