What You Need To Know About an Accessory Dwelling Unit
Today with the housing market being at a shortfall, people are considering adding an Accessory Dwelling Unit either directly to their existing dwelling or as a standalone guest house. For some good reasons you may want to consider this and in this article you will be whisked along on an informational journey through the dos and don'ts and how this may be a great opportunity to add value and the Tax benefits of constructing and owning an ADU. With the high costs of living and as people retire and are often on fixed incomes this may be the thing for your elderly parents to keep their independence without becoming institutionalized in a nursing home or assisted living facility. States and towns are easing up on restrictions limiting single family homeowners from adding these buildings and while conditions are where they are now, it may be the perfect time to consider making a move. This could prove to be a great opportunity to add value to your existing property while getting someone else to pay for it, reaping the rewards that ADU tax benefits may offer. WHAT DO I DO NOW? So now you need to know what the benefits are and how do you get started. The first thing to do is check with your municipality to find out if incentives and special financing programs are offered and what conditions and stipulations apply. Next you must come to a decision based on your needs to make an informed decision to directly meet those needs. For example cities like Los Angeles have been on the move to keep long term renters and have been implementing rules to restrict homeowners on their use of and amount allowed to be collected for rents on their ADUs. Other municipalities may or may not be inclined to follow suit. In Portland, Oregon in 2018 a pilot program was initiated to offer reduced cost of construction if the unit was rented to low-income renters and since then others have followed suit, even providing lists of pre-approved ADUs to hasten the process for homeowners. In 2020 the Accessory Dwelling Unit may be one of the key factors in a large scale effort to combat the increasing housing shortage. You can and should reap the rewards. INCOME and TAX ADVANTAGES According to ADU Geeks, a business that can handle the entire process from financing to finish, one of the best moves to make when considering an Accessory Dwelling Unit for income property is to put that into a limited liability company or LLC. With this you and the home you are living in on the property will be legally protected from any renter mishaps associated with the new dwelling. Now all your startup costs with this new building are tax-deductible providing you with real ADU tax benefits. You can deduct the cost of forming your LLC as well as any and all startup costs involved. Next the cost of the building can be depreciated at once so long as you have a listing to rent. It doesn't matter if you have a tenant or not you get a fat depreciation. For example if you spent $200,000.00 on a building (most would spend half) then your annual depreciation for the first year alone would be a whopping $6970.00([$2000,000/27.5 years]x[11.5/12]=$6,970.00). Any of your rental income will go directly to your schedule E and your expenses so you will be getting taxed once instead of twice on that money while being blanketed in protection by your LLC. Those are some real tax benefits! WHERE DO I GET STARTED? So you've decided you want to build the ADU but you don't know who you can trust to do it right and not take advantage of you. From the research studied the best candidate for the job is a company that's been around since 2017 specializing in all aspects of ADU construction. NEO Builders comes to the top of the list every time. They are ranked in the top 2% by BuildZoom out of 336, 931 California licensed contractors. It doesn't get more impressive than that. They will consult with you for free to decide what the size of the product can legally be. They will have an architect work with you to insure you have everything you want and it fits with your municipality's codes. Plans then are submitted and they do the work. They even walk the building inspectors through the completed project to make sure everything is legally in compliance and next it's occupancy for your tenant or family member. You can get competitive bids but in the end NEO Builders will be the hands down choice you can make to get the absolute best building to suit your every need whether it's a garage add on or freestanding building.
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Neo Builders Inc. is an experienced construction company with a specialty in building ADU’s. Building an ADU with Neo Builders will increase your monthly cash flow in a stress free and organized process. Don’t wait, make the call today for a step towards financial freedom. An initial consultation and quote are totally FREE of charge. If you would like to understand Los Angeles ADU laws click here NEO Builders.
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NEO Builders Inc.
3940 Laurel Canyon, Studio City #394, 91604
License #: 1061134