ADU's are changing the way we Live
The topic of ADUs is gaining popularity as we reconsider our living arrangements. If you’re in the market for a home with an ADU, or are interested in adding one to your existing property, keep reading. Perhaps you’re intrigued by the possibility of supplementing your mortgage with rental income. In addition to conforming loan guidelines now permitting buyers to use rental income to qualify for homes with ADUs, there are numerous other reasons to learn about ADUs. My goal is to provide a simple and practical guide to the latest in modular building, such as ADUs and Income Units.
Who is building ADUs and why? ADUs can generate wealth, offer in-fill housing, minimize displacement, and strengthen neighborhoods. People build ADUs on their property to expand living space for themselves or their family, such as creating a separate living space for a parent or adult child.
An ADU is short for Accessory Dwelling Unit, which is a secondary home constructed on a single family residential lot. There are various types of ADUs, such as tiny houses, granny flats, and backyard cottages, which all serve as a flexible living arrangement that can increase the value of a home. An ADU is designed to serve as a complete residence, providing everything necessary to live comfortably, including sleeping, cooking, and bathing facilities. There are many ways to construct an ADU, including detached garages, basement conversions, prefab units, and additions to existing homes. Depending on the owner’s preference, an ADU can be used to house family members or generate rental income to offset or pay for their mortgage.
Are you looking to create a space for family members or guests to stay? Or maybe you’re considering adding extra office or studio space that could be rented out for extra income. Whatever your goals may be, there are many ways to approach building or purchasing an Accessory Dwelling Unit (ADU).
Your decision will depend on your priorities. Do you want more indoor space, like converting your basement, or more outdoor space? Are you looking to generate rental income, or perhaps downsize and live in the ADU while renting out your main house?
There are other types of detached structures, like Guest Suites or Home Studios, but let’s focus on ADUs for now. Keep in mind that ADUs cannot exceed 20 feet in height, and their coverage cannot exceed that of the primary residence. Additionally, ADUs cannot occupy more than 15% of the total area of the site.
In Portland, an Accessory Dwelling Unit (ADU) is a secondary, smaller dwelling unit that can be legally added to a residential property. This includes adding it to the same lot or within a house, attached house, or manufactured home. Legally, the ADU is considered part of the same property as the main residence and is not typically sold or bought separately.
For long-term rentals, Portland has a program that waives the extensive building permits required for building ADUs. Some clauses also exist to assist with building ADUs for long-term rentals. However, for short-term rentals, most homeowners opt for Airbnb. Portland has strict rules and regulations when it comes to short-term rentals like Airbnb.
Regardless of the type of rental, you will need to obtain a permit from Portland’s Central Planning Bureau. The process can be a bit of a hassle and require approval from Portland City Council and the Zoning Administrator. The timeline for obtaining a permit can vary depending on how busy the bureau is, taking anywhere from days to months.
In Portland, most properties can accommodate an ADU, but there are certain zoning requirements to keep in mind. You’ll need to reserve an open space of at least 250 square feet and 12′ x 12′, which cannot be in the front yard. The location of your ADU will also be influenced by tree protection and setbacks, and it must be situated at least 40′ behind the front property line or behind the rear wall of the existing house. With all of these considerations, it’s best to seek professional help that balances affordability, quality, and sustainability. You might start by reaching out to a Design/Build partner or exploring prefab units from Cover. ADU styles include apartments over garages, garage conversions, back yard cottages, granny flats, mother-in-law quarters, and detached prefab units. If you’re building a new Portland ADU from scratch, expect to spend roughly $150 per square foot, or at least $200-250k for a minimum viable unit on a smaller budget.
There are professionals who specialize in ADU and can personalize your loan options to fit your needs. If you already have a credit union or lender, or even if you just want to chat with me, I can connect you with the right people who have the products and expertise you require.
We also have in-house lending with Orca Mortage!
Click HERE to apply for a construction loan:
Let’s consider the potential ROI of your proposed ADU project. ADUs are an excellent way to generate passive income that continues to grow. Detached ADUs offer the most value to your property, followed by attached ADUs. ADUs that are converted from existing space within your primary residence, like a master bedroom suite, attic, or basement, add the least value, but still contribute to your property’s worth.
An ADU has the potential to generate passive income, save you money, increase your options, and maximize your property’s value. To get a sense of how much income an ADU in your area could generate, research rent prices on popular rental websites like rentcafe, craigslist, AirBNB, or vrbo. ADUs provide tenants with more privacy than apartments and often come with their own outdoor areas, making them an attractive option for many renters.
In conclusion, consider whether you require the assistance of a professional property management company or if you prefer to handle it independently. Alternatively, you could speak with someone who is currently engaged in this type of lifestyle. It can be intriguing to learn about the advantages and disadvantages of such an arrangement. Additionally, you may be contemplating the sale or rental of your current residence or finding an ADU that suits your needs. If you’re interested, I’m happy to discuss all aspects of this lifestyle with you. I have experience from all perspectives of this unique and practical way of living. Please don’t hesitate to contact me, and I look forward to hearing from you soon!
