ADU Zoning and House Hacking

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ADU Zoning and House Hacking

Bryan Tench
Englewood, CO · Member since 2016 · 4 posts · 1 vote

Hey everyone,

I am a new investor in the Denver metro area. My wife and I are looking to House Hack our first property. We are considering making an offer on a single family home this weekend. The home is unique in that it has a separate entrance to the basement and an easily configurable entrance to a great little studio area with a half bath. Our strategy is to live in the basement level, rent out the main floor on a traditional lease and AirBnB the studio area. It would require minor mods to support this strategy but I'm not too familiar with zoning limitations and risks. Since it is a SFH we would need to add somewhat of a kitchen to the basement so we could live in it. Zoning Ordinance for this home limits the ADU to <700 sqft and 1 bd. The basement is larger than 700 sq feet so my question is when does this become an issue? Does that mean that upon re-sale we simply cannot advertise it as a SFH w/ ADU or is there a immediate risk to us living there while renting our the main floor?

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James CarlsonPro Member
Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
9y

@Bryan Tench. Interesting post. I love the idea. (I actually put in an offer for a buyer this weekend for a SFH in Englewood with a basement in-law suite.) Others have offered some great insights about zoning issues, so I won't wade into that area.

I will reiterate what @Bill S. said about Airbnb laws. While the Lakewood code doesn't currently address short-term rentals like Airbnb and VRBO, in all likelihood it will soon. Many cities are following Denver's lead here. Aurora just passed a similar law. Edgewater just put a moratorium on STRs while they figure it out. Arvada doesn't address it in their code, but their planning department director has issued a letter opining that STRs are not allowed. Castle Pines city attorney has issued a similar letter. This is all to say, if rules aren't promulgated yet in your city, they will be soon.

So ... how are you to plan? I look to Aurora as an example of what might come. Officials there said they looked at Denver's new law when drafting their ordinance. The end result was that STRs are allowed but only in your primary residence. I'm guessing this primary residence rule will become the norm. So this would allow you to do what you proposed (at least under the STR rules; again, not sure about zoning.) But a big caution: If you plan to move on to other house-hacking opportunities or just move into another place, then you might not be allowed to rent one unit as an STR, as it would no longer be your primary residence. So be sure that when you run the numbers that it would still work if that potential STR were a long-term rental ... because some day it might be.

Congrats on getting out there. Good luck!

[email protected]720-460-1770
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  • Kevin Grinstead
    Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
    9y

    Hi James, Based on my research with zoning the kitchen probably would not be a problem with the city. The separate entrance might be if the property is zoned SU. (single Unit) The TU zoning (Two-Unit) is permissible to have the property be a duplex and have separate entrances  to assist in renting. 

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  • James CarlsonPro Member
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    Awesome, @Kevin Grinstead This is kind of what I suspected, but as with so much in zoning, it's tough to nail down a concrete answer. 

    [email protected]720-460-1770
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  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    9y

    @James Carlson so I do not have direct experience with this but based on the process they use. I would think that a 2nd kitchen would be a No Go in Denver for the U-SU zoning. It would be ok for the U-TU zoning. I know someone who was looking at making a duplex into a triplex in Golden and they wouldn't allow the 3rd range to be installed. All they could get building permits for were the equivalent of a wet bar (frig and sink). The gas line for a gas range or the 220 connection for an electric stove were not allowed in the "third" unit. Personally, I don't think the second access would be a problem. They like multiple egress points in most buildings. Now if you were framing off the interior door between the "units" then the zoning kicks in. TU it would be ok, SU not ok. I have seen SU zoned properties with kitchens in the basement but since the neighbors complained, they could only be rented/sold as SFRs. I am pretty sure the basement work was not permitted because it didn't appear to meet code (low ceiling and multiple questionable electric and gas "modifications").

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  • James CarlsonPro Member
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    9y
    @Bill S. Quite helpful. Thanks. I get this question a lot. So just don't put in a kitchen. Wet bar and mini fridge at most. Got it.
    [email protected]720-460-1770
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  • Kevin Dickson
    SFR Investor · Denver, CO · Member since 2009 · 184 posts · 55 votes
    9y

    @Bryan Tench Circling back again, my duplex did not sell.  I found a tenant who wanted to organize it as an Airbnb.   This is legal because the house is his primary residence (you don't have to own the house to do Airbnb, but you should have the owner's permission).  We plan to split the extra rent above the base rent of $1800.

    Preliminary results are that it is just barely worth the extra work.  Airbnb competition is quite stiff in Denver, which keeps the rent down.

    Our current strategy is to use the Airbnb platform to find roommates staying 30+ days, which means we don't have the hassles of licensing and paying the STR tax. One problem so far is that you can't post an Airbnb listing on Craigslist.

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