How Profitable are ADUs?: Profit Potential from an ADU in San Diego County

Here’s a detailed article exploring the financial outlook of owning an accessory dwelling unit (ADU) in San Diego County — how much profit you might make and whether that income can realistically provide a livable wage in this expensive region.

The Cost-of-Living Context

In San Diego County the economic reality for families is sobering. Although the federal poverty line is only around $30,900 per year, the Real Cost Measure report estimates that a household of two adults with two children would need to earn $116,036 per year just to cover basic needs (housing, child care, food, transportation, health care) — and that number is higher than the county’s median household income of ~$108,000. (NBC 7 San Diego)That gap helps illustrate why many families are working multiple jobs just to “get by.”

With that in mind, if you’re considering an ADU investment, it’s useful to compare potential income against this high threshold.

Profit Potential from an ADU in San Diego

Owning an ADU can add a meaningful rental income stream. Below are some of the key figures and considerations for San Diego:

Typical Rental Income

• One source states that in cities like San Diego the “average rental income” for an ADU is around $2,600 per month for long-term rental, with potentially more if using a short-term rental model. (Better Place Design & Build)

• A more detailed breakdown from a local guide shows March 2024 average ADU (or small-unit) rental rates in Greater San Diego: for example ~1-BR units in some zip codes ~ $1,900–2,900/month, 2-BR ~ $2,600–3,700/month. (SnapADU)

• Another analysis indicates that in many parts of the city a well-designed 1-bedroom ADU can rent for $2,500 to $3,500 per month (i.e., $30,000 to $42,000 annually). (adugeeks.com)

Example Return & ROI

Let’s walk through a simplified scenario (based on one published example) to illustrate how this might work:

• Construction/project cost of ADU: $348,000

• Gross annual rent: $42,000 ($3,500/month)

• Maintenance/ vacancies: ~$4,200

• Property tax: ~$3,480

• Net income: ~$34,320 → about a 9.9% ROI (net income ÷ total cost) in that example. (Better Place Design & Build)This gives you a ballpark of the profit potential from an ADU in San Diego (under ideal conditions) and how it might perform as an investment.

Primary Cost & Risk Elements

• High upfront cost: Permitting, design, construction, utilities, site work all add up.

• Ongoing expenses: Maintenance, property tax increase (since value goes up), insurance, property management if you hire someone.

• Vacancy risk: Rental units may have downtime, tenant turnover, or slow rent increases.

• Regulation & zoning: You must ensure the ADU is legal, meets code, follows local zoning/HOA rules, and rental model (short-term vs long-term) is allowable. (SnapADU)

• The income depends heavily on location, size, amenities, and tenant market.

Is an ADU Alone Enough to Provide a Livable Wage?

Given that a “livable wage” for a family of four in San Diego is estimated at ~$116,000 (per the Real Cost Measure), let’s compare.

Scenario Comparison

• If you rent out the ADU and earn ~$30,000–42,000/year (as above), that is only ~25–35% of the estimated income needed.

• Even in the stronger scenario ($42,000 net) you still fall short of the ~$116k benchmark by more than half.

• If you’re using the ADU income to support yourself (or a family), you’re unlikely to reach “livable wage” status from the ADU alone.

Conclusion

Owning an ADU can be a significant supplemental income source, but on its own it is unlikely to constitute a full livable wage for a family in San Diego’s high-cost market. Unless your rent is unusually high, your costs unusually low, or you have multiple ADUs or other income streams, you will still need additional income.

How to Maximize ADU’s Contribution Toward a Livable Wage

Since the ADU income likely won’t cover everything, here are ways to maximize its benefit:

• Choose a prime location and desirable design/features: Higher rent possible for well-finished units in strong rental neighborhoods.

• Keep costs under control: Efficient design, durable finishes, minimal maintenance costs.

• Long-term stable tenants: Lower vacancy and turnover costs help net income.

• Leverage tax benefits: Rental property deductions, depreciation, etc — speak with a CPA.

• Combine with other income: Use the ADU income as part of a diversified income strategy.

• Plan for appreciation: Over time the property value will increase; the ADU helps build equity.

• Optimize financing: If you can finance the ADU at a low cost, your cash flow improves.

Final Thoughts

Building and renting an ADU in San Diego County is a smart strategy to generate additional income and build property value. However:

• It is not a guaranteed path to a full livable wage on its own in this market.

• You should treat it as one piece of a broader income and investment plan.

• Be realistic about rent achievable, costs incurred, and how it fits your household’s needs given the high living-cost context.

• Given the $116,000 threshold for basic needs, leaning on just one rental unit would likely leave you short — but pairing it with other income sources could bring you closer to financial stability.