What's a realistic ADU rental income ROI in San Diego because my 10-12% projections seem too optimistic

Seeking Advice/Help

Trying to figure out if ADU rental income ROI actually makes sense in San Diego or if it's one of those things that looks good on paper but doesn't work in reality. Looking at rough numbers for a backyard ADU project: Estimated cost: $180-200k (permits, construction, landscaping, everything) Potential rent: $2,000-2,400/month (studio, 500 sq ft, separate entrance) Monthly expenses: Property tax increase maybe $150, insurance $80, utilities $100ish = $330 Net monthly: $1,700-2,000 roughly Annual return: Around $20-24k on $200k investment = 10-12% ROI maybe? Does this match what people are actually seeing? Not including home value increase, just focusing on rental income. Also curious about vacancy rates, property tax implications, all that stuff. Main issues are timeline (heard permits take forever), cost overruns (always seem to happen), and whether rent prices stay stable or if market is already oversaturated. Near UCSD area if that matters. Has anyone actually done this and can share real numbers not just projections? Trying to decide if it's worth it or if there are better passive income options.

Posted Feb 22, 2026, 4:54 PM UTC

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