In recent years, the popularity of accessory dwelling units (ADUs) has surged due to their potential as income-generating properties. Homeowners are capitalizing on the opportunities provided by short-term rentals, such as Airbnb or VRBO, or long-term rentals to supplement their earnings. However, when it comes to designing an ADU for these rental purposes, there are several important considerations to keep in mind. In this blog post, we will explore the key design considerations for both short-term and long-term rental ADUs.

Short-Term Rental ADUs

Flexibility and Guest Experience

When designing an ADU for short-term rentals, flexibility is key. Consider incorporating modular furniture that can be easily rearranged to accommodate varying guest preferences. Additionally, emphasize the overall guest experience by selecting high-quality and durable materials, modern amenities, and stylish furnishings that align with the target demographic. Strive to create a space that feels inviting, unique, and comfortable to ensure positive reviews and repeat bookings.

Knowing that the short-term rental market is becoming increasingly competitive, consider design elements that enhance the guest experience while becoming instagrammable moments. Let your guests help you market the rental through their social media and referring your rental to other potential guests.

Privacy and Separation

Ideally, an ADU designed for short-term rentals should provide a sense of privacy and separation from the main residence. Consider features such as a separate entrance, dedicated outdoor spaces, and soundproofing measures to minimize any disturbances between guests and hosts. A well-designed layout with distinct sleeping areas and private bathrooms can enhance the overall appeal of the space. Specifically, a detached ADU is an ideal unit because it is physically separated from the main house.

Functional Kitchen and Amenities

A fully-equipped kitchen with modern appliances is a significant factor for guests who prefer short-term rentals as they often are choosing to stay in an Airbnb rather than a traditional hotel. Ensure the ADU's kitchen is well-designed, with ample counter space, and essential cooking utensils, and easy to use appliances. Other amenities, such as laundry facilities, reliable internet, and entertainment options, should also be considered to enhance the overall guest experience.

ADU Storage Solutions

Short-term rental ADUs often attract guests who may have a fair amount of luggage. Incorporate clever storage solutions, such as built-in closets, shelving, or under-bed storage, to maximize space and allow guests to keep their belongings organized during their stay.

Long-Term Rental ADUs

Functional and Practical Layout

While short-term rentals prioritize aesthetic appeal, long-term rental ADUs should focus on practicality and functionality. Ensure that the design places emphasis on optimizing the available space for everyday living. Consider incorporating features like ample storage space, efficient floor plans, high performance systems, and and elegant and durable materials to cater to long-term tenants' needs.

Private Outdoor Spaces

Long-term tenants often appreciate outdoor spaces where they can relax and unwind. Design the ADU to include private patios, balconies, or even small gardens, providing a sense of tranquility and allowing tenants to enjoy some fresh air, and make the smaller size of an ADU feel larger.

Sustainable and Cost-Effective Features

Long-term rental ADUs can benefit from energy-efficient designs and cost-saving features. Consider integrating energy-saving appliances, LED lighting, efficient insulation, and solar power options. These features not only reduce utility costs for tenants but also align with environmentally friendly practices. They can also help your ADU rental unit stand out in the competitive rental market.

Privacy and Noise Reduction

Long-term tenants typically value privacy and minimal noise disruption. Incorporate measures such as soundproofing materials, separated entrances, and well-insulated walls to create a peaceful living environment. Adequate separation and privacy between the main residence and ADU are also essential to ensure a harmonious coexistence.

ADU Storage Considerations

Considering ADUs are smaller dwellings, careful consideration should be paid to the design of storage space. For long term tenants, you may want to consider spaces for larger items like bikes, camping gear, and even car parking. Ample closet space for clothes and personal belongings is a great start, but often people who live in a rental long-term have other items and dedicated storage space can be a huge selling point for your ADU.

Conclusion

Designing an ADU for short-term rentals versus long-term rentals requires distinct considerations to appeal to the target renters. Short-term rentals should prioritize flexibility, guest experience, and privacy, along with functional amenities. On the other hand, long-term rentals should focus on practical layouts, efficient use of space, and sustainable features, while also prioritizing privacy and peace for tenants. By carefully considering these factors, homeowners can ensure their ADUs cater to the specific needs and preferences of their chosen rental market, ultimately maximizing the property's income potential.

At Modern ADU Plans we have designed dozens of ADUs for both short-term, Airbnb style rentals, as well as units for long-term rentals. We now offer a range of designs that well suited to help you add an ADU to your property and start earning income from a rental unit. Check out all of our available designs here:

Find Your Perfect ADU Design for a Rental Unit

Open and bright living rooms are great for rental units - both short and long-term.

Providing outdoor living space makes smaller ADUs feel more spacious and are an attractive amenity for rental units.

Start Your ADU Project

If you own a short-term rental property, or are thinking of starting one, whether it's an urban house, a backyard ADU, a casita, or a remote cabin in the woods, there are a few key things you need to know in order to run it successfully and profitably. Especially if you want to build an ADU as an investment and earn passive income.

Short Term Rental Rules and Regulations
Understand the laws and regulations that apply to your property. Different areas have different rules regarding short-term rentals, including zoning laws, occupancy limits, and tax or licensure requirements. It's important to understand these laws and regulations in order to avoid any legal issues or fines. You should also be aware of any specific requirements or restrictions that may apply to your property, such as noise or parking restrictions. It is important to be familiar with these and work with your local jurisdiction to file any necessary paperwork and obtain the right business licenses so you don’t get shut down. Running a short term rental is running a business and most cities or states will consider your rental a business and expect you to follow their business rules.
Booking and Reservation Management and Fees
Set up a system for booking and managing reservations. This may include setting up a custom website or listing your property on a popular platform like Airbnb or VRBO - although understand the fees they charge in order for you to be listed on their sites. You should also develop policies for booking and cancellation, as well as any additional fees or charges that you may want to add to the nightly rental fee. We have had past success on Airbnb, renting out an ADU we owned, and are currently building a small cabin we will rent out to friends and family through a custom booking site. We required a 2-night minimum in order to make it worth renting it out, we added a cleaning fee on top of the nightly rental amount (it is a single cleaning fee for the duration of the stay), and we also paid a percentage of the total fee to Airbnb.
Cleaning and Maintenance of the Short Term ADU Rental
Develop a system for cleaning and maintaining the property. Keeping your property clean and well-maintained is essential for attracting guests and maintaining a good reputation. It is also a considerable amount of work, thus it is very important to plan ahead. Develop a system for cleaning and maintaining the property, including a schedule for regular deep cleaning, repairs, and maintenance. You may want to consider hiring a professional cleaning company or designating a staff member to handle some of these tasks. We set up a system with a professional cleaner and they would automatically get scheduled to clean after any reservation was made. It was a great way to reduce the amount of work we had to do to manage the rental and ensure the next guest had a great experience.
Part of running a short term rental businesses is planning for and budgeting these costs. You may think that you are charging enough to turn a profit but then get hit by unexpected repair costs that eat through what you earned. Make sure you are setting your rental rates after planning for ongoing cleaning, maintenance, and repairs so you don’t get caught by surprise. It is also recommended that you set aside some of the profits each month into a separate account that you then use to pay for minor repairs or significant maintenance or upgrades. And track all of these expenses so you can deduct them when filing your annual taxes.
Guest Rental Policies and Procedures
In order to ensure that your property is well-respected by guests, it's important to have clear policies and procedures in place and written in both the reservation platform and on site. These may include rules regarding noise, parties, smoking, and pets, as well as any other specific requirements or restrictions that you want to impose on how they use your space. Communicate these policies to your guests before their stay and make sure that they understand and agree to follow them. We also recommend having them printed and available on site as part of a guestbook or binder that they can access when needed. As each house, ADU, or cabin is unique, having a short “How To” guide with the basis for the house is a great way to make your guests feel at home. Give simple instructions on how to operate the heat and air conditioning, directions on where to find basics like extra toilet paper or towels, and a simple guide to activities on the property or in the surrounding area. If there are areas of the ADU or property you don’t want to them to use or there are specific places they should park, add these to the guide.
Provide Amenities and Supplies for Guests.
To make your property as attractive and comfortable as possible, it's important to provide amenities and supplies for your guests. This may include linens, towels, and basic toiletries, as well as appliances and other amenities like a coffee maker, microwave, or television. You should also consider providing basic supplies like paper towels, trash bags, and cleaning supplies. The idea is to make the place as easy to use as possible while hopefully reducing cleaning and maintenance costs.
We often would leave a bottle of wine along with a gift card to a local cafe for our guests if they booked more than a couple of nights. Small details like that can go a long way in differentiating your rental from others on the market and lead to better reviews. Remember, you guests are going to be some of your best marketers. Look for things you can do to make them smile, encourage them to write good reviews, or even design details that beg to be photographed and shared on social media.
Manage your Short Term Rental Finances and Pricing.
To run a successful short-term rental property, you'll need to manage your finances and pricing carefully. This may include setting competitive rates, keeping an eye on competing rentals in your market, tracking your expenses and income, and keeping your property well-maintained to ensure that it stays in good condition and attracts guests. You should also be aware of any fees and tax implications of operating a short-term rental property and make sure that you are complying with all relevant laws and regulations. Although the potential income often sounds good, it is important to carefully estimate and plan for the costs you will incur running the business.
Your Short Term Rental is not going to be purely passive income. It is a business and will take effort in order to be profitable. Make sure you develop a budget, track all expenses, and plan for bigger costs like repairs that only need to be done once in a while. As you develop a better sense of the costs of running the business, set your pricing and minimum nights stay to ensure that it is a profitable business.
How Much Income Can Renting an ADU On A Short Term Basis Generate?
You can definitely make a decent living renting out an ADU on a short term basis. As you plan to embark on this endeavor think about how many vacant nights you will have, how many hours or days you need between stays to turn the place over, what seasons will have more demand, what pricing you should set at various times to attract enough reservations, and what your operating costs will be.
For example, if you are only renting out the ADU on weekends - like we did - you only have about 100 nights a year you can rent out the place. And perhaps summer plus holiday weekends will have high demand but winter weekends may not be fully booked. Planning on renting 70 out of the 100 nights may be a good estimate to build a budget off of.
If you are renting out the ADU for an average of $200/night you could generate $14,000 in revenue (You may charge higher rates, like $300/night in the busy season but lower rates in the off season). However, you would have to subtract cleaning services, supplies, and maintenance costs, plus any other expenses needed to run the rental.
Alternatively, if you were renting it out full time and had a 70% occupancy rate that would give you 255 nights rented each year. At the same average nightly rate of $200 you could make around $51,000 in revenue. Of course this is just revenue and not profit, but still that could be a pretty decent income for a business that doesn’t take up your full time to manage.
Get Insurance for Your Short Term Rental and ADU
Contact your current insurance provider to understand what coverage they provide for rental units on your property. Many home insurance policies won’t cover rentals so you probably will have to purchase supplemental insurance. Make sure that the policy you purchase will cover damages or accidents causes by guests and renters.

Overall, running a short-term rental property requires a combination of careful planning, business savvy , marketing strategy, and attention to detail. By understanding the laws and regulations that apply to your property, setting up a system for booking and managing reservations, developing a system for cleaning and maintaining the property, creating policies and procedures for guests, providing amenities and supplies, and managing your finances and pricing, you can successfully operate a short-term rental property and provide a comfortable and enjoyable experience for your guests and a steady income stream for you.

A short term rental business can take a lot of different shapes. If you already own a home and there is potential to add another unit, like a basement apartment, a converted garage, or a backyard guest house or ADU, that can be a great way to get your foot in the door and start earning rental income. One of reasons we think this is the best first step is that you already own the land so the startup costs can be much less than buying a new property. Not only that, adding an accessory dwelling unit can start generating monthly income now, but also increases your property value in the long run.

If you have any additional questions about adding an ADU as a rental unit on your property, or are thinking of building a small vacation home to rent out, feel free to reach out with any question or peruse our ready-made ADU plans that are downloadable today.

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