Building an ADU in backyard of current rental

[Varinder Kumar]

So my current rental is doing great. I am looking to building a 300-400sqft additional dwelling unit in the backyard. I called the city already in regards to this an waiting for them to call me back. We are going to discuss what their laws and regulations are as far as setbacks and zoning. I would like to know from my fellow BP'rs their insight on this project. Has anyone done this before? I am looking to Air BnB the unit. For the unit itself with will be something along the lines of:

Sleeps 4, one queen bed and another sofa bed, small kitchen and bathroom. 

My backyard is pretty big, I want to divide the yard in half and build the unit on one side where it already has its own entrance to the side of the home. As far as my current tenants are concerned. I am yet to speak with them about it- any advice on this also would be great! I won't raise their rent and have not raised their rent in the 2 years they have been there.

And I plan on marketing the unit for $99 a night, the home is close to theme parks, malls, gyms, shopping and restaurants. 

I look forward to the replies on here, thanks! in advance.