To use the ADU ROI Calculator, input the construction cost, down payment percentage, interest rate, loan term, expected monthly rent, occupancy rate, annual property taxes, and annual insurance. The calculator will provide you with the return on investment, monthly loan payment, annual rental income, net annual income, total interest paid, and projected equity growth after 10 years.
The ROI is calculated by dividing the net annual income by the initial construction cost. Net annual income is derived from the annual rental income minus expenses such as loan payments, taxes, and insurance. The monthly loan payment is calculated using the loan amount, interest rate, and term. Total interest paid is the difference between the total payments and the loan amount. Equity growth is projected based on a 3% annual appreciation rate over 10 years.
Suppose you build an ADU with a construction cost of $250,000, a down payment of 20%, an interest rate of 6%, and a loan term of 30 years. If the expected monthly rent is $2,000 with a 95% occupancy rate, and annual property taxes and insurance are $3,125 and $1,800 respectively, the calculator will show the ROI, monthly loan payment, and other financial metrics.
When planning to build an ADU, consider local zoning laws and regulations. Ensure that the projected rental income aligns with market rates. Factor in potential maintenance costs and unexpected expenses. Use this calculator alongside other tools like the Mortgage Calculator and Investment Calculator for a comprehensive financial analysis.