This article was originally published on Redfin

Have you been thinking about using your ADU as a rental unit, but you’re just not sure where to start? The potential earnings and benefits of renting your ADU are endless, but given that every city has its own ADU zoning restrictions, HOA regulations, and building laws, actually renting out the unit can be difficult. For example, laws surrounding rental ADUs from Los Angeles, CA are completely different from the laws in Houston, TX.

To help you learn more, we reached out to ADU experts to share their best advice and tips about using your ADU as a rental unit. Keep reading to see what they had to say.

Photo Courtesy of That ADU Guy

1. Always do your due diligence on potential tenants

The one thing we recommend to our customers is for them to do their due diligence on their future tenants. Let’s be honest; everyone can be on their best behavior for a 10-minute interview; however, documents never lie. We recommend asking your future tenants as part of the screening process for their three most recent pay stubs, a copy of the credit report, three references from previous landlords, and the current employer’s phone number to ensure they’re still working. Also, slowly saving the profits from the rental to about 6 months’ worth of rent in a separate account is a great idea. That way, if things go sideways with your tenants, it wouldn’t affect you that much. – The ADU Guru

2. Check with your city’s planning department

Because many of the cities that legalized ADUs did so to boost the supply of affordable housing, some frown on or have explicitly banned homeowners who use their ADUs as short-term rentals. If you want to use your ADU as a short-term rental, you might need to obtain a business license and meet certain criteria set by your local government. Just in case, be sure to check with your city’s planning department before listing your ADU on Vrbo or Airbnb. – Torii

3. Attract your ideal tenant

When renting out your ADU, consider this: the setup, design, and feeling of independence are what allow property owners to create a space for their tenants that truly feels like its own. It’s much easier to attract your ideal tenant than it is to find them – we recommend creating a private and luxurious space that can fit a small family. We think ADUs should be a fully-functional home that feels just like any other home, just a little more cozy. – Framework First, Salinas, CA

For your ADU to be the perfect rental property, you must have high demand, low supply, and a well-managed product. Tenants want the same things homeowners want: A good location, privacy, custom home amenities, and the ability to have a pet. I have found that many renters are looking for stand-alone ADUs with an in-unit washer/dryer, a dishwasher, and some outdoor space. – Derek Sherrell, That ADU Guy

4. Create a strong relationship with your tenant

If you’re going to rent out an ADU and share your backyard it’s vital to know what you want, and know the tenant you’re going to be sharing space with. A great tenant/landlord relationship makes everything else about managing the ADU easier. Invest time in building that relationship, and you’ll have less vacancy, less to worry about, and maybe even make a friend. – Coram Houses, Durham, NC

5. ADU rentals are a great way to earn passive income

Would you like to have an additional $1,500 or more in monthly passive income? Due to increased housing demands, rental properties are at a record high. Instead of growing grass in your backyard, envision a money tree that blossoms $100 bills at the beginning of every month. – D A Holt General Engineering

An ADU can earn you income to supplement your mortgage payments, retirement savings, or vacation fund. It’s easy to see why generating an income stream from renting out an ADU can be a smart move. However, keep in mind that it does require due diligence and careful oversight since regulations for short-term rentals vary by location. – MHBO.com

The ADU – it’s a misunderstood gold mine. If you consider building it and renting it, your investment return will be a third of the time compared to an average home in California, then it’s just equity money. – Giisamex Architecture Inc. South Pasadena, CA

6. Create an environment that retains tenants long-term

Even though rentals are in demand, creating an environment that retains tenants long-term is important. Things like new paint, wood floors, stainless steel appliances, and stone countertops can go a long way. Also, become familiar with landlord regulations for your area and vet candidates thoroughly for income and compatibility. A difficult or non-paying tenant can cost a lot of time and money, not to mention, in the case of an ADU, they literally live next door. – Windy City Builders