Portland ADU vs. Multi?

[Taj T.]

Hi All, I'm an investor from the Eugene area, looking to get started with investing in Portland (I just moved up). My preference would be to find a solid multi property, but inventory seems to be very low in this category. I'm looking into the option of buying a single fam primary and building an ADU as a rental property on the lot, or turning a basement into an ADU. Does anyone have experience dealing with the Portland ADU laws in this manner? Successes, failures, other thoughts? Thanks in advance! Taj

[Dan Drazba]

I built an ADU on my property and it turned out amazingly well. I own the main lot, purchased it about 3 years ago, the area surrounding me is multi family. Tore down my garage and built an ADU. It looks like a house next to my main house since it's on a corner lot, they have direct access to the street.

Umpqua Bank provided the renovation loan and are great to work with and allow use of renovation funds for an ADU. All they need is a quote from a contractor and they will give you the money.

If you'd like to build anything this year, you're already behind :) I started my design process in September 2015 and I was cutting it close. First, you have to find a knowledgeable designer to guide you through the process, get the type of ADU you want, finalize and push permits through the city. If you went fast, it would take 3 months.

Then, it's time to secure a builder, the good ones basically book up in Feb-March and the ones that don't charge exorbitantly high fees (I saw 10,000 for exterior painting on one quote...really?)

The ADU process is time-consuming, I lived next door and if I wasn't home all the time, mistakes that I couldn't take back would have been made. There are many decisions and it will eat your time.

That being said, all I had to do was front an extra $800 on my mortgage payments for about 8 months to cover the full cost of the renovation loan, max out some credit cards to pay contractors between the time the bank reimbursed me for costs, and now I'm cash flowing $800 on the property after renting it out.

I am eyeing properties to do this again on, but it's going to be rough to find just the perfect candidate.  If you find the perfect property, the numbers REALLY tie out for ADUs.

You should shoot for securing a property now and doing an ADU project in 2018 for new construction, 2017 for a conversion.

What I'd look for:

- Big Garages - garages can be turned into ADUs as long as no external walls our touched

- Corner lots for new construction - This is the most ideal

- Basements - I've seen some basement conversions that really work well.

It's such a niche market that you should have seen about 10-20 ADUs in real life before making any sort of investment decision.  It's amazing how many different styles can be accomplished with a small space and loopholes (lots of vaulted ceilings because that doesnt count towards sqft space)  Research here: https://accessorydwellings.org/category/projects/

Above all, go on an ADU tour, there should be one upcoming in May: https://accessorydwellings.org/adu_tour/