Most homeowners have no idea they could be sitting on a hidden income stream worth thousands of pounds every year.
Across Montana, people are struggling with rising mortgage payments, higher living costs, and housing shortages — while unused garages, basements, and backyards sit doing absolutely nothing.
But what if your property could help pay your mortgage?
What if that empty garage could become a rental bringing in over $1,000 a month?
And what if the laws changed recently to make it easier than ever before?
In this interview, Montana real estate professional Sara Sheets explains why Accessory Dwelling Units — better known as ADUs — are becoming one of the biggest opportunities for homeowners right now. From hidden rental income and zoning changes to realistic building costs and financing options, this is the guide many homeowners wish they had years ago.
If you own property in Missoula, this interview could completely change the way you look at your home.
Sarah Sheets, What inspired you to create the Montana ADU Guide, and why now?
Honestly, it came from conversations I kept having with homeowners who had no idea what was possible with their property. People would mention they were struggling with their mortgage, or that they had an aging parent who needed to be closer, or that they had a garage they never used — and in almost every case, there was an ADU opportunity sitting right there that they had never considered. The problem was not motivation. It was information. Nobody had put together a plain-English resource that explained the Missoula rules, the real costs, and the real income potential in one place. So I built it. And the timing matters because Montana's housing legislation changed significantly in 2023, which opened up options that simply did not exist a few years ago. This is the right moment for Missoula homeowners to understand what those changes mean for them.
For readers who may be unfamiliar, can you explain in simple terms what an ADU is and why it's becoming so popular?
An ADU — an Accessory Dwelling Unit — is a second, self-contained living space on a property that already has a primary home. It could be a finished basement with its own entrance and kitchen, a garage converted into a studio apartment, or a small separate cottage in the backyard. It is a complete, independent unit on the same lot as your main home. The reason they are becoming so popular right now is simple: housing costs have gone up dramatically, mortgage rates are higher than they were a few years ago, and people are looking for ways to make their property work harder. An ADU lets you generate rental income from a property you already own, without buying something new. For a lot of Missoula homeowners, that changes the entire financial picture of their home.
You mention that many homeowners are "sitting on hidden income." What's the biggest misconception people have about their property's potential?
The biggest misconception is that building an ADU is something only wealthy people or developers do. Most homeowners I talk to assume it requires a massive cash outlay and years of construction headaches. The reality is that a basement conversion — which is the most common and most affordable ADU type — can be done for $30,000 to $60,000, and in many cases that investment pays for itself within three to four years through rental income. The other misconception is that Missoula's zoning rules make it too complicated. They used to be more restrictive, but that has changed. Most residential lots in Missoula now qualify for an ADU. The barrier is usually information, not regulation or money.
How has Montana's 2023 housing legislation changed the opportunities for homeowners in places like Missoula?
It was a significant shift. Before 2023, many Montana cities had strict zoning rules that limited where ADUs could be built, required owner-occupancy, and imposed restrictive size and design standards that made projects impractical. The 2023 legislation — particularly Senate Bill 245 — required cities like Missoula to allow ADUs in all single-family residential zones and removed some of the most burdensome restrictions. That opened up a large number of properties that previously had no viable ADU path. It also sent a clear signal that Montana is taking housing supply seriously. For homeowners, it means the window to act is open in a way it has not been before.
What kind of rental income can homeowners realistically expect, and what factors influence those numbers most?
In Missoula right now, a well-finished ADU typically rents for $900 to $1,800 per month depending on size, location, and whether it is a long-term rental or a mid-term rental to traveling professionals or university staff. The factors that matter most are square footage, the quality of the finish, whether it has a private entrance and outdoor space, and the rental strategy you choose. A small basement studio might bring in $900 to $1,100 per month on a standard lease. A detached backyard cottage with a full kitchen and private yard could command $1,400 to $1,800 per month, especially on a mid-term basis to the healthcare workers and university professionals who are constantly looking for furnished housing in Missoula. The numbers are real — I walk through specific scenarios in the guide so homeowners can see what applies to their situation.
A lot of people assume building an ADU is too expensive or complicated — how does your guide break down thosebarriers?
The guide does two things. First, it gives honest cost ranges for each type of ADU — not aspirational numbers, but what Missoula contractors are actually charging right now. Second, it walks through the financing options that most homeowners do not know they have. A lot of people think they need cash to build an ADU. They do not. A HELOC, a cash-out refinance, or a renovation loan can fund the entire project using equity they already have in their home. When you show someone that a $50,000 basement conversion financed through a HELOC costs them roughly $350 per month in interest while generating $1,200 per month in rent, the math changes completely. The guide is designed to get people to that "oh, this actually makes sense" moment as quickly as possible.
What are the most common mistakes homeowners make when they first explore adding an ADU?
The most common mistake is starting with a contractor before understanding the zoning rules. I see this regularly — someone gets excited, calls a contractor, gets a quote, and then discovers their lot does not meet the setback requirements or their HOA has restrictions.
The second mistake is underestimating the importance of a separate entrance. An ADU with a shared entrance is much harder to rent and commands significantly lower rent than one with full privacy. And the third mistake is not thinking about the rental strategy before they design the space. A unit designed for a long-term tenant looks different from one designed for a traveling nurse on a three-month assignment. Those decisions affect the layout, the furnishings, and ultimately the income. Getting the strategy right before breaking ground saves a lot of expensive course-correcting later.
You describe your approach as treating property like a financial asset. How is that different from how most real estate agents work?
Most agents are transaction-focused. Their job is to help you buy or sell a specific property, and they do that well. My approach is different because I am thinking about what a property can do for you over time, not just what it is worth today. When I work with a buyer, I am not just looking at the home — I am looking at the lot size, the basement layout, the zoning designation, the proximity to the university or the hospital, and asking: what is the income potential here? That is a different lens. And for existing homeowners who are not buying or selling anything, I am helping them see their current property as a financial tool that can be optimized. That is a conversation most agents are not having, and it is the conversation I think Missoula homeowners need most right now.
Who is your ideal client — and what kind of transformation are they hoping to achieve?
My ideal client is a Missoula homeowner who has been in their home for at least five years, has built up some equity, and is starting to feel the pressure of rising costs — whether that is a higher mortgage rate on a refinance, property taxes, or just the general cost of living. They are not looking to sell. They love their home and their neighborhood. But they are curious about whether their property could be doing more for them financially. The transformation they are hoping for is moving from a home that costs them money every month to a home that generates income — or at least offsets a significant portion of what they are paying.
That shift changes how people feel about their financial situation in a really meaningful way.
Can you walk us through what happens during your 15-minute property assessment and what homeowners can expect to learn?
It is a focused, no-pressure conversation. I ask a few questions about the property — lot size, current layout, whether there is a basement or a detached garage, what the zoning designation is — and based on that I can usually tell someone within fifteen minutes whether they have a viable ADU opportunity and which type makes the most sense for their situation. I also walk through a rough income estimate so they leave the call with a real number in mind, not just a vague sense that it might be possible. Most people are surprised by how much clarity fifteen minutes can provide. There is no sales pitch at the end. If there is a clear opportunity, I explain what the next steps would look like. If there is not, I tell them that too. My goal is to be the most useful fifteen minutes they spend on this topic.
Beyond the financial benefits, what impact do ADUs have on local housing shortages and communities like Missoula?
This is something I care about a lot. Missoula has a genuine housing shortage. Vacancy rates are low, rents have increased significantly over the past several years, and the people who work in our hospitals, schools, and service industries are increasingly struggling to find affordable housing close to where they work. ADUs are one of the most practical solutions to that problem because they add housing supply without requiring new infrastructure, without displacing existing neighborhoods, and without large-scale development. Every ADU that gets built is one more unit available for a travel nurse, a graduate student, a young professional, or a family that needs a place to live. The financial benefit to the homeowner and the community benefit to Missoula are not in conflict — they reinforce each other. That is part of why I find this work meaningful.
Looking ahead, do you see ADUs becoming a mainstream part of homeownership in Montana — and what does that future look like?
I do, and I think it happens faster than most people expect. The legislative changes are already in place. The financing tools exist. The rental demand in Missoula is real and growing. What is missing right now is awareness — most homeowners simply do not know this is an option for them, or they have outdated information about what the rules allow. As that awareness grows, and as more homeowners see their neighbors successfully renting ADUs and offsetting their mortgages, the conversation will shift from "is this possible?" to "why haven't I done this yet?" I think within five to ten years, an ADU will be considered a standard feature of a well-optimized Montana property — the same way a finished basement or a two-car garage is today. We are just at the beginning of that shift, and that is exactly why I think now is the right time to be paying attention.
For more information, please visit https://go.sheetshomes.com/adu-guide-request
Licensed Montana Real Estate Salesperson | OneReal Brokerage | MTRE License #RRE-RBS-LIC-136183
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Company Name: Sarah Sheets
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Website: https://go.sheetshomes.com/adu-guide-request
