Renting parts of the house separately and legally

[Jennifer Smith]

I have a three-bedroom, two-bath house. One bed and one bath are accessible through a separate entrance. I am going to be building an ADU in my backyard soon.

It is my understanding that it’s likely to eventually be legal to have two ADUs on the same property in Portland (a basement and a detached, for example) but that it’s not legal now.

Is it possible for me to legally rent my basement unit separately from the upstairs of the house, without running afoul of anything legally? I plan on refinancing the home as a rental, with signed leases for the upstairs, the downstairs, and the ADU, as long as that's legal.

Or would I need to legally turn the basement into an ADU eventually to have that be legal?

[Chris Shepard]

@Jennifer Smith

Hi Jennifer,

You are allowed to rent your house out. You can rent out separate bedrooms to different tenants and have different terms with those tenants. If they share a kitchen and it works out that’s great.

What you aren’t allowed to do is modify a space without a building permit and then rent it out. Ie if the basement doesn’t have a kitchen and you put one in, that would be illegally modifying a space and renting it out. As well you aren’t allowed to AirBnB without a permit.

As long as the finished space in the home is currently permitted you are fine to rent it out as is.

One last item, it might be more advantageous for you to refinance the property while you are still living there. You can do up to 80% LTV (you'll save more capital) and as well the interest rate is a lot lower (1 or 1.5%). I would recommend talking to a lender ASAP so they can help you plan accordingly. Liz and Mike at Fairway Mortgage down in John's Landing are excellent if you need advice from a local lender.

Let me know if you have any property management for real estate questions. Feel free to shoot me a pm if you have any specific questions.

Cheers and good luck with your project!