Hello all,

If you are considering an ADU your probably wondering if the investment is worth it. One way to determine the value an ADU generates over time is to conduct a "Break-even" analysis. A break-even analysis looks at the total variable and fixed costs of building an ADU and compares it with the rental revenue generated (or saved by not paying rent to someone else) in order to determine the point in time which the capital invest in an ADU pays back the original cost. This represent a point in time when there is neither a profit nor a loss AKA the "break-even point".

When considering the investment in an ADU on your property you will need to consider the cost to construct the unit, the cost to operate the unit (utilities, taxes, etc.), inflation, debt service, the value of the improvement, and the monthly revenue or rent savings realized.

To help homeowners here in Manchester, I have adapted as template provided by Kol Peterson on the accessorydwellings.org web page. The break-even analysis here is pre-filled for a typical scenario of an $80,000 investment which would result in monthly rent of $1,100. You can download this excel sheet and make changes to it to reflect your ADU scenario to determine the break-even point for your investment. Download the Break-Even Calculator Here.

I hope you find this tool useful and if at any point you are confused about the values or want some help understanding how to use the file, please do not hesitate to reach out with your questions in the comment section below.

Regards,

JV