Generate Income by Adding A Rental Unit to Your Property

17 01 2011

If you’re a home owner in need of additional income, you may have considered renting out a portion of your house.  But the lack of privacy is probably the deal breaker.  Therefore, many consider adding a separate unit onto their house, or creating one within the existing footprint. 

The first thing to look at is how your property is zoned.  Even if a property is zoned R2, there are many other requirements in Santa Barbara, such as adequate lot size, parking, and open yard area, that must be met for a second unit to be allowed.  Once it has been determined that a second unit is allowable, the design can begin.

When dividing a space, providing a separate entry, kitchen, and bathroom for each unit are obvious necessities.  Access to the washer and dryer should also be a consideration.  What may not be obvious is the need to separate the infrastructure, specifically, the HVAC and lighting systems.  Each unit needs control of its own temperature.  And you don’t want to flip a light switch in one unit and have the light go on in the other.   Proper sound insulation between the units is also important. 

In Santa Barbara, any exterior changes, such as a new entry door for the second unit, must be approved by the Architectural Board of Review.  Once ABR approval is obtained, construction drawings must be submitted to the building department for approval.  The City might take this opportunity to require other upgrades to both the site and the building.   It may be tempting to try and skip the permitting process, but the City is constantly on the lookout for illegal units, so doing so can be an expensive mistake if caught.  The design and permit approvals typically take a few months. 

Adding a rental unit significantly increases the value of a property.  Creating a small unit within an existing house might cost about $100k, but the return on that investment is relatively high when you consider the monthly rental income which will be generated by it.