VIDEO: How To Rent Your ADU

You’d love the extra income of a rental ADU in your yard but…. how do you get a good tenant? After all, that tenant is in your backyard- you want someone who pays the rent and is a good neighbor. Listen in as I talk to Diana Tiao, professional property manager at Tiao Properties. She knows more about finding, installing and managing residential properties than I could ever hope to learn.

Here are some of the topics we covered:

1:32 Is it easy to rent an ADU?

[00:01:37] Diana: I think about renting a ADU it’s very, so I do mostly
long term rentals. It’s one year lease and above. And there’s a lot of
similarities with renting ADU in terms of finding the best tenants that fit
your units as well. So there’s, there’s a whole lot of different steps that I’d
be happy to kind, [00:02:00] through as go well,

[00:02:01] Kendyl: I guess what I meant when I said, is it easy? Do
people want to rent ADUs? Are they in demand or is it difficult to find a
tenant? Who would want to rent? Rent an adu?
[00:02:13] Diana: I think that there, I, I would imagine that there’ll be a
good demand for ADUs because they, they tend to be newer units.
[00:02:20] And in the city of LA a lot of our properties are on the, on the
older side. And a lot of ADUs also have its own walls that are not
connected to another unit, so that’s another plus. So I would think that
ADU would be a really high demand as well. They’re, they tend to have
just more modernized.
[00:02:40] Appliances, et cetera in there.
[00:02:42] Kendyl: Right. Cause people are maybe afraid that they’ll
build this ADU. They’ll start incurring monthly costs and then it’ll remain
vacant because nobody wants to, to rent it. But that’s probably not the
[00:02:56] Diana: . That’s not the case. And I feel like that it, it all comes
[00:03:00] out to pricing as well.

3:15 What is the best size for an ADU rental?

[00:03:22] My opinion, I would probably say a one bedroom or even
studio would be easy to rent.
[00:03:29] There are also less decision makers when there’s only one
person living ADU or a couple. Okay. So I, that usually, from my
experience, renting, it’s a lot easier when there are less people.

4:33 Does quality get you higher rents?

[00:05:31] Will the tenant pay more for a higher quality ADU versus a
lesser quality?
[00:05:39] Diana: They would, I mean, it is just, it’s also just, it comes
down to price. It comes down to what’s on the markets. And then if
you’re comparing you know, that, that is definitely consideration. Like
what, what are the finishes? How does the ADU actually look?
[00:05:51] And they’re comparing that versus what the price. It’s for your
ADU versus other options.

Because people are at different price wages. I
think just kind of depends on what type of tenants you wanna.

[00:06:11] Kendyl: Ah, well that, There you go. So I, is it unreasonable
to think that a higher quality ADU would be attractive to a higher quality
tenant, meaning more financially stable?
[00:06:26] Diana: Correct. Okay. Yes. Okay. Mm-hmm. ? Yeah. You
know, in, in, in real estate sales, we often say pretty sales for more.

ADU DIGGS makes high-quality ADUs more affordable for everyone. Click here to see our gorgeous designs!

7:22 How to you figure out the proper rent rate for your ADU?

[00:07:22] Diana: That’s a really good question. So we do a rent survey
for all of our listings that we’re going to post.
[00:07:29] And you know, we, it changes, the market changes and so
and you’re ready to post the ADU once you have those really nice
photos that make a big difference. I would go on to different rental sites,
whether it’s Zillow or Red Patch. It’s different sites so you can find out
what’s something that’s comparable to what you have, what they’re
renting for.
[00:07:52] And it’s a, it’s comparison. So it’s, I usually like to start with a
range. So, you know, for example, it might be it [00:08:00] might be
shooting, for example, 2000 to 2,200. And I, I kind of wanna go in that
range. And one thing I look for also is that how many. Inquiries do I have
versus how many people actually call me to set up an appointment.
[00:08:16] So it’s, you know, a lot of people, you get a lot of eyes when
it’s on the, on our different websites and I think it’s probably pretty
reasonable to a hundred different views on a given day. Okay. Okay.
And then it’s reasonable to maybe have two or three people call to set
up an appointment a day. So, you know that that’s kind of your, your

9:41 What ADU features give the highest rental ROI?

[00:10:05] Diana: They are washer dryer.
[00:10:08] Okay. Air conditioning parking. We’re in LA so a lot of, a lot of
us spend our time outside. So there is some sort of a outdoor space, or
even if it’s a small area where there is some greenery, you could put a
chair there or for, for morning coffee floors, if you have wood floors that,
that’s, that’s also really nice to have people really appreciate.
[00:10:31] Wood floors. It.
[00:10:32] Kendyl: What about wood looking floors, like vinyl, wood
plank or ceramic tile that looks like wood. How does that play? I get a lot
more people who are, there’s a lot more value place to wood floors or, or
plank plank looking floors so and the other thing to consider is
maintenance as well. So someone who isn’t, you know, you may have a

tenant who isn’t gonna be as gentle with your floor, so [00:11:00] you
wanna be able to be able to maintain that things get dropped and still be
able to maintain the quality of those floors.

11:37 How important is parking to getting top rents?

[00:11:42] Diana: It’s, it’s a consideration. So if you don’t have parking, I
would probably emphasize where the public transportation is. I would
also make sure that the build, the ADU feels secure.
[00:11:54] That there is lights out there and there is sort of maybe there’s
a gate. Just whatever that is. [00:12:00] You know, for people to feel
comfortable there. So and I also, for people that come, I have properties
that don’t have parking, so I encourage them to come during different
times of the day so they can check out what the parking is like on the
[00:12:13] Maybe when they get off work, they can see what it looks like
as well. So there’s different, different things. And You know, public
transportation is becoming more and more popular for the environment,
and so I would definitely encourage that as well, or sure, Sure.
[00:12:29] Kendyl: So especially if anyone’s listening to this and you’re
adding your ADU in a dense urban area, parking may be more of a
benefit in terms of, you know, higher rents than it is in the burbs where I
live, where there’s lots of street parking. So just keep that in mind. Just
because you don’t have to add parking doesn’t mean that it’s not a good
play economically

12:58 How important is it to have a separate electricity meter to rent an ADU?

[00:13:15] Diana: Oh. I personally don’t think it’s worth a headache and
money to get a separate utility meter.
[00:13:21] Okay. If you would like for your, a tenant to pay for their own
utility, which I think is a great idea. Cause it just for environmentally it
helps us be all be responsible for our usage. There are companies out
there that will help you. Divide up the utilities. They’re called RUBS it’s
called, Can you spell that?
[00:13:43] R I think it’s, It’s R U Bs. So it’s ratio utility billing services.
And one in the ones that we use is called Livable so they will they’ll take
your bill. Say it’s a [00:14:00] DWP bill. They’ll take your bill, they’ll look
at the amounts that’s used for that particular period and they’ll break it up
between how many, how many occupants are in that ADU
[00:14:12] then they’ll charge the residents for their proportion and the,
the residents will pay the companies directly, and then you as the owner
get a check where they get money deposited into your bank. That’s like
every two months or something. So that’s a super easy way. The cost is
10, I think it’s $10 per unit.

15:40 How do you screen prospective ADU tenants?

[00:15:47] Diana: Well that, and that’s a really, that’s a valid concern.
So, Well, I mean, we prefer to have we, we like to schedule the
showings and we like to personally [00:16:00] go and meet the the
applicants. I wanna see that. You know, the possible tenant arrives on
[00:16:06] They’re responsible even through that whole communication
process. And we look into their financials. We typically like to have two
and a half months rent for two and a half months income for what the
rent is. And we usually ask for one to two months of security deposit,
depending on their financials.
[00:16:24] And you know, there’s also. We do credit check, we see if
they have we always call their previous or their current landlord and their
previous as well, to see who they, how they are as tenants, if they pay
their rent on time, if they are there any issues, you know, were they, like,
were they disturbance to other tenants?
[00:16:46] So so those are things that we look for for screening.
[00:16:49] Kendyl: Do you find that those, do you find that those
landlords tell you the truth? Or might they give you a somewhat sanitized
version because they really want that person to move?
[00:16:58] Diana: Yes. [00:17:00] Yes. that, that’s a really, really good
concern. So that’s what we call the previous people as well, and we’ll
also call their employer and make sure that that is where they work.
[00:17:09] A lot of times we’ll go online, we’ll search the company up
rather than what is on the application, just to make sure it’s not their
friend picking up the call. So those references are really important. They,
they take time, but it’s worth. I’ve had my share of not so great tenants.
So , and that is a whole other thing that you’re spending your time
dealing with after the fact.

[00:17:27] So it’s super important to find the right tenants. And of course
there’s, there’s always a fair housing, a important aspect of it as well that
we need to keep in mind. Yes.
[00:17:37] Kendyl: Do you ever get the criminal background check?
We’ve done that on this side over here.
[00:17:41] Diana: Always. Always.

19:42 How do you deal with a difficult tenant when you rent an ADU?

[00:19:59] [00:20:00] And so first we start with communication. Even for
the start, like we communicate what is what we expect more tenants that
certain rules you. No loud noise between 10 to 8:00 AM 8:00 AM for
example. Things like that. So we wanna make sure that we’re clear that
this is what is expected. And all writing.
[00:20:23] Yeah, that’s all writing. They sign off audits so that they’re
clear and they’re also clear that that’s what they can expect by, by living
at the ADU right? So they know that this is, if there’s anyone else in the
property, that’s what they can expect. So that gives them a level of
comfort as well. So, you know, we go through all that and then they, they
are, Violating those rules, for example, then it’s, it’s a matter of
[00:20:48] At first. We remind them that they sign this and why this is
important. And you know, when we continue to communicate with
verbally and we also follow up with emails as well and that doesn’t work.
And, [00:21:00] you know, there, there’s also the legal part of things and
generally I find that we’re able to communicate with them.
[00:21:07] They usually clean up or they say, You know what, This is not
the right place for me. And we, you know, we do our best to set all the
expectations ahead of time. So we avoid this. It’s inconvenient for
everyone. And sometimes we do have to end the lease early, whether it
is just an agreement that we agree upon, or we may have to get a
lawyer involved as well.

[00:21:29] So generally we’ve been pretty successful just from the
communication part to avoid going through lawyers, but there are
situations that it does come to that point. It would be a housing, like a
housing attorney is who you’ll be looking for.
[00:21:44] Kendyl: So it sounds like if you have really good
communication, really good documentation, and of course excellent
people skills, generally you’re able to resolve things without having to
[00:21:56] Diana: Correct.

22:31 What does a professional property manager do?

[00:22:37] Diana: So a property manager, what we do is we take care of
your property from A to Z basically, and we can take care of all your bills.
[00:22:46] So we can pay, pay for all your bills, including your utilities,
your property tax your mortgage. We’re basically your middle person.
For everything with your property and we will [00:23:00] handle all the
communications with your tenants. Finding the best tenant for you
collecting rents and We’ll create multi financial reports for you.
[00:23:09] The great thing is that if there is any issues that come up with
the property, there is like a, there’s a leak that’s happening. We can get
someone out there quickly. And because we have these developed
relationships with our vendors, they answer our calls and they’re there
within, you know, a lot of times within an hour.
[00:23:27] Kendyl: And for a getting a plumber in an hour. Amazing Yes.
[00:23:32] Generally within an

[00:23:32] Diana: hour. And it’s like we have also, if a vendor isn’t
available, we have backup people. So I recently had a major leak that
happened and I have to be vendors that are ready to go within an hour.
To get this taken care of. So that’s the advantage because we also, we
have that long term relationship with our vendors.
[00:23:49] And it’s, the, the great thing is, is that in terms of property
management, the fees are, they’re all write off, They’re considered
business expense. So It’s great for someone [00:24:00] who doesn’t
have the time or the the resources to research all of this different
information cuz the laws do change and depending on what city or what
neighborhood you’re in, the rules are different.

24:31 What does a property manager charge to rent and manage an ADU?

[00:24:31] Diana: That’s a good question. So we look at different factors.
We look at the condition of the property how old it is, if there’s any
different maintenance. And we, we wanna do a great job for our clients.
So we look at it and we look at how much time we’ll be spending. Your
specific property per month, and that’s how we calculate the monthly
[00:24:52] So our, there’s a range. The range based on the time spent is
generally from six to 10% [00:25:00] of the monthly income is what we
generally charge.
[00:25:02] Kendyl: So a hell of a value really. And that will, and and
where you are on that six to 10% range will depend on just how much
time and effort you would think is gonna be and, and then are there
instances where, you know, just all hell breaks loose and you had to put
a lot more time in it that you would be charging the landlord maybe more
that month because it was just so much going.
[00:25:24] Or is it you agree on a fee? Okay. Yeah.
[00:25:27] Diana: That I usually don’t but we do have a project
management fee. So an example is that they’re in LA there are these

really intensive inspections. So it’s basically the LA housing department’s
way of making sure that your place is safe to live.
[00:25:43] And so that’s become really, really intensive. It has to do with
permits and a bunch of red tapes. So that is one of the areas where we
do charge a management fee. It’s a large project we’ll charge up, but
that’s only if we have an agreement with the owner prior to doing the
work. [00:26:00] Got it. The owner has the option to take on us and do
that themselves.

Get In Touch With Diana Tiao

Diana Tiao
Tiao Properties