Homeowner TA: Outreach Content – Renting Your ADU

Renting Your ADU

After your final inspection, your ADU is ready for move-in! This might be you, a friend, a family member, or a tenant. There are many benefits to sharing your property with a tenant, but renting also comes with many responsibilities – make sure you have a good sense of the laws governing rental agreements and think about the issues that might arise from welcoming a new neighbor into your space.

Preparing to Rent

• Completing preliminary steps: Prepare to rent your ADU by confirming your homeowners insurance is set up adequately, setting up utilities, and developing a plan to handle the finances. You’ll also need to confirm your ADU’s address and what you’ll need for mail service. You likely received an address for your unit during permitting.
• Understanding rental laws: You need to understand all the laws related to being a landlord, especially around discrimination. For an overview of Colorado laws, with a particular focus on Denver, review Residential Landlord Tenant Guide. You should also talk to local staff about regulations that might apply, such as restrictions on short-term rentals, rent stabilization, or minimum lease terms.
  • [Add information here about short-term rental regulation, making clear how owners can and cannot rent out their ADU]
• Set the rent: Maximizing the rent is often not the only consideration – setting a fair rent a bit under market rate will help you attract and keep good tenants. Consider pricing your ADU so that it is affordable for local workers and families who may not be able to afford high rents. Many homeowners are motivated to rent their ADU affordably to community members because they serve vital roles in our neighborhoods and often have difficulty finding housing that meets their needs. If you financed your construction with a loan, consider the loan length, interest rate, and any reserve funds you have as well.
  • [If relevant, add information about any affordable rental programs or incentives that are available]
• Write your lease: You will need to create a lease (or rental agreement if renting month-to-month), which both you and the tenant will sign. This agreement should clearly identify all the expectations for you and your future tenant. Some jurisdictions may require landlords to initially offer a one-year lease to tenants, so talk to local staff to confirm if this is a requirement. Even if you are renting to a friend or family member, creating an agreement is always a good idea to avoid possible confusion or conflict. Sample agreements can be found online. Many realtors can also help you set up a lease or rental agreement. Once you select a tenant, you should collect a security deposit and first month’s rent when you sign the lease. Conducting a move-in inspection with your tenant is also a good idea.
• Find a tenant: Research how to successfully advertise your ADU and select a good tenant. Along with word of mouth or posting your rental online, you can also contact nearby schools, faith communities, or other similar locations to see if any teachers, staff, or community members are looking for housing. Typical methods for advertising rentals include posting a description of your ADU to a rental listing website like Craigslist and Zillow. Many people also post to social media platforms like Facebook or Nextdoor, where local community members may have created a group page for people looking for housing in your area.
  • [If relevant, add information here about tenant matching organizations]

Managing Your Rental ADU

Think about a long-term plan for the care and upkeep of your ADU, how to split shared responsibilities, and how to address any issues that might occur with your tenant.

• Maintenance: According to state law, it is your responsibility as a landlord to maintain a “habitable” ADU. It is a good practice to keep your property well-maintained, keep your tenant happy, and prioritize a good relationship. Set aside some of the rental income to manage maintenance proactively and regularly. Give your tenant contact information for letting you know about any issues and be prepared to respond promptly. Except in the case of an emergency, you will need to give your tenant notice 24 hours before you or any maintenance people can enter the ADU.
• Rent increases: Generally, if your tenant has signed a lease, you cannot increase the rent during the lease term. When the lease expires (or in month-to-month tenancies), you can increase the rent as you see fit, although some places may have restrictions designed to encourage stabilized rental costs.
• Addressing conflict: Hopefully you and your tenant(s) will not have problems, but if problems do arise that cannot be resolved, you may need to consider mediation assistance.
• Eviction: In rare cases you may need to consider eviction. It’s recommended that you work with a lawyer if eviction is necessary. State law mandates a judicial eviction process, which is best handled by a lawyer.