Why Portland, OR, has so many tiny homes

Portland, OR, is a tiny home heaven with over 4,200 accessory dwelling units (ADUs). That’s not just a fun fact, but an opportunity, according to Erik Leland at Realty First.

Average home price: $538,687 (down 0.9% YoY according to Zillow)
Homes that sell over list price: 34.5%
Homes that sell under list price: 45.9%
Average rent: $1,717/month

How he got started: A few years out of college, Leland bought a home to live in, then held onto it as a rental after moving out. “That got me hooked,” he says. Since then, he’s purchased over 400 acres of land and a handful of residential properties in the Beaver State, near Sherwood, Lake Oswego, and Beaverton.

The pros: In 2014, Leland’s client purchased a $572,500 property that came with a fantastic bonus: a 1,010-square-foot attached ADU. “He rented out the ADU on Airbnb, generating up to $40,000 a year,” Leland explains. Now, Leland is helping to sell the property for $1,399,000—roughly 144% appreciation over 12 years. “Open houses have drawn interest from people who want it as a mother-in-law suite, as separate quarters for older kids, and as a rental,” he says. “That range of demand is part of what makes a property like this a strong investment.”

The cons: “Oregon has some of the most tenant-friendly laws in the country,” Leland warns. “Landlords need to understand just-cause eviction requirements and rent increase caps before renting any space.” Rental units also raise insurance premiums, and property taxes are high ($10,350 per year for this property).

His advice: “Evaluate all property as a home and as a future income asset,” Leland says. “My client did not set out to be a real estate investor. He just bought a home he wanted, recognized the potential of the ADU as a revenue stream, and went for it.”

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