• The units are studio homes, with a full kitchen, laundry facilities, and a private patio.
  • The startup would share the rental income with homeowners, who could make $500 to $1,500 a month depending on the average median income of their neighborhood.
  • The state of California has long been plagued by an affordable housing crisis, and an increase in supply could help lower costs over time.
  • Visit Business Insider's homepage for more stories .

A California startup wants to build tiny homes in your backyard, rent them out, and give you an extra source of income of upwards of $500 a month.

United Dwelling partners with local communities and homeowners to transform unused backyard space and garages into affordable, 369-square-foot tiny homes. They would then be rented out for between $1,300 and $2,100 to a tenant vetted in part by the homeowner.

The company was founded by Steven Dietz, formerly of Upfront Ventures, which backed the likes of PetSmart and Ulta Beauty. United Dwelling just raised $10 million in a Series B funding round led by Alpha Edison with participation from Lightspeed Ventures, bringing its total funding amount to $12.2 million, according to Crunchbase.

The capital will in part be put towards the installation of more than 150 units in Southern California by the end of the year and 1,500 more by the end of 2021, as long as COVID-19 shutdown restrictions allow construction to move forward.

Here's what the tiny home looks like.

An accessory dwelling unit (ADU) is a housing unit that sits on a lot with another home. Another term for them is "mother-in-law" unit.

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United Dwelling

The state of California has been burdened by a housing and affordability crisis, which has exacerbated homelessness in the state.

In 2016 and 2019, legislation was passed to relax restrictions on building accessory dwelling units in the backyards of single-family homes.

Adding more affordable supply to the market could help in lowering housing costs.

The startup's units require spaces measuring 20 feet by 24 feet.

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United Dwelling

There are more than 831,000 homes in Los Angeles County that accommodate those requirements, according to the company. The company has plans to eventually expand to the Bay Area and other locations.

When the company partners with homeowners, it covers the cost of construction of the ADU in the backyard or garage.

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United Dwelling

It takes a mere six weeks from signing the lease to completion of a new home.

The startup merely rents the land where it stands, with some leases extending to 15 years, but the homeowner owns the ADU.

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United Dwelling

Source: Fast Company

The company finds up to five qualified tenants, and the homeowner gets to help in the final selection.

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United Dwelling

The monthly rent would typically be about 20% less than the average rent of the neighborhood where the home is located.

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United Dwelling

Source: United Dwelling

Homeowners could receive anywhere between $500 to $1,200 a month from the monthly rent payments, according to the company.

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United Dwelling

United Dwelling receives a cut of that and also manages the property throughout the lease.

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United Dwelling

Homeowners can also buy the unit from United Dwelling for about $88,000, according to the company.

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United Dwelling

There are already five homeowners working with United Dwelling, according to TechCrunch.

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United Dwelling

Other companies striving toward a similar mission are Y Combinator alums Homestead and Rent the Backyard.

Source: TechCrunch

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