Remember, investing 200,000 into an ADU won't likely increase your properties value by 200,000, but the rent potential is a great bonus.

If you go with the partnership route1) You need to manage the money going in and out of the business bank account.2) File a partnership return and be responsible for issuing K-1's3) make distributions to you and your partner for cash flow that you receiveYou will likely spend many hours on a nice gesture.I may want to consider instead to give a christmas gift or a bonus for early completion of projects.

Bonus if you have any advise or pools. 

Bonus rule:  this applies to any investment or business that even HINTS at being a scam, below board, or ethically questionable - If you don’t know who the “sucker” is, it’s YOU. 

@Cate DeBates Triple Net commercial lease is a huge bonus!

But it also means you have virtually zero bargaining power as the seller can reuse any and all repairs and just keep your 6 months of rent as a bonus. 

Non-passive to achieve this level of return.Add the addition of the ADU makes the main unit rent controlled if over 15 years old.the work to add an ADU likely exceeds the effort of a brrrr that can achieve infinite return  Experienced investors are adding multiple ADUs by leveraging items like bonus density, committing units to affordable housing, etc.  

., structural updates) can be added to your basis, while maintenance costs are deductible in the year paid.Since bonus depreciation is now at 40% for 2025 and 20% for 2026 under the current law, future real estate investments will have fewer upfront depreciation benefits.

A good real estate accountant can save them thousands of dollars by leveraging entity selection and formation, tax deductions, cost segregations, bonus depreciation and tax planning.I recommend that they find a tax accountant who specializes in real estate taxation, business taxation, financial planning and tax planning.I would also recommend that they look for a accountant willing to work with them throughout the year, who can help them strategize and who is responsive when they want to know the consequences of the financial decisions they are making throughout the year.Good luck.

Turning a "SFR 3bed / 2bath with a bonus room" , into a 4 bed / 2 bath with the simple addition of a closet, is one of my favorite value add plays.