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My primary residence: profitable ADU and personal palace

Fundamentally, I was seeking a residential living situation that would pay for itself. To me, dwelling in America cost too much. I sought a less expensive way to live in a nice space in an urban area (Portland). I wanted to find a living model that would not drain my financial resources. At first, I considered a range of options, from tiny houses, to renting out a house boat, to retrofitting a bus or airstream. After much creative brainstorming, I realized that ADUs represented a living model that could actually be profitable.

Cedar shingles exterior with south facing windows to maximize solar gain

Since I lived in a city that permitted ADUs, I sought a property that would be well suited to building an ADU and whose main house pay for itself through rental income, once I moved into the ADU.  The process of selecting the right property took a couple months, but after visiting 60 houses in NE Portland, I found the property that met my criteria and purchased it. With an FHA loan, I put down only 3.5% of the value of the house (~$10K), and this left me with enough disposable cash to build an ADU.

The ADU that I started in April of 2011 and completed in September of 2011 cost $92K (including the permits, design and finish material). It serves as my primary residence and I rent out the main house. The main house, a 4 BR, 2 BA, pays for its own mortgage and then some. I calculate that this model has a 8 year payback period.

Now that I am living in the ADU, I realize how lucky I am to have the flexibility to rent out the main house however I wish. So far, I’ve rented it out on a short term basis to people who are visiting from out of town. I’ve also been able to have a group of five friends stay at the house over a long weekend, which I would never have been able to do before. Now, I’m renting it out to a group that will be there for four months. Next summer, I may rent it out nightly or long term, depending on what makes the most sense to me.

It’s great to have the flexibility to use the main house however I deem fit; maybe someday, I’ll want to move into the house again. Or, maybe I’ll want to live somewhere else in town at some time. Any scenario I conjure up is not only feasible, but profitable. As I see it, now that I’ve built an ADU, I can live essentially for free for the rest of my life. The residential options seem limitless. What a great sense of freedom!

The ADU is 799 square feet, and for now, it houses both me and my partner. Although the ADU is situated in densely settled area, it’s set back from the street such that most pedestrians wouldn’t even know it was there. The thick staggered stud walls with blown in fiberglass insulation deaden the sounds of the world, leaving us with a quiet urban palace only 2 miles from downtown.

It was great to be heavily involved in customizing the ADU design to do exactly what I wanted. For example, I don’t like what TVs represent. But, I love movies. So, I put in a kick ass projection system that displays movies on 10 ft white wall (running off of my laptop) with awesome surround sound speakers. I like open space design, so my main ceilings are 20ft high. I like big tubs, so I have a huge soaking tub that is also the shower. I bike every day, so I have a great covered spot to hang my bike where it won’t get wet. I did not sacrifice anything that mattered to me by building a house that was under 800 sq ft. The ADU is totally luxurious.

The process of designing and building this ADU has turned me into an ADU advocate. For those wh0 take the leap, I suspect that you will also become advocates for ADUs. My personal ADU blog has thorough descriptions and videos of my building process and lays out the project costs clearly. Despite the luxuries mentioned earlier, I have a predisposition towards energy efficient building design, so that is another focus of my blog. You can read all about my ADU project and learn a lot about the design/build process at

About Kol Peterson

Kol is an ADU consultant, advocate and author of Backdoor Revolution: The Definitive Guide to ADU Development. Read more here: and learn about building your own at Email at

7 comments on “My primary residence: profitable ADU and personal palace

  1. Pingback: ~ Refinancing an ADU ~ Best Practices ~ Best Execution~ | Accessory Dwellings

  2. kim
    November 10, 2012

    I am interested in renting an ADU in, or near Wilsonville, OR…or parts of Portland, but I am having trouble finding listings for available units. Craigslist announces a few but is there another website/publication that I could look at, that specializes in these types of rentals?

    • kolpeterson
      November 11, 2012

      You’re not alone. Several people have asked me this same question. If it were me, I’d vigilantly search Craigslist using this query

      Then, I’d take that URL, and use Yahoo Alerts to be notified by email whenever there was a new posting that matched
      this RSS feed of the query.

      The reality is that these kinds of units are in huge demand, and there’s very little supply. The demographic demand for ADUs is one of the many motivations for this blog, in fact.

      • kim
        November 11, 2012

        Thank you both for the suggestions!

    • Martin John Brown
      November 11, 2012

      I’ve heard this same question. Besides the things Kol mentions, a significant issue is the variety of names people use for these kind of dwellings (see this post: So you might try searching for things like “granny flat,” “backyard cottage,” etc.

      Also know that (currently, for better or worse), a fair number of such units will not be permitted. That may or may not be a problem for you, but it is possible to check for ADU permits on sites like (a little digging is required)

      Good luck!

      • kim
        November 11, 2012

        Thank you!

  3. Pingback: Refinancing an ADU – a mortgage broker’s perspective | Accessory Dwellings

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This entry was posted on October 26, 2011 by in 600-799 SF, Detached, New Construction, Projects and tagged , , .


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