by Emily Coombs
on Wednesday, May 18th, 2022 at 3:22pm.
As a town immersed in rapid growth, keeping up with the housing demands is challenging. Many lots in Bozeman are large enough for an Accessory Dwelling Unit (ADU), and homeowners utilize the space. An ADU is a structure added to the principal residence on the property. It can be attached or detached, but there must be a separate entrance from the primary dwelling if attached.
Homeowners can use an ADU as an office or guest space, but they are often used as either a long-term or short-term rental unit. The rental market continues to be tight and building an ADU as a rental can be a worthwhile investment. However, there are several things to consider before jumping in.
Things to Consider When Building an ADU
Do your homework. The City of Bozeman Planning Department offers appointments with a city planner and can answer questions about zoning, eligibility requirements, and the process. As a homeowner, you’ll need to contact the Water and Sewer Departments to determine if your services need an upgrade. Be sure to ask about timelines for approvals along with permit costs.
Be sure to ask about the current regulations requiring lot size and parking, as they are frequently updated.
Be sure to do the math. Building costs in Bozeman are very high, and a slowdown is unlikely. However, if the numbers pencil in and you decide to move forward, take some time to be sure being a landlord is right for you.
Things to Consider About Owning a Rental Unit
Will the rent cover the mortgage, maintenance, and taxes? If it’s a short-term rental, include the state lodging taxes in your calculation.
Do you mind sharing your space? Backyards are often common areas.
If it’s a short-term rental, are you going to hire a management company to handle the clients and cleaning, or are you going to do it yourself?
Do you have the proper insurance? Short-term rental insurance differs from your primary insurance, so be sure you are adequately covered.
ADUs can be a significant investment, adding value to your property. Arming yourself with knowledge before you begin will make the process flow much smoother.