ADU Returns: 15.1% in Santa Monica, 15.0% in SoMa, 8.9% in Van Nuys

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Analysis from A-du's October 2026 return on cost model. Build costs start from the UC Berkeley Center for Community Innovation ADU owner survey; rents come from 183 new-construction rental listings read October 30, 2026.

In Santa Monica, the net rent from a new backyard ADU covers its build cost in about 6.6 years; in Van Nuys, the same math takes about 11.2. Across the ten Los Angeles County and San Francisco neighborhoods where we found enough new rentals to rank, a detached ADU's return on build cost runs from 8.9 percent in Van Nuys to 15.1 percent in Santa Monica, with SoMa close behind at 15.0 percent.

The short version:

• Where we found at least three new rental listings per unit type, a new detached ADU returns 8.9 to 15.1 percent a year on build cost, before land, financing and income tax.
• A 750-square-foot two-bedroom costs $286,749 all in under our Los Angeles County assumptions and $473,280 in Santa Clara County, so Bay Area rents have a much higher bar to clear.
• No Santa Clara County neighborhood had three listings for every unit type; the five cases there with three or more listings land between 7.0 and 9.8 percent.

Read this first. These numbers are less than straightforward because of four factors. First, land is left out: this is the return on build cost for an owner who already holds the lot, before any loan payment and income tax. Second, rents are asking rents on apartments and ADUs built in 2021 or later, some with move-in specials. Third, build cost is a regional estimate, not a contractor's price for your lot. Fourth, only 10 of the 33 neighborhoods we looked at had three or more listings for every unit type; four San Francisco ZIP codes had none. We rank only the ten.

What the ADU costs to build

The model starts from what owners reported paying. The center's 2021 report put the median ADU at $197.22 a square foot in Los Angeles County and $329.17 in the Bay Area, for units permitted in 2018 and 2019. Detached units ran $300 a square foot statewide against $250 for all ADUs, so we scale the regional medians up by 1.2. Then we bring them forward with Turner's Building Cost Index, from a 2019 average of 1,156 to 1,575 in the third quarter of 2026, as reported October 15. That is about a 36 percent rise, landing hard cost at $322.44 a square foot in Los Angeles County and $538.18 in Santa Clara County and San Francisco.

On top of hard cost we add 15 percent for design and engineering, the midpoint of the 10 to 20 percent range in the Santa Clara County ADU Guidebook, plus permit and school fees. Under Government Code Section 66311.5, an ADU of 750 square feet or less pays no impact fees and one under 500 square feet pays no school fees, which is why the model stops the two-bedroom at 750.

Unit	Size	Los Angeles County	Santa Clara County	San Francisco
Studio	400 sq ft	$151,579	$252,597	$253,291
1 bedroom	600 sq ft	$229,751	$379,624	$381,238
2 bedrooms	750 sq ft	$286,749	$473,280	$476,075

Operating costs are our own assumptions and the same everywhere: 5 percent vacancy, 8 percent management, 5 percent repairs and maintenance, $1,000 a year of insurance, and property tax at 1.2 percent of project cost (1.1827 percent in San Francisco). If you plan to manage the unit yourself, your return runs higher than ours.

The ten neighborhoods with enough data

Return on cost is one year of net operating income divided by the all-in build cost, blended across a studio, a one-bedroom and a two-bedroom. The last column prices rent by the square foot instead; more on that below.

Neighborhood	County	Listings	Return on cost	Rent priced per sq ft
Santa Monica	Los Angeles	11	15.1%	13.4%
SoMa / Mission Bay	San Francisco	9	15.0%	12.8%
Culver City	Los Angeles	10	13.1%	10.3%
Echo Park / Silver Lake	Los Angeles	11	12.2%	11.0%
North Hollywood	Los Angeles	9	12.1%	9.7%
Potrero Hill / Dogpatch	San Francisco	9	12.1%	10.8%
Palms / Mar Vista	Los Angeles	10	12.0%	11.5%
Hollywood	Los Angeles	9	11.8%	9.8%
Inglewood	Los Angeles	9	11.6%	8.4%
Van Nuys	Los Angeles	9	8.9%	7.5%

In dollars, a Santa Monica studio costs $151,579 to build on our numbers and nets $24,624 a year, about $2,052 a month after vacancy, management, repairs, insurance and property tax. A few areas borrow listings from next door: Santa Monica includes a Venice building, Culver City one in Westchester, and SoMa's studio rent comes from the same Potrero Hill building as Potrero's.

The size catch

The two-bedroom listings we found are bigger than the unit we modeled. In these ten areas the typical new two-bedroom listing runs 768 to 1,078 square feet, against our 750. Price the rent by the square foot instead of taking the median listing, and returns fall by 0.5 to 3.2 points. Santa Monica still leads at 13.4 percent and SoMa still follows at 12.8 percent, so the top of the ranking holds; Van Nuys drops to 7.5 percent.

Small units also rent for more per foot. New Hollywood studios list at a median $5.57 a square foot a month; new two-bedrooms, $3.57. The model holds build cost per foot flat, but a studio still needs a full kitchen and bath, so its real cost per foot is likely higher. Treat the studio's edge as an upper bound. It is a good number. It is also a number for someone who already owns the dirt.

Santa Clara County: higher rents, higher costs, fewer listings

Santa Clara County is where the data runs thinnest. The five cases with three or more listings are a Berryessa studio at 9.8 percent, a Santa Clara two-bedroom at 9.4 percent, a downtown San Jose two-bedroom at 8.0 percent, a Campbell one-bedroom at 7.2 percent and a Blossom Valley one-bedroom at 7.0 percent. Higher figures rest on less: south Palo Alto shows 12.7 percent on four listings, three of them from one new Mountain View building; Mountain View shows 11.3 percent on two listings per unit type; Gilroy shows 3.8 percent on one listing. We would not plan around any of them.

The gap is cost, not rent. A new two-bedroom in downtown San Jose lists at a median $4,505 a month, above Hollywood's $3,719, but the 750-square-foot unit costs $473,280 to build there against $286,749 in Los Angeles County. Our Bay Area cost works out to about $631 a square foot all in, above the $400 to $550 the 2023 county guidebook gives for all-in costs. If your builder lands in that range, your return runs well above ours.

That spread is why A-du's plan pages show a range. They use this model's operating assumptions with each plan's own cost range: $350 to $600 a square foot plus fees for most California plans, and $450 to about $620 all in for the free Oakland, San Ramon and Los Altos plans. Our Los Angeles County cost, about $379 to $383 a square foot all in, sits near the bottom of that range; our Bay Area cost, about $631 to $635, sits just above the top.

One San Francisco check: under the city's Waiver program, if the Zoning Administrator grants waivers and the lot already holds a rental unit, the owner signs a Costa-Hawkins agreement that puts the new ADU under rent control. Our San Francisco listings are market-rate.

The cross-street check. Our most expensive modeled unit, a 750-square-foot San Francisco two-bedroom at $476,075, still comes in well under the $606,000 a Seattle architect spent on an 800-square-foot, two-level ADU that replaced a garage, as we covered in October. In New York, the Plus One program combines a $175,000 state grant with a $220,000 city loan, and having the loan forgiven means capping the rent for 15 years, as we laid out. A capped rent changes the top line of this math.

Our read: on build cost alone, Los Angeles County is where a new rental ADU most clearly pays its way. Seven of the eight neighborhoods we could rank there clear 11 percent on the median-rent method. In Santa Clara County the rents run higher, but build cost takes most of the difference, and the listings are too few to say more.

If you are a homeowner deciding whether to build to rent, A-du's build marketplace lists pre-approved ADU plans from city and county catalogs and design firms, filtered by what your city approves, with an estimated build cost for each and an estimated return on cost when the page has a rent estimate for your area.

The number to watch is rent per square foot on new studios, now $4.44 to $5.94 a month in Culver City, Palms and Santa Monica. If it holds, the math holds as costs climb.