California ADUs for Investors: Income, Rules, and the AB 1033 Correction
Program and regulatory figures verified July 24, 2026. Details change; confirm your scenario with us.
An ADU can turn a thin California single-family into a workable two-income property, and the rules changed enough in the last few years that most of what you'll read online is out of date.
California's statewide ADU laws
California has spent several legislative sessions forcing cities to allow accessory dwelling units. Under AB 68 and the statutes that followed, most cities must permit ADUs by right on single-family and multifamily lots, with streamlined ministerial approval rather than discretionary review, and the state leads the country in ADU production. For an investor, an ADU is a second rent check on one parcel, and in high-price California that second stream is often what moves a property from a thin ratio to a workable one. A JADU (junior ADU), built within the existing walls of the home and capped at 500 square feet, is a related but distinct category with its own owner-occupancy rules.
How ADU income counts in a DSCR loan
Many DSCR and non-QM lenders count rental income from a permitted ADU toward the property's DSCR, and some programs count income from up to 3 ADUs on a single property. Lenders generally want the ADU permitted and legally recognized, and they use the appraiser's estimated market rent when there is no signed lease. Treatment is program-specific, so we confirm which lane a property fits before you're under contract; we never promise a specific ADU-income figure. Keep this distinct from a different, newer rule: as of roughly March 2026, Fannie Mae's Selling Guide allows projected ADU rental income to count toward a borrower's qualifying income on a one-unit primary residence, capped at 30% of total qualifying income. That is an owner-occupant, conventional-mortgage feature, not a DSCR feature; don't conflate the two. Mechanics: the DSCR guide.
Can I sell an ADU separately in California?
Almost everywhere, no, but that is no longer universally true, which is the correction worth knowing. AB 1033, signed in 2023, lets a city opt in by its own ordinance to allow a homeowner to sell an ADU separately from the main home through a condominium conversion. As of roughly April 2026, only three jurisdictions had opted in: San Jose (where the first arms-length ADU sale, around $530,000, closed escrow in 2025), Santa Monica, and unincorporated San Diego County. Everywhere else in California, separate ADU sale remains prohibited absent local adoption. The list will keep growing, so confirm your city's current status; for an investor, an AB-1033 city opens an exit that doesn't exist elsewhere. This is general information; confirm with a California real estate attorney.
SB 9: the duplex path versus the lot-split path
SB 9 gives investors two very different tools. The two-unit path lets you convert a single-family lot to a duplex with no owner-occupancy requirement, so it is available to an investor as-is, a clean way to double the rent roll on an eligible lot. The urban lot-split path is the opposite: splitting one lot into two requires the applicant to sign an affidavit committing to occupy one resulting unit as a principal residence for at least three years, and community land trusts and qualified nonprofits are the only ones exempt from that occupancy rule. So the duplex conversion is the investor-friendly half of SB 9, and the lot split usually isn't. Confirm eligibility and process with your city and a California attorney before you build a plan around either.
No pressure, no obligation, and no salesy follow-up: a 20-minute call with our team, real numbers, and a straight answer on whether the deal pencils.
Frequently asked questions
Can I sell an ADU separately from the house in California?
Generally no, but AB 1033 lets a city opt in by ordinance to allow it through condominium conversion. As of April 2026, only San Jose, Santa Monica, and unincorporated San Diego County had opted in; the first San Jose sale closed around $530,000. Everywhere else, separate ADU sale is still prohibited. Confirm your city's current status with a California attorney.
Does ADU rental income count toward a DSCR loan in California?
Often yes. Many DSCR and non-QM lenders count permitted ADU rental income toward the property's ratio, and some programs count income from up to 3 ADUs on one property, using appraiser-estimated market rent absent a signed lease. Treatment is program-specific, so we confirm the lane before you're under contract rather than promising a figure.
Is Fannie Mae's new ADU income rule the same as DSCR ADU income?
No, and conflating them causes errors. Fannie Mae's roughly March-2026 update lets projected ADU rent count toward a borrower's qualifying income on a one-unit primary residence, capped at 30% of total income. That is a conventional, owner-occupant feature. DSCR programs count ADU rent toward the property's ratio instead, a separate product with its own rules.
Can I use SB 9 to add units as an investor?
Yes, through the two-unit path: SB 9 lets you convert a single-family lot to a duplex with no owner-occupancy requirement, which is available to investors as-is. The urban lot-split path is different: it requires a 3-year owner-occupancy affidavit, so it usually doesn't fit an investor. Confirm eligibility with your city and a California attorney.
Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content, not a loan commitment and not legal or tax advice. California rent-cap percentages, city and county STR rules, tax figures, and litigation status change; verify current requirements with the city or county, your CPA, or a California real estate attorney before you buy. Loans are subject to buyer and property qualification.