3. Look ahead 10 years
What could owning build over time?
Compare the same years for both homes. Appreciation can grow the property’s value, loan payments can build equity, and rent can help cover housing costs. These are projections, not guaranteed benefits.
With roughly the same starting effective monthly payment, the ADU home is projected to have 53.1% more equity after 10 years.
That is $321,580 with the ADU versus $210,092 without it—a $111,488 equity advantage. Starting effective payments are $3,000/month with rent and $3,000/month without rent (within 5%).
This compares total projected equity, including each down payment. The ADU home may require more cash upfront; this is not a comparison of investment returns. Starting effective payments subtract net rent; later rent and expenses can change. Cash-shortfall warnings still apply.
Rental income helps pay the costs while you own the home. It is already reflected in cash remaining—adding it to cash + equity again would count it twice. A larger home may build more dollar equity, but it also requires a larger loan and more cash at closing.
More room for your family later
Rent out the extra space while it helps with the payment. If your family grows or your kids need more room, you may be able to stop renting when the rental arrangement ends and use the basement or ADU yourselves. That could let you stay in the same property and avoid the selling costs, moving expenses and purchase costs of trading up to another home.
The tradeoff: rental income stops, so you must be able to cover the full mortgage payment and household costs from your own income. Whether the space works for your family depends on its layout—a separate ADU does not necessarily add connected living space to the main home.
The projection above assumes you keep renting for all 10 years. It does not model reclaiming the space or count avoided transaction costs as savings.
How to read the return: Return on cash = (home equity − down payment − closing costs) ÷ (down payment + closing costs), shown as a percentage. For example, $100,000 equity less $50,000 initial cash leaves $50,000 net equity gain: a 100% return on that initial cash. At 0%, equity equals the initial cash invested. This excludes the initial out-of-pocket investment from the gain and is not annualized. It does not include ongoing housing costs, tax benefits or sale costs. It is not a rental cash-on-cash return or a complete investment return. With no initial cash investment it is N/A.
Equity = projected home value − remaining mortgage; it already includes the down payment, appreciation and loan paydown. Equity is not cash in hand. Total out-of-pocket housing costs include mortgage payments, PMI, taxes, insurance and maintenance, less net rent. Those costs reduce cash; regular contributions from your entered monthly payment budget add to cash. Cash earns no interest.
Both homes start today. Growth and expense inflation apply once each year after Year 1; the monthly payment budget stays constant. Expenses include general maintenance and the rental option’s extra maintenance and renter utilities. The projection assumes approved PMI cancellation below 80% of projected value with scheduled automatic termination as a fallback; confirm eligibility with your servicer. The initial payment illustration above keeps PMI constant for its first 12 months. No sale, refinancing, construction costs or tax benefits are assumed.