How To Make an Accessory Dwelling Unit Suit You (And Make Money Doing It)

When friends or relatives come to visit from out of town, you could quickly make up a spare bedroom or (dare it be mentioned) the couch. Or, the addition of an accessory dwelling unit (ADU) to your property elevates the guest experience while also impacting the property value.

Eric Tollefson added an ADU to his home on Lake Harriet, but uses the term “loft” to describe the space. “The open design, large number of windows, and vaulted ceiling really give it that feel,” he says. “I wanted a place for friends and family to visit comfortably and have their own space. It’s also where I’ll live while the main house is renovated in a couple of years (a process that will take a while); moving across the deck will be much easier than moving to something temporary.”

Chris Strom, the owner of Christopher Strom Architects and developer of the “Second Suite” concept for Minneapolis neighborhoods, worked with the city to determine the feasibility of adding an ADU. “We had to achieve two variances because of the unusual and historic lot: one for the fact that the ADU was really close to the primary residence, and one because it was not located completely behind the primary residence.”

Tollefson’s first step was finding an architect who shared his vision of what the space could be; Strom was a perfect fit. “I learned about him through Lavender, after he wrote about how to build an accessory dwelling unit. He’s passionate about creating very useful spaces, has great experience with ADU’s and had a lot of excitement around the project,” Tollefson says. “Chris looked at the existing structure to understand options and proposed a number of layouts; after a good deal of discussion we landed on a plan. At that point, you need to find a builder you trust and figure out what fits within your budget (which you’ll likely change as you see all the things you can do).”

Uber Built was selected for Tollefson’s ADU due to their close attention to detail and smaller-company feel. “I never imagined how many decisions I’d have to make (pulls, doorstops, cooktops),” Tollefson recalls. “Design isn’t my strong suit, so I had a couple good friends with strong opinions help me there.”

Because of the small existing footprint of 380 square feet, Strom says the challenge was needing to think of functional spaces in terms of zones instead of rooms; space had to be shared. He says, “We wanted to choose high-quality fixtures that would stand the test of time but could also achieve efficiency in a small footprint. The 18-inch Bosch dishwasher is a case in point.”

Being detached from the house, the construction of an ADU isn’t very intrusive, but that doesn’t mean the process is hands-off. As Tollefson says, “Throughout the design and build you need to be in close contact with the architect and builder to make decisions and determine how to attack unforeseen issues. Clearly that would be a very different story if you’re working on something attached to your main residence.”

But homeowners beware; this is not like building a tricked-out garage (e.g. it costs more). Strom makes it clear: building an ADU is essentially building a small house; all the same tradespersons are required as in building a primary residence with an ideal lot being 50 feet wide or more.

But for Tollefson and many others, the benefits outweigh the costs. “ADUs (or the “Second Suite” concept) provide independent living opportunities for older family members, special needs persons, and rental opportunities,” Strom says. “The ADU concept is a net-positive for the city of Minneapolis because it increases density and widens the possibilities to multiple income levels while still retaining the essential residential character of existing neighborhoods.”

In terms of decorating, Tollefson treated the ADU like a completely different space than his home, wanting to maximize the light and views while keeping the interior sleek and minimal. “It’s amazing how large 375 square feet can feel when you’re smart about how you use the space!” Tollefson says. “The three buildings on the property (garage/loft, boathouse, and main house) are all painted different, but complimentary, colors, so the whole look comes together as a sort of Scandinavian fishing village. I’m also planning on bringing this aesthetic into the main house when it’s renovated; I’m excited to mix together that modern look with the bones of my hundred-year-old home.”

With a combination of friends and family having already used his ADU, Tollefson has also already rented it a few times on Airbnb. Tracy Leigh Morgan, owner and design strategist behind A Modern Host says people set up short-term rentals, like Airbnb, in all kinds of spaces and with all kinds of goals. “You can really do anything from simply renting out a spare room in your home, all the way to creating one of these accessory dwelling units like Eric’s. Or, if local regulations are with you, you can purchase investment properties for this exact purpose. Consider spare rooms, spaces like basements with private entrances, mother-in-law apartments, guest houses, cabins, unused garages/sheds (assuming they can be made all-weather comfortable, of course), or even your whole home or apartment, if allowed.”

To begin, Morgan urges her clients to think and act as if they are starting a business, suggesting hosts get a clear picture of financial, tax, and legal risks and responsibilities. “You have to do a little soul-searching to make sure you have the temperament and time to host, the willingness to invest, and the desire to take it all pretty seriously,” she says. “You want to get clear on the kind of host you want to be and the kind of guest you want to attract. Basically, what’s your brand? Everything flows from there.”

But don’t be discouraged if it takes a while for money to start coming in. When you first hop on Airbnb, you’re a bit of a no one, Morgan says. There’s no way of promoting yourself within the app itself and ratings can only come from previous guests, creating a bit of a conundrum.

“I encourage clients to think about marketing and selling in other ways,” Morgan shares. “Instagram offers a place to include imagery of the neighborhood, things to do, things you’ll experience if you stay, and can build out the ‘show and tell’ of your rental space. A Facebook business page can hold all of those photos, as well as provide a place for non-guests to provide ratings on the quality of the space, location, and other things that would be informative to guests before booking. A flyer can go up in the local coffee shop. Think about other creative ways to network your space around and attract the guests you want.”

The functional part of actually setting up a rental space on websites like Airbnb isn’t difficult if you have some comfort navigating online. According to Morgan, it can be done in an hour, tops, but like with many things, it’s more about preparation. You’ll need to make sure your listing, at the end of the day, is speaking to your ideal guest. Morgan says this means

• Great photographs that not only show the space/layout effectively, but also communicate the “story” that you’re trying to sell. You can include 11 in the listing, but Morgan recommends eight as a bare minimum.
• Well-written, informative copy. You’ll want to make sure your description of the space, the entirety of the property, the neighborhood, and any other relevant information is thoughtful and considered. Take the time to use proper grammar and punctuation so your listing reads well.
• Pricing strategy, design of the space, and amenities that all make sense together. The design, décor and amenities are really everything.

When it comes to pricing, Morgan’s advice is to do your homework and know your product. Your pricing should be a reflection of your neighborhood, the quality and design of your space, the amenities offered, and any other bits that make your space stand out. Who is your ideal guest and what does the competition look like?

“Airbnb has some great tools that can help you figure out where the market is, but that’s really just another bit of information and should be considered as part of the whole, instead of a definitive answer,” Morgan says. “Eric’s space was unique enough that calling it a ‘studio’ (aka, zero bedrooms) pushed the pricing in a direction that didn’t match up with the rest of the elements.”

Of course, when considering a small space like an ADU for rental purposes, the decor and fixtures you choose impact the overall feel. Morgan once again reminds homeowners to know their brand and ideal guest before starting to plan anything. With that in mind, set a budget that makes sense.

“Most spaces are not guest-ready just because they have a bed and the basics,” she says. “You don’t necessarily need to do a full-blown renovation or redesign, but be realistic. To be a hotel-alternative, you’ll likely need some updates.”

And invest wisely. Not every space needs top-of-the-line everything, so spend money on things that will return comfort for the guest, ease for you as the host, durability, functionality, and/or a great pop for your brand. Morgan says, “Eric’s space is a blend of high-end finishes and fittings, specialty store picks, IKEA and Target goodies, vintage/thrifted items, and custom-designed pieces. Creativity is key when making the budget fit the purpose.”

But that creativity has its limits. Morgan urges hosts to resist the urge to get “theme-y” in your design. “Sure, it’s fine to reference to a lake and outdoorsy aspect in your design if that’s where your rental is, but going overboard on nautical-themed everything will feel dated and overdone,” she says. “And don’t get overly caught up in what you prefer. Again, your voice and personality should come through in your rental space, but the purpose is to attract the ideal guest. Serve them first.”

Most of the furniture in Tollefson’s space does double duty. The pull-out sleeper sofa increases the capacity to host four people and Morgan worked with a local furniture craftsman to design the coffee table to fit the space perfectly and to include the two smaller nesting tables that act as extra seating. Describing other decisions that went into the space, Morgan adds, “I chose all hypoallergenic bedding and pillows to eliminate any allergy concerns, and picked linen for the sheets and duvet covers since they are incredibly durable, love a high-heat wash, and feel extra luxe. Eric also added a dishwasher and washer and dryer making it an ideal place for extended stays, which opened up another potential revenue stream.”

With some friends and family guests under his belt, Tollefson would absolutely build his ADU again if he had the chance to go back and redo it. He says, “Everyone who has stayed so far loves it, it’s already had a great impact on the property value and it’ll be a source of passive income as long as I live here.”

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For more information about Christopher Strom’s accessory dwelling units, visit www.secondsuite.org.
For more information about Tracy Morgan’s company, A Modern Host, see www.amodernhost.com.
For more information about this property, go to www.lakeharrietloft.com.