House Hacking in Murrieta: ADU and Rental Basics

Want to lower your mortgage without moving far from the places you love? House hacking with an ADU, JADU, or a simple room rental can turn your home into a smart income asset. If you live in or are eyeing Paseo Del Sol in southwest Riverside County, you have real options to create rental income while keeping the lifestyle you want.

In this guide, you will learn the basics of ADUs and JADUs, where to confirm local rules, how to estimate costs and financing, and what to expect as a landlord. You will also get a simple worksheet to run your numbers and a step-by-step plan to get started. Let’s dive in.

House hacking options to consider

Rent an ADU on your lot

A detached or attached ADU gives you a self-contained rental while you live in the main home. You can also convert existing space, like a garage, into an ADU.

Create a JADU inside the home

A JADU is a smaller unit carved from your existing home, typically up to 500 square feet. It can be a lower-cost way to start generating income if you have suitable interior space.

Rent individual rooms

If you want to keep construction simple, renting out rooms can bring in income quickly. Put clear house rules in writing and check basic occupancy and parking standards.

Explore short-term rentals

Short-term rentals can produce higher gross income in some cases, but rules and taxes differ from long-term rentals. Always verify HOA and city requirements before listing.

ADU and JADU basics in California

California has passed several laws since 2016 to encourage ADUs and JADUs. In many cases the state limits local restrictions, allows different ADU types, and sets high-level size and permitting timelines. Local implementation can vary, so confirm details with the City of Murrieta planning and building divisions. Rules can change and fees are updated over time.

Key items to verify for Paseo Del Sol properties:

• Zoning and whether an ADU or JADU is allowed on your lot.
• Permit process, inspections, impact or utility fees, and timelines.
• Parking rules and potential waivers in certain situations.
• Design standards, height, setbacks, and any architectural review.
• Utility and sewer connections, including whether separate meters are allowed or required.

Check HOA and CC&Rs first

Many homes in and around Paseo Del Sol are in planned communities with active HOAs. CC&Rs may affect exterior changes, parking, rental types, and unit appearance. State law limits some HOA restrictions on ADUs, but you still need to follow reasonable community design rules.

What to do:

• Request CC&Rs, architectural guidelines, and any rental policy in writing.
• Ask the HOA early about ADU placements, exterior materials, and parking plans.
• Document all approvals and keep copies with your permit file.

Costs and how to finance

Typical cost ranges

ADU costs vary with size, site work, and finishes. In Southern California, a detached ADU commonly runs from the low six figures into the $300,000 range depending on complexity. Conversions or internal ADUs can be lower and often fall in the tens of thousands for simpler projects. Get at least three local contractor bids and a design estimate to firm up your budget.

Main cost drivers:

• Foundation, framing, and structural upgrades.
• Utility extensions and sewer work.
• Site work such as grading, retaining walls, and driveway or parking.
• Fire-safety and energy code requirements.
• Design, engineering, and permit fees.

Financing options to explore

• Cash or savings.
• Home equity line of credit or home equity loan.
• Cash-out refinance to fund construction.
• Renovation loans such as FHA 203(k) or Fannie Mae HomeStyle Renovation, if eligible.
• Local portfolio or construction-to-permanent loans.
• Personal loans or contractor financing.
• Grants or incentives offered by city, county, or state programs. Check current programs with local offices.

Talk with a local lender who understands ADU underwriting. Some lenders may allow a portion of projected ADU rent to help you qualify, often with documentation.

Taxes and rental income

Rental income is taxable. You can usually deduct costs tied to the rental portion, including a prorated share of mortgage interest, property taxes, insurance, utilities you pay, maintenance, and depreciation. If you run a short-term rental, you may need a business license or to collect transient occupancy taxes. If you plan to sell, renting a portion of your home can affect how the primary residence capital gains exclusion applies. Consult a CPA to plan your cash flow and your after-tax return.

Step-by-step timeline

1. Feasibility check. Pull parcel and zoning data, review HOA rules, and walk the site with an ADU designer or architect.
2. Pre-application or planning review. Ask the City of Murrieta planning and building teams what is required and how long it typically takes.
3. Design and engineering. Prepare site plan, floor plans, elevations, and structural and MEP drawings.
4. Permits. Submit for planning approvals if needed, then building permits and utility permits.
5. Construction. Hire a licensed contractor. Build time often ranges from a few months to most of a year depending on scope.
6. Inspections and final. Complete inspections and obtain a certificate of occupancy if required.
7. Lease-up and operations. Set rent, market the unit, screen tenants, finalize leases, and set house rules.

Landlord rules in California

• Habitability and repair. You must maintain safe, habitable housing and perform timely repairs.
• Security deposits. California limits security deposits for residential rentals. Limits have varied over time, so verify current caps before collecting.
• AB 1482. The California Tenant Protection Act adds rent caps and just-cause eviction protections for many units. Some new builds or small owner-occupied situations may be exempt. Confirm applicability to your property.
• Tenant screening. Use written criteria, verify income, and run credit and background checks with proper disclosures.
• Management. You can self-manage or hire a property manager. Long-term management often runs around a percentage of collected rent. Short-term rentals usually cost more to manage.

Run your numbers before you build

Use this simple worksheet to model your cash flow. Replace X with your figures.

• Estimated monthly rent from ADU or room: $X
• Vacancy allowance: $X
• Property management cost: $X
• Added utilities, maintenance, insurance: $X
• Incremental property tax or loan costs: $X
• Net monthly cash flow: rent minus all expenses above
• Payback period on build cost: total project cost divided by annual net cash flow

Aim for conservative assumptions. Include a reserve for repairs and a buffer for permit or construction delays.

Short-term rentals checklist

Short-term rentals can be attractive but carry extra rules.

• Verify whether short-term rentals are permitted for your property and in your HOA.
• Confirm any business license and transient occupancy tax requirements.
• Check parking, noise, and occupancy standards.
• Ensure your insurance policy covers short-term rental activity.

Buyer and seller tips

If you are buying in Paseo Del Sol

• Ask for HOA documents early and review any rental or architectural rules.
• Walk the lot for potential ADU placement, utility access, and parking layout.
• If you plan a JADU, confirm interior space and egress options with a designer.
• Run projected rent and cash flow with a lender who understands ADUs.

If you are selling a house-hack-ready home

• Gather permits, final inspections, and any HOA approvals for existing ADUs or conversions.
• Highlight separate entrances, kitchenette layouts, parking solutions, and privacy features in your listing.
• Present operating details such as utility splits and average rent received if applicable and permitted.

Avoid common mistakes

• Skipping HOA and CC&R checks. Get approvals in writing before you design.
• Underestimating utility and sewer work. Obtain early cost opinions from your contractor and utility providers.
• Forgetting insurance updates. Notify your carrier about rental use or an added structure.
• Ignoring landlord laws. Use compliant leases and follow notice and deposit rules.

Your next step

If you want a clear path from idea to income, pair local permitting knowledge with a solid financial plan. With a background in accounting and tax, our team can help you model scenarios, estimate costs, and position your purchase or sale for better results. When you are ready, connect with Jeff Engstrom to discuss your goals or request a free home valuation.

FAQs

Can I build an ADU on a Paseo Del Sol property?

• In many single-family zones the state framework supports ADUs, but you must confirm zoning, setbacks, utilities, and HOA rules with local offices before you proceed.

How long do permits and construction usually take for an ADU?

• Planning and permit steps can take weeks to months depending on workload and design, and construction often takes several months after permits are issued.

How much does an ADU cost in Southern California?

• Detached ADUs commonly range from the low six figures up to the $300,000 range depending on size and site work, while conversions can be lower for simple projects.

Can projected ADU rent help me qualify for a mortgage?

• Some lenders consider a portion of projected ADU rent with documentation, so talk to a lender familiar with ADUs early in your planning.

Do HOA rules override city approvals for ADUs or rentals?

• HOA CC&Rs are binding on owners and can limit certain design or rental practices, so secure HOA approvals in addition to any city permits.

Are short-term rentals allowed in Paseo Del Sol?

• It depends on both HOA policies and local municipal rules, so verify permissions, licensing, and taxes before you advertise a short-term rental.