SOUTHERN OREGON ARCHITECTS

DESIGN BUILDERS

Suncrest Homes 541-944-3976

ARCHITECTS

Peter Grossman 541-231-2048

Bob Haxton 541-890-2412


Using Your ADU as a Rental? Here’s What You Need to Know

July 27, 2022 by Jenna Hall, Redfin

1. Always do your due diligence on potential tenants

The one thing we recommend to our customers is for them to do their due diligence on their future tenants. Let’s be honest; everyone can be on their best behavior for a 10-minute interview; however, documents never lie. We recommend asking your future tenants as part of the screening process for their three most recent pay stubs, a copy of the credit report, three references from previous landlords, and the current employer’s phone number to ensure they’re still working. Also, slowly saving the profits from the rental to about 6 months’ worth of rent in a separate account is a great idea. That way, if things go sideways with your tenants, it wouldn’t affect you that much. – The ADU Guru

one thing we recommend to our customers is for them to do their due diligence on their future tenants. Let’s be honest; everyone can be on their best behavior for a 10-minute interview; however, documents never lie. We recommend asking your future tenants as part of the screening process for their three most recent pay stubs, a copy of the credit report, three references from previous landlords, and the current employer’s phone number to ensure they’re still working. Also, slowly saving the profits from the rental to about 6 months’ worth of rent in a separate account is a great idea. That way, if things go sideways with your tenants, it wouldn’t affect you that much. – The ADU Guru

2. Check with your city’s planning department

Because many of the cities that legalized ADUs did so to boost the supply of affordable housing, some frown on or have explicitly banned homeowners who use their ADUs as short-term rentals. If you want to use your ADU as a short-term rental, you might need to obtain a business license and meet certain criteria set by your local government. Just in case, be sure to check with your city’s planning department before listing your ADU on Vrbo or Airbnb. – Torii

3. Attract your ideal tenant 

When renting out your ADU, consider this: the setup, design, and feeling of independence are what allow property owners to create a space for their tenants that truly feels like its own. It’s much easier to attract your ideal tenant than it is to find them – we recommend creating a private and luxurious space that can fit a small family. We think ADUs should be a fully-functional home that feels just like any other home, just a little more cozy. – Framework FirstSalinas, CA

For your ADU to be the perfect rental property, you must have high demand, low supply, and a well-managed product. Tenants want the same things homeowners want: A good location, privacy, custom home amenities, and the ability to have a pet. I have found that many renters are looking for stand-alone ADUs with an in-unit washer/dryer, a dishwasher, and some outdoor space. – Derek Sherrell, That ADU Guy

4. Create a strong relationship with your tenant

If you’re going to rent out an ADU and share your backyard it’s vital to know what you want, and know the tenant you’re going to be sharing space with. A great tenant/landlord relationship makes everything else about managing the ADU easier. Invest time in building that relationship, and you’ll have less vacancy, less to worry about, and maybe even make a friend. – Coram HousesDurham, NC

5. ADU rentals are a great way to earn passive income

Would you like to have an additional $1,500 or more in monthly passive income? Due to increased housing demands, rental properties are at a record high. Instead of growing grass in your backyard, envision a money tree that blossoms $100 bills at the beginning of every month. – D A Holt General Engineering

An ADU can earn you income to supplement your mortgage payments, retirement savings, or vacation fund. It’s easy to see why generating an income stream from renting out an ADU can be a smart move. However, keep in mind that it does require due diligence and careful oversight since regulations for short-term rentals vary by location. – MHBO.com

6. Create an environment that retains tenants long-term

Even though rentals are in demand, creating an environment that retains tenants long-term is important. Things like new paint, wood floors, stainless steel appliances, and stone countertops can go a long way. Also, become familiar with landlord regulations for your area and vet candidates thoroughly for income and compatibility. A difficult or non-paying tenant can cost a lot of time and money, not to mention, in the case of an ADU, they literally live next door. – Windy City Builders

adu interior
7. Focus on quality and updated features

To get the most value out of renting your ADU, your ADU must feel and be spacious with great quality and updated features to ensure satisfaction from your tenants. Builders like AKD Homes can design-build the exact size and quality you desire to assure you get the most out of your ADU. – AKD HomesHayward, CA

8. Consider a manufactured home ADU

If you’re looking to maximize your return on investment, we suggest that you consider building a manufactured home ADU. The cost of the manufactured solution is less than half that of conventional construction and can yield a net ROI OF 12%. – Sonoma Manufactured HomesPetaluma, CA

9. Know the rules and how to interpret them to your advantage

Each council has different rules for granny flats (ADUs), so it’s vital that property owners check the requirements for building on their property. This can be a complex process as some councils can be reluctant to provide specific answers to your questions. Since we know the rules and regulations, we also know how to interpret them to our client’s advantage. For example, some councils restrict the size of ADUs but seldom limit the size of decks, patios, or balconies. So, we encourage clients to make them as big as their budget permits and position them off the living room. This helps with the indoor/outdoor transition and makes a small space feel larger and more livable. – Granny & Co. Homes

There are various ADUs available, and whether or not you can use your ADU as a rental all depends on local code and building zones. An ADU can be an addition, attached, detached, above the garage, or even a basement conversion. All of these can easily be used as a potential rental unit. However, ADUs typically cannot be sold as separate units and must remain an “accessory” on your property. – Gregg Camp, Santa Cruz Realtor®

10. Stand out from other hosts

We focused on the Accessory Dwelling Unit market because of the options ADUs create as rentals, a place for Mom, the boomerang college kids, added remote workspace, or a quiet place for you. A key to a good listing is fabulous photos taken with a real camera, maybe even by a photographer. Separate yourself from other hosts by creating a comprehensive binder stored on the desk or countertop that includes operating instructions for the entire DADU. Also, stock the unit well, from cooking utensils to a quality bed, and lastly, don’t forget the toilet paper. – Michael Murray, Founder of Ballard Backyard CottagesBallard, WA

11. Be sure to give your tenants privacy

Our advice for successfully renting your ADU can be summed up in a popular song lyric from the band Offspring in the mid-’90s, “Keep ‘Em Separated”. For you and your tenant’s comfort, privacy and security, strategically separating your main home from your rental unit is key. This isn’t necessarily focused on distance, which may be logistically or legally prohibitive, but includes strategic landscaping, building position, window placement, and even a water feature for a sound barrier. – Watershed StructuresSnohomish, WA

12. Educate yourself to be a fair and empathetic landlord

ADU owners have a unique opportunity to do their part in alleviating the housing crisis while also building wealth for the family that owns it. Two major ways to be a fair and empathetic landlord are to one, educate oneself on the local and state laws protecting landlords and tenants, in addition to historic tenant biases against certain communities. Second, learn about available local and federal programs that assist ADU owners in placing tenants, as well as supporting those who are building ADUs, and utilize them to be most effective. – Inclusive Action for the CityLos Angeles, CA

13. Tailor your rental agreement to your specific situation

Your tenant will live on your property, so you may want to include specific details about any shared space. That way, you can ensure your lifestyle requirements are aligned and avoid any sticky situations. Don’t want to hear loud music at 2 am? Put it in your rental agreement. – Casita CoalitionLos Angeles, CA

Post originally published at Redfin: https://www.redfin.bcom/blog/adu-rental-tips/

Jackson County ADU Resources courtesy of R3V

Accessory Dwelling Unit

rthreev.org/2022/01/12/accessory-dwelling-unit

What is an ADU?

ADU is short for Accessory Dwelling Unit.  It can be accessory to detached single-family homes, townhouses, manufactured homes and duplex dwellings on their own lot.

Examples of ADU’s

Jump to your town’s ADU rules: Medford – Phoenix – Talent – Ashland – Central Point – Jackson County

If you are a professional homebuilder, see this set of ideas.

Why ADUs are important for you and your community

  • Creates more housing density at lower costs within the Urban Growth Boundaries that maintain our wide open spaces for ag and wildlife.  
  • Serves people and places according to AARP by creating attainable housing for elders and people starting out.
  • Supports aging in place, generational wealth building, and housing for extended family or friends.
  • Adds affordable “missing middle” housing options in a moment of critical shortage/ opportunity.  Missing middle is everything from ADUs to 8 unit complexes. 
  • Generates income – what does a 1 bedroom unit rent for in your area?
  • Increases property values 25% to 34%. A 2012  study from Portland.
  • Accelerates mortgage payoff at a time when 24% of Oregon homeowners are mortgage burdened and of that 9% are severely cost burdened- Oregon Center for Public Policy
  • Reduces the need for cars and increases walking, biking, and transit use.

How an ADU could work for you

  • ADUs are extremely valuable when it’s time to sell your home. 
    • Studies show that ADUs can increase property values and make homes more desirable to potential buyers, especially those interested in aging-in-place.
  • Estimate your gains using this handy calculator.  Scroll down the calculator to adjust assumptions. Or try this calculator.

Here’s Derek Sherrell, local ADU developer who offers a lot of great advice and encouragement to anyone interested in ADUs. 

See more tips from Derek, That ADU Guy, on YouTube and on his website.

Pre-approved ADU Plans

Here’s Carlos Delgado, the architect who designed the ADU plans pre approved in the city of Medford talking about his approach to ADUs.

When ADUs might not work

  • Zoning  restrictions – most single family lots can now include an ADU
  • Not enough space on your lot – buildable area of your lot, set backs, etc.
  • Access to utilities is expensive – is there enough slope for the sewer line?
  • Upfront costs of planning and permits
  • Financing ADU’s can be tricky – check with your banker
  • The form of your existing house  may not make an attached ADU easy – attached ADU example

Check with your local community development staff before you give up on the ADU idea. More info below

How to get started

Here’s Kristen Maze, Director of Community Development at the City of Talent helping you think about preparing to apply for permits to build an ADU.

Trying to Make the Complex Simpler

This process is NOT simple. We are trying to help you get started, but know that there are many options and potential roadblocks along the way.  But, as Derek says, the hard work is definitely worth it!

Lots of good materials on these websites:

A Few Key Details About ADUs In Your Area

This is only a few key pieces of a much larger puzzle.  Check with your local planning department, their contact information is at the top of this table. On your phone, click on the phone number to dial it.

Click to jump to your town: Medford – Phoenix – Talent – Central Point – Jackson County

Ashland

Planning department contact information

541-774-6907

ADUs are allowed in zones

R-1, R-1-3.5, RR, WR, R-2, R-3, NN, NM

Setbacks and coverage ratios

Set back and coverage ratios vary for different zones. Find the requirements for your zone here.

Other rules

Just a start here, look at more info links for the complete picture

Off-street parking is NOT required

Accessory Residential Units (ARU) and in the Single-Family Residential Zones (R-1-5/R-1-7.5 & R-1-10) ARUs require a Conditional Use Permit.

More info here

Link to building permits

Permits, Forms, & Fees

Central Point

Planning department contact information

541-664-3321

stephanie.holtey@centralpointoregon.gov

ADUs are allowed in zones

R-L, R-1, R-2
LMR, MMR, HM

Setbacks and coverage ratios

Rear Yard Setback: 5 ft
800 sq ft or 50% of the gross floor area of the primary dwelling, whichever is less

Other rules 

– just a start here, look at more info links for the complete picture

Off street parking is NOT required.
Separate utility connections are not required

More info here

Link to building permits

Permits

Medford

Planning department contact information

541-774-2380

planning@cityofmedford.org

ADUs are allowed in zones

MFR-30, MFR-20, MFR-15, SFR-10, SFR-6, SFR-4, SFR-2

Setbacks and coverage ratios 

Up to 75% of the primary dwelling’s Gross Habitable Floor Area (GHFA)
Detached ADUs cannot be larger than 900 sq. ft.; attached ADUs converted from existing space in the primary home cannot be larger than 50% of the primary dwelling

Other rules

– just a start here, look at more info links for the complete picture

Off street parking is NOT required

More Info here

Link to building permits

Applying for a permit
ADU Fee Waiver

Phoenix

Planning department contact information

541-774-6907

ADUs are allowed in zones

R-1

Setbacks and coverage ratios

Maximum lot coverage 40%
Minimum lot size 6,000sqft

Other rules

– just a start here, look at more info links for the complete picture

Off street parking is NOT required

More info here

Link to building permits

Building permit information here

Talent

Planning department contact information

541-774-6907

ADUs are allowed in zones

RLD, RMD, RHD, RMH, CN

Setbacks and coverage ratios

Not to exceed 800 square feet of floor area, or 75 percent of the primary dwelling’s floor area, whichever is smaller.

Other rules

– just a start here, look at more info links for the complete picture

Off street parking is NOT required
More info here

Link to building permits

Permits

Jackson County

Planning department contact information

541-774-6907

ADUs are allowed in zones

Unlikely outside the UGB, White City allows ADUs.

Rural areas are unlikely to allow ADUs. That is under review in the state wildfire risk map that is to be completed in Fall 2022.

Depends on your zoning because the County considers an ADU a separate dwelling on the lot.

See question 2 in their FAQs

Setbacks and coverage ratios

Depends on your zoning.

Other rules

Consult with planners at the County.

Link to building permits

Checklist

Permits

Fees

How to finance your ADU construction

  • Local banks you currently work with – equity line of credit, cash out refinance, etc.
  • Craft3 ADU finance program
  • In Portland, some developers who lease your land and build an ADU for you
  • There is a lot of useful data around cost assumptions and financing options in this document from Santa Cruz County in California.  Of course, our fees are different, but many of the construction cost estimates, financing options, etc. are still useful.

Oregon State ADU Code

Oregon Statue on Accessory Dwelling Units in Rural Residential Areas

ADUs are an important way to fill in the missing middle in our housing supply.

A fun tiny house village in Portland. h/t buildinganadu.com

What Home Builders Can Do to Simplify Later ADU Development

Professional home builders can make ADU development much easier by planning ahead. This video offers a few good ideas.

One creative idea for affordable homes with ADUs is for builders to build the ADU first and sell the large lot with its approved larger home site left for future development.  This allows buyers to get started on homeownership more easily while they can look forward to building their larger home once they have built equity in their starter home.

Other Ways to Encourage Missing Middle Development


Rice Architecture Students Win ADU|HOU Design Competition

“The Planning and Development Department’s recent ADU|HOU Design Competitionreceived enthusiastic response from architects and design professionals, and has garnered about 30 submissions of Accessory Dwelling Unit schematic designs and concepts. After receiving nearly 400 online votes, we have a winner.”

Congratulations to the Rice Architecture team. 

Double House,” submitted by two Rice Architecture students – Adam Berman and Siobhan Finlay – was the top design selected in a public online vote in early October. Read more

ADU PRO TIPS

The Anatomy of an ADU, One of COVID-19’s Most Popular Home Additions

Accessory dwelling units, or ADUs, have become a bit of a buzzword in the housing world. In recent years, these backyard tiny homes have offered affordable housing solutions in pricey cities, provided studio space for creative types, and served as in-law suites for aging relatives. Now, ADUs, sometimes called “granny flats,” are popping up at record pace during the coronavirus pandemic. They’ve taken on a new purpose: to create flexible space for people cooped up at home. Continue reading »

ADU RESOURCES

#ADU #MustRead

Backdoor Revolution-

The Definitive Guide to ADU Development

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ADUs, commonly known as granny flats, Backyard cottages, inlaw suites, and accessory apartments, are a form of residential infill housing on the precipice of a massive revitalization in the US.

Backdoor Revolution (paperback)

25.00

358 pages. Black and white. 1.2 lbs. 6″ x 9″. Free shipping in the US.

“Backdoor Revolution is an A–Z manual on how to create ADUs, written by one of the most passionate, knowledgeable and experienced people in this burgeoning movement. For anyone wanting to build or live in an ADU, or to include as a permitted use in a zoning code, this is the go-to book.

With this book, Kol leads the reader through the challenges and barriers that get in the way of permitting, financing and building ADUs, and lays out the opportunities for bringing this grassroots phenomenon into a viable housing option for American cities and towns.

— Ross Chapin, author of Pocket Neighborhoods: Creating Small-Scale Community in a Large-Scale World

The ABCs of ADUs

COURTESY OF AARP

The ABCs of ADUs

A Guide to Accessory Dwelling Units and How They Expand Housing Options for People of All Ages

You’ll want to download this helpful primer for elected officials, policymakers, local leaders, homeowners, consumers and basically anyone who’s looking into the idea. This publication is a “best-practices guide for how towns, cities, counties and states can include ADUs in their mix of housing options.” LINK