Average rents for purpose-built apartments in London, Ontario were $1,066 for a bachelor, $1,371 for a one-bedroom and $1,651 for a two-bedroom in October 2025, according to CMHC. At those rents, a detached unit priced from $148,000 to $218,000 pays back its build cost in roughly 13.5 to 15.5 years, a net return of about 6.5% to 7.5% a year before financing. Site servicing lengthens that, and a new unit that rents above the citywide average shortens it.
Those are modelled figures, not guarantees. Below is the full math so you can swap in your own numbers.
What do ADU-sized rentals actually rent for in London?
CMHC's annual Rental Market Survey is the standard reference. Its October 2025 averages for purpose-built apartments in the London CMA:
| Unit type | Average monthly rent (CMHC, Oct 2025) | |---|---| | Bachelor / studio | $1,066 | | 1 bedroom | $1,371 | | 2 bedroom | $1,651 |
Source: CMHC Housing Market Information Portal, London primary rental market. The same survey put London's vacancy rate at 4.0%.
These are averages across all purpose-built apartments, old and new, so treat them as a conservative floor. A newly built, separately metered garden suite with in-suite laundry and a private entrance competes with new apartments rather than older stock, and usually rents above the average. Before you build a pro forma, check active listings within a few blocks of your address for comparable new units.
Location inside London matters more than square footage. Proximity to Western University, Fanshawe College, the hospitals and frequent bus routes drives rent more than an extra 40 square feet does.
What does the ADU itself cost to build?
Kuzyn Builds publishes fixed starting prices for three pre-designed detached models:
- The Paul — from $148,000, 321 sq ft, studio, 1 bathroom
- The Maria — from $168,000, 409 sq ft, 1 bedroom, 1 bathroom
- The Henry — from $218,000, 549 sq ft, 2 bedroom, 1 bathroom
Those base prices include the complete structure, interior finishes and fixtures, windows and doors, a ductless heat pump HVAC system, appliances (fridge, stove, dishwasher, microwave), quartz countertops, vinyl plank flooring, planning and building permits, and Tarion warranty coverage on detached units.
They do not include site servicing: sewer and water line connections, electrical service connections or upgrades, trenching and excavation, distance-to-utility costs, or municipal permit and connection fees. Those are lot-specific and can be modest or substantial depending on how far your unit sits from existing services and what capacity your panel has. Get a site-specific quote before you finalize any return calculation — this is the single biggest variable in ADU budgeting, and no honest builder can quote it from a map.
Other configurations carry different economics entirely:
| Configuration | Typical cost | Typical timeline | |---|---|---| | Interior / basement conversion | $75,000 – $150,000 | 2–4 months | | Garage conversion | $80,000 – $160,000 | 2–4 months | | Addition to existing house | $120,000 – $220,000 | 4–6 months | | Detached standalone unit | $148,000 – $350,000+ | 4–8 months |
What is the payback period on a detached ADU in London?
Roughly 13.5 to 15.5 years on the build cost alone, using CMHC's average rents and a 25% allowance for operating costs and vacancy.
Here is the model at CMHC's October 2025 averages:
| Model | Build cost (from) | Rent used | Gross/yr | Net after 25% costs | Simple payback | |---|---|---|---|---|---| | The Paul (studio) | $148,000 | $1,066 | $12,792 | $9,594 | ~15.4 years | | The Maria (1 bed) | $168,000 | $1,371 | $16,452 | $12,339 | ~13.6 years | | The Henry (2 bed) | $218,000 | $1,651 | $19,812 | $14,859 | ~14.7 years |
Rent above the average shortens this quickly. Every extra $100 a month adds $900 a year of net income at the same 25% allowance, so The Maria at $1,571 a month pays back in about 11.9 years instead of 13.6.
Site servicing works the other way: every additional $20,000 of lot-specific cost extends payback by roughly 1.3 to 2.1 years at these net-income levels. A $40,000 servicing bill on The Maria pushes payback from about 13.6 years to about 16.9.
The 25% allowance covers vacancy, the increase in your property tax assessment, additional property insurance, maintenance and a repair reserve. If you include utilities in the rent instead of separately metering the unit, budget closer to 35%. If you hire a property manager, add another 8–10% of gross rent.
What does the simple payback number leave out?
Three things, and they all work in your favour.
Property value. A legal, permitted, separately serviced second unit is an income-producing asset attached to your title, and appraisers treat it as such. The resale lift is not the same as the build cost, and it varies by neighbourhood — but it is real, and it shortens the effective payback considerably if you sell before the unit has paid for itself.
Rent growth. The model above holds rent flat for over a decade. CMHC recorded 4.1% growth in London's average two-bedroom rent in 2025 alone. In Ontario, a residential unit first occupied after November 15, 2018 is exempt from the annual rent increase guideline during a tenancy (any unit's rent can be reset between tenancies). Confirm the current rule and your unit's status with the Landlord and Tenant Board before you rely on it.
Non-rental use. Plenty of London ADUs never see a tenant. Housing a parent, an adult child, or yourself while you rent out the main house produces value that never appears on a rent roll.
Can you finance an ADU in London?
Yes — through several routes, and federal programs for secondary suites have expanded recently. The Canada Secondary Suite Loan Program and a federal mortgage refinancing option for homeowners adding suites both exist; reported terms have included loans up to $80,000 at 2% over 15 years. Terms, caps and eligibility rules change, so verify the current program details directly with CMHC or your mortgage broker before budgeting around them. Home equity lines of credit and construction draws remain the common alternative.
One point worth modelling: if your borrowing cost is below your net yield on build cost, the ADU carries itself from month one. At roughly 6.5–7.5% net on build cost at average rents, that's a meaningful spread against most secured rates.
What London rules should you check before you build?
Check London's current Additional Residential Unit (ARU) provisions with the City before you commit. How many units a lot can hold, parking for new units and setbacks are set by the City's zoning by-law, and they can change between when you plan and when you apply.
What is stable: every ARU in London requires a building permit, and detached units need their own servicing approvals. If you rent the unit out, you will also need a residential rental licence; Kuzyn Builds handles the permit, licence and regulatory submissions as part of the build. What you should confirm in writing for your specific address: how many units your zoning permits, parking requirements, lot coverage and setbacks, and current municipal connection and permit fees. Call the City of London's planning and development services, or let us pull it as part of a site review.
If you want the fuller background on unit types, permits and process, our complete guide to ADUs covers it, and our buyer's guide to ADU builders in London explains what to compare between quotes.
Frequently asked questions
Is ADU rental income taxable in Ontario? Yes. Rent from an ADU is taxable income, reported on Form T776 (Statement of Real Estate Rentals) with your personal return. You can deduct a portion of operating costs, including mortgage interest, property tax, insurance, utilities and maintenance attributable to the unit, and you claim the build cost through capital cost allowance rather than as an expense. Renting part of your property can also affect the principal residence exemption on eventual sale — speak to an accountant before your first rental year.
Which ADU model gives the best return in London? The one-bedroom posts the shortest payback of the three, roughly 13.6 years at CMHC's average rents in the model above, because rent per dollar of build cost is highest. Two-bedroom units produce the most absolute monthly income and the widest tenant pool, including small families. Studios are the lowest entry cost and the fastest build. Compare all three on the ADU models page.
How long does it take to build a detached ADU in London? Four to eight months for a detached standalone unit, from permit to occupancy. Interior, basement and garage conversions typically run two to four months. Permit review timelines vary with City workload, so ask for a current estimate when you apply.
Does a detached ADU come with a warranty? Yes — detached ADUs built by Kuzyn Builds are covered by Tarion warranty, Ontario's new home warranty program. Attached conversions and additions fall outside Tarion's new-home coverage; ask any builder to put their own workmanship warranty in writing for those configurations.
Run the numbers on your lot
Every figure above changes when applied to a real address: your rent band, your servicing distance, your zoning. Kuzyn Builds has completed 80+ projects across Ontario over 10+ years, and a site review is the fastest way to turn these ranges into a number you can actually plan around.
Book a free consultation or call +1-519-694-4776. We serve London, St. Thomas, Strathroy, Sarnia, Grand Bend and the surrounding region. You can also browse our full range of services if your project goes beyond a single unit.