ADU Zoning and House Hacking

[Bryan Tench]

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?

[James Carlson]

@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!