First Time Real-estate investment, Durham NH, Single Family w ADU

17 Replies

Hey BP community. I am 26 and about to close on my first investment property. It is a 3bd 1ba single family with a 1bd 1ba ADU (seperate kitchen,bath, living room, and bedroom) in seacoast area of NH.

I think I can get 1200 for the 1 bedroom and 2200 for the 3 bedroom. Do you agree, should I ask for more? The home is on a private road, 5 min from UNH, very good curb appeal, nice yard and has nice contractor grade quality appliances, windows, and flooring. I think people would call this B-property?

I plan to owner occupy the home for at least a year and would like to move to another investment property when I can save enough. I have and engineering job that is fueling my savings, owner occupying this investment should help my savings rate. Would you live in the 1bd or 3 bd? Rent or AirBnb the other?

Hey Nicholas,

I think you are pretty good with what you are asking for rent. It is a good average of what I am seeing at the moment. It really depends on your needs when it comes to deciding which side to live in. You should also consider the cost of furnishing and maintaining an Airbnb. It will be much easier to maintain it while you live there, so it might not be a bad option. Average rents are expected to rise over the next year as they follow the rise of housing price, so it is never a bad option to just rent it out and raise the rents as market rents rise. It really depends on your long-term goals and whether or not you plan to manage the property yourself or hire a management team. 

I hope this helped!

I agree, it depends on your needs.  If you're single and have no kids etc.. it might make more sense to take the smaller unit for yourself so you can maximize your ability to save.  Especially if you think you'll only be there for a year.  I'm not sure how an AirBnB would do over by UNH, are you thinking when parents visit?  Just wondering if there is enough attractions to drive people to Airbnb in that area.  Congratulations on the investment!  

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Thanks @Sean Delisle , no kids just my gf and I. That's why we are considering the 1bedroom. 

Yes I think when family and friends of UNH students visit UNH. It is also centrally located for mountains, beaches, Portsmouth and Dover so I suspect I would get other people interested as well but I don't know.

If any local people know the AirBnB market that would be helpful :).

@Nicholas Chagnon is your target market for students from UNH? How much is the property? You might be able to get more if you rent the 3-bed to students.

I would live in the one-bed if you can. Durham is probably more of an A-class area considering the excellent school system, and generally higher prices for homes. However, most of the rental demand would likely be students or maybe families looking for a good school system while they house hunt.

Good luck, I owner occupy a 4-unit in Dover. Feel free to connect!

Also, Airdna does indicate that there's potential for a STR market, at least for one of my 1 bed units. Looks like 86% occupancy @ 125/night to come out to roughly 3.2k/month. I'd recommend looking at student rentals for you though considering your proximity to the school. Might be able to get closer to 2.5k-3k/month without having to cover utilities, weekly turnovers, etc.

@Ryan Randall

What’s your experience been in the Dover market so far? It’s where we are strongly considering looking for a small multi, and the data seems to indicate that it’s appreciating, high demand and increasing rents. It also seems that it’s a good place for people who might be priced out of Portsmouth. I grew up on the seacoast and haven’t been back much in recent years, but talking to friends still in the area seems to confirm all of this.

I would strongly suggest you familiarize yourself with Durham's zoning laws in detail before executing your current plan. Specifically, this section:

"4. In zoning districts where no more than three unrelated persons may occupy a dwelling unit (as specified in subsection 175-56 General Dimensional Standards), there shall be no more than three unrelated occupants in total for the single-family dwelling and the accessory dwelling unit combined or for the single-family dwelling and the accessory apartment combined."

This include these zoning districts:

1. Rural (R)
2. Residence A (RA)
3. Residence B (RB)
4. Residence C (RC)
5. Central Business District (CB)
6. Professional Office (PO)
7. Church Hill (CH)
8. Courthouse (C) and
9. Coe’s Corner (CC)

It is highly likely that your ADU Home falls within zones 1-4. This would make your current plan illegal under Durham zoning laws. Anyone who has any experience in owning or managing rentals in Durham can tell you that the town does NOT screw around with this stuff. The town and citizens of Durham are determined to continue to bite the hand that feeds them, but at the end of the day, you have to work within their regulations. They can, and they absolutely do, fine/lein/prosecute/whatever, people attempting to circumvent student housing rules.

Furthermore, Airbnbs and the like are not currently allowed in these zones without an exception from the ZBA (good luck with that):

Section 175-53. Table of Uses
Residential Zones:
Rural (R) Special exception
Residence A (RA) Special exception
Residence B (RB) Special exception
Residence C (RC) Special exception.

I don't want to see anyone's investment go up in smoke because of these zoning restrictions. If I had to guess, you're buying the home on Poindexter Rd in Durham, as it matches your description, which is why I wrote what I said. What the prior owner says about rentals should be disregarded going forward. Have an exit strategy that does not involve renting if you are in Durham and are in one of those zones restricting unrelated housing. 

That said, if you are within 5 minutes of UNH but not within Durham, forget everything I said. 

@James Smith , Good detective work. That is the one (Pendexter). I have discussed with the town and they said in email that I am "likely to get accepted" for the airbnb but I am not counting on it for sure. As for renting, 2 UNH students in the ADU and a family in the 3 bedroom qualify for the 3-unrelated-people rule. I have been concerned about this rule but think its more limiting for larger properties.

Any thoughts on how hard it would be to get a family to rent the 3-bedroom for 2200?

Thanks for everyone's help! I would love to connect with anyone from the area in person.

@Matt Anderson and @Ryan Randall , I live and work in the Dover area. I have put in 15 offers in the area including Dover, Exeter, Portsmouth, Newmarket and Somersworth. I think all of these areas have good appreciate potential (even Somersworth). That said I am not that experienced.

One thing about Dover and ADUs is you have to live in the home or the ADU or else you cant rent them separately. However, in Durham they don't have that rule.

@Ryan Randall No problem friend, Durham is rough on this stuff.

@Nicholas Chagnon - Coming from a guy who used to be on a Zoning Board, do not count on that verbal assurance. That's from one person; you never know what everyone else would do. I would say just make sure you don't need the Airbnb to make the deal work, and count it as icing on the cake. So I think you're mindset is right on here. 

Be real careful on the "unrelated rule." Is it likely that you'll have any problems if everyone is a good neighbor, probably not. But I'm actually not sure if your GF and You would count as one or two unrelated people (I'm a little shaky on the specific of what related technically means in Durham, I don't know if the town lawyers have weighed in on non-related cohabiting couples).

I wouldn't worry too much about a family in the 3BD for 2200. When I managed rentals in Durham a decade ago (mostly students), rents could already go for that much for a 3BD. I know families renting out 3BDs for more than that in Durham already. You could probably get 2 students to pay the 2200 no problem as well. You can see my previous posts from years ago for my thoughts on students vs families if you're interested. 

I'm always down to chat about investment stuff, feel free to hit me up. Best of luck in Durham. Worst case you own a house in a town that anyone with kids wants to live in.

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I’ve always thought Durhams taxes were high compared to Newmarket and Dover, but the proximity to UNH I’m sure helps with rents.

I would also double check on whether or not you can rent out both units once you do move out. I haven’t worked with Durham on a property with an adu like this before but neighboring towns do require one of the two units to be owner occupied in order to rent it out.

Hi Nicholas,

I own a 3BR single family home with a 1BR ADU in Durham- I'm currently renting the 3BR for $3,000/month and there was a ton of interest so I'm sure you'd have no problem renting for that amount. There's definitely a shortage of rentals in that area. If I were you I'd live in the 1BR and have someone else pay your mortgage. If you have any questions feel free to reach out!

@Nicholas Chagnon its a balance of your comfort and the amount of cash flow you want. You are asking all the right questions though. 

Also I like the idea of buying near UNH as bedroom rentals to a group of college students is much easier than one off bedroom rentals AND they cashflow better. 

AirDNA and talking to other Airbnb renters is a great way to get a ballpark of what you could make on airbnb. Once you have those numbers and how much a bedroom would rent for in your 3/2 house you could make a numbers decision. 

Personally, my guess is airbnbing the 1 bedroom and living in the bigger house while renting out bedrooms to people you want to live with would cashflow the most and be the most comfortable for you. But, I don't like living alone.