What a casita earns, and how lenders count it

What small units rent for in the Valley

Phoenix ADU builders report casita rents of roughly $1,200 (studio) to $2,500 (larger units). Treat as marketing figures; verify with current listings near your address. A casita usually rents above an apartment of the same size because it comes with a private entrance, a yard, parking at the curb and no shared walls, but the right number for your lot is whatever similar units within a mile are renting for this month.

Sources: Zumper Phoenix rent research (Sept 2026); builder figures from the cost guides cited on the math page.

Yield and payback

Gross yield is a year of rent divided by what the unit cost. Payback is the reverse: how many years of gross rent equal the cost. Both are before vacancy, taxes, insurance, maintenance and financing, so real returns are lower. The examples use typical Valley build costs per foot, not a quote for any project.

A conversion recoups faster because it costs less to create, not because it rents for more. Rent also keeps compounding in your favor: a unit that rents for $1,300 today and follows even modest rent growth returns more over ten years than the first-year yield suggests, while the build cost is fixed the day you finish.

Net, not gross: what to subtract

• Vacancy. Budget one month a year between tenants.
• Property tax. The assessor adds the improvement to your valuation.
• Insurance. Tell your carrier; a rented unit changes the policy.
• Maintenance. A new unit needs little for years, but plan for appliances, HVAC service and repaint.
• Utilities. Decide up front whether the tenant pays a share or you add a sub-meter.
• Financing. If you borrow to build, the loan payment comes out of the rent first. The financing guide covers the options.

The lender rules that changed the game

Until recently, the rent a casita could earn did not help you qualify for the loan to build or buy. That changed in 2023.

FHA

• 75% of an existing ADU's estimated rent can count toward qualifying income on an FHA loan
• 50% of projected rent counts for a new ADU built with an FHA 203(k) renovation loan (for example a garage conversion)
• ADU rent can be no more than 30% of total qualifying income; not allowed on cash-out refinances
• Policy: FHA Mortgagee Letter 2023-17 (October 2023)

Fannie Mae (conventional)

• Rental income from one ADU on a 1-unit primary residence can be used to qualify for a purchase or limited cash-out refinance
• Capped at 30% of total qualifying income
• The appraisal must include a comparable rent schedule (Form 1007) establishing the ADU's market rent

In plain terms: a buyer of your home with a legal casita can use most of its rent to qualify for a bigger mortgage, which widens the pool of buyers who can afford the house. And a homeowner converting a garage with an FHA 203(k) loan can count half the projected rent before the unit exists.

Sources: FHA Mortgagee Letter 2023-17: ADU rental income in qualifying (Oct 2023); Fannie Mae: Accessory dwelling unit income (Selling Guide fact sheet). Lender overlays vary; confirm with your loan officer.

Short-term rental is a different question

The state law protects long-term rental (90 days or more, or month to month). Short-term rentals still need a city permit, and Phoenix requires the owner to live on site to use a casita finished after September 2024 as a short-term rental. Plan on a long-term tenant unless you have checked your city's short-term rules first.