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Should You Build An Accessory Dwelling Unit?

The City and County of Honolulu recently passed a law which allows Honolulu homeowners the ability to build an accessory dwelling unit (ADU) on their property if they meet certain criteria. If your lot is between 3,500 sq. ft. and 5,000 sq. ft. the ADU can be up to 400 sq. ft. If your lot is over 5,000 sq. ft. the ADU can be 800 sq. ft. This new law is sure to create additional rental units on the island of Oahu over the next few years. For homeowners considering if building an ADU for rental income is right for them, here are for questions you to ask:

1. What will it cost? Homeowners will want to consult with an architect and a contractor to determine what type of ADU you could build on your property and what your cost would be.

2. How would I finance it? You’ll need to determine if it would be feasible to use your savings, a home equity line loan or line of credit, or another source of capital to build the ADU. The cost of funds will have a direct affect what your return on investment will be.

3. What could I rent it out for? You can consult with a property management expert to get an estimate of what the market rent would be for an ADU in your geographical area and in your particular neighborhood.

4. What is my return on investment? Once you know the cost to build the ADU, the cost of funds, and what the market rent would be, you can determine what your return on investment is, and if it would be worth it for you to build an ADU on your property.

The Department of Planning and Permitting recently updated their website to include additional information on ADU’s in Honolulu: If you have questions regarding renting out an ADU, or any other rental property here in Honolulu, give Real Property Management a call at (808) 445-9500.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

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