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While interviewing more than 60 ADU Homeowners for the ADU Case Studies Project, I came across several different ways that people use their ADUs. I heard time and time again that ADUs provide housing flexibility and give their owners additional rental options as their life circumstances change. ADU owners can Rent One, Both, or Neither. Since 80% of ADUs are used as primary residences, it’s no surprise that many of them are rentals. Here in Portland, OR – where there are no owner-occupancy requirements for ADUs – ADU owners can Own Two, Rent One or Own Two, Rent Both (thereby Doubling Rental Opportunities). But I’d always assumed that when an owner decided to rent out either their house or ADU they’d be renting it to a single household.
Then I got to talking to Lisa Lonstron for her ADU Case Study. Check out Lisa Lonstron’s ADU: An Artistic Basement Apartment to read all about her place. She shared with me an additional option that hadn’t occurred to me. Lisa lives in her basement ADU. Her other house – the one she lived in before she turned her basement into her apartment – is a rooming house. My curiosity piqued, I asked a bunch of additional questions so that I could share this option with you as another example of how ADUs create housing flexibility. (You’ll see my questions in bold and Lisa’s responses in quotes.)
You mentioned that you house is kind of like a rooming house. What do you mean by that? What’s your current set up?
“I rent out the bedrooms to individual parties, similar to a boarding house arrangement. They share the main house interior common areas and both units share most outdoor common areas.” –Lisa Lonstron
How did you decide to set it up that way?
“The decision behind it was that I knew a few people who needed a place but couldn’t afford a place on their own. When I sat down and looked at what I would have to charge for the rooms –wanting to rent them affordably – I realized that it could be a very viable option for all. Our vision moved towards creating a community of co-habitation in our home, while still having our own self-sufficient and completely detached space.” –Lisa Lonstron
So you’re able to bring in more rental income by renting the rooms out individually than you would if you were renting the whole house, but your tenants are also able to pay less in rent than the would if they lived alone AND they also don’t have to deal with the hassle of finding a shared house. Sounds like a win-win situation!
“Yes. We don’t gauge the rental fees which helps encourage our tenants to treat this as their home to a certain degree. Plus, turnover is limited.” –Lisa Lonstron
What are the implications for being set up this way?
“There are other restrictions you put on the tenants if you’re running it as a boarding house. If you’re renting out a house you can’t legally say it’s an adult-only house, but if you’re renting out a room you can do that.” –Lisa Lonstron
What’s your turnover like?
“The turnover isn’t very high. Most of my renters have been there two years or more. We operate on a month-to-month rental agreement with a 30-day mutual notice. One thing that’s nice is that it’s not a big turnover all at once.” –Lisa Lonstron
How do you select renters?
“We do extensive interviewing and we use a democratic system. Everyone has a say. We very much share the selection process. I consider them all my housemates.” –Lisa Lonstron
What is the interaction like between you and your tenants?
“The nature of our business agreement is that of landlords and tenants. On the other hand, since most of our tenants come to us via word of mouth or personal referrals, the personal relationships encourage a certain amount of socializing as time permits. We’ll do occasional brunch, dinners, movie or game nights. We share food gardening beds in the backyard and I encourage tenants to help with occasional weeding and yard maintenance.” –Lisa Lonstron
What has surprised you about using your property this way?
“I’m pleasantly surprised that it works so well to utilize the space among the number of people who live here. Another perk is that I have been able to cut down some hours at my day job, and concentrate on building my personal business and creative outlets.” –Lisa Lonstron
What do you like best about using your house as a rooming house?
“In our case, entry policies are not as strict as other rental situations require. The tenants will visit us or we’ll visit them. Living on the property gives us a certain peace in the comings and goings, though we always try to respect privacy and give an adequate heads up before we enter their space.” –Lisa Lonstron
What do you like least about your current set up?
“Adjusting to the landlord/tenant laws and requirements. It’s been an interesting adjustment to share space I used to have all to myself (with my family). A lot of it was just a mindset. In terms of shifting my space, my internal feeling, away from the house and towards the ADU. It is strange when something has to be fixed and I get the part, but we still abide by giving them 24-hour notice. We try to really abide by those things so we don’t cause any problems. Since we live in the ADU and our tenants in the main house, we try to communicate and find reasonable solutions to when things are needing to be fixed in main house.” –Lisa Lonstron
It sounds like you’ve found that living in the ADU and renting out your house as a rooming house has given you more financial freedom than if you’d stayed upstairs and rented out the basement apartment. Would you say that’s true?
“Yes, definitely. Declaring the rental income for unit A (the main house) has allowed us certain tax write-offs and depreciation we hadn’t realized previously. By living in the ADU and renting out the rooms in the main part of the house, we are able to gain a small amount of income which is helping us pay off old debt. It’s also positioning us for larger exterior remodels we are planning to do to the main house this fall, including a complete re-roofing, re-siding, and exterior paint. Documenting steady income adds to the potential resale value, as well as lending options and opportunities to better maintain and care for this property. Overall, this experience has been nothing but positive. It feels like a smart investment for the future.” –Lisa Lonstron