ADU, Guest House, or Home Addition? Which One Fits Your Property Best

As Central Oregon’s population continues to grow and housing costs rise, more homeowners are exploring creative ways to make the most of their properties. Whether your goal is to add income potential, make space for family, or simply boost resale value, three main options come up again and again: building an Accessory Dwelling Unit (ADU), a guest house, or a home addition.

While these structures may look similar from the outside, they serve very different purposes — and are treated differently under local regulations in Bend, Redmond, and Deschutes County. Understanding the distinctions can save you time, money, and future headaches.

What Is an ADU?

An Accessory Dwelling Unit (ADU) is a self-contained secondary home built on the same lot as your main residence. It has its own kitchen, bathroom, and living area, and can be either attached to or detached from the main home.

In 2025, Bend and other Central Oregon cities have made it easier than ever to build ADUs by streamlining permits and removing outdated barriers such as owner-occupancy requirements and minimum lot sizes.

Why Homeowners Choose ADUs

• Rental income: ADUs can generate steady long-term rental income or house aging family members affordably.

• Flexibility: Great for multi-generational living, downsizing on your own property, or providing independent space for adult children.

• Property value: In Bend, adding an ADU can increase resale value by 15–30%, depending on design and rental potential.

Example: A homeowner in southwest Bend built a 600-square-foot ADU for under $250,000 and now rents it for $1,600/month — offsetting a large portion of their mortgage.

What Is a Guest House?

A guest house is a smaller detached structure meant primarily for short-term stays — think family visits, home offices, or creative studios. Unlike ADUs, guest houses don’t have a full kitchen (sometimes only a kitchenette) and can’t legally serve as a long-term rental in most Bend and Deschutes County zones.

Why Homeowners Choose Guest Houses

• Lifestyle and privacy: Ideal for visiting family, teenagers, or remote work.

• Simpler permitting: Guest houses are often easier and cheaper to approve than ADUs because they’re not classified as separate dwellings.

• Lower cost: Without a full kitchen and separate systems, construction costs are typically 20–30% less than a comparable ADU.

Example: A homeowner in Tumalo built a 400-square-foot guest house with a kitchenette and bathroom for $150,000 — adding comfort and functionality without the complexity of an ADU permit.

What Is a Home Addition?

A home addition expands the footprint of your existing house. It can be a new bedroom, office, or living room, directly connected to your main residence. Additions are not separate dwellings and therefore cannot be rented out independently.

Why Homeowners Choose Additions

• Best for resale: Extra square footage can boost your home’s market value and appeal to future buyers.

• No separate utilities: Since it shares systems with the main home, it’s simpler to build and maintain.

• Perfect for long-term homeowners: Great for those planning to stay in their homes for years but need more functional space.

Example: A couple in Redmond added 500 square feet to create a new primary suite — increasing their home’s appraised value by nearly $100,000.

Comparing the Three: Which Is Right for You?

Feature	ADU	Guest House	Home Addition
Kitchen	Full	Partial / None	Shared
Rental Potential	Long-term (some short-term)	Typically not allowed	None
Permitting	Moderate	Easier	Simplified
Typical Cost (2025)	$175K–$300K	$100K–$200K	$100K–$250K
Value Added	High (income potential)	Moderate (lifestyle use)	Strong (resale)
Zoning Requirements	Must meet city/county ADU code	Flexible	Follows standard building code
Best For	Income + flexibility	Family/guest space	Expanding your home

If you’re looking for passive income or flexibility, an ADU is the top choice.If your goal is personal use or a creative workspace, a guest house may be ideal.And if you simply need more living area, a home addition offers the best value and simplicity.

Central Oregon Regulations to Keep in Mind

Local rules vary between Bend, Redmond, Sisters, and unincorporated Deschutes County:

• City of Bend: Encourages ADUs to increase housing stock; allows detached and attached units on most lots.

• Deschutes County: More restrictive for rural ADUs — fire zones, septic capacity, and parcel size are critical factors.

• Guest Houses: Usually easier to approve, but cannot include full kitchens or separate addresses.

• Additions: Permitted through the standard building process; zoning rarely restricts them.

Before breaking ground, always verify your zoning designation, lot size, and setback requirements with your local planning department.

Financial & Investment Considerations

For many homeowners, the choice comes down to return on investment (ROI).

• ADUs can generate $18,000–$30,000 per year in rental income in Bend’s 2025 market.

• Guest houses offer lifestyle and resale value but limited income potential.

• Additions deliver long-term equity growth but no immediate cash flow.

If you’re considering building for financial gain, a rental-friendly ADU or build-to-rent design can make your property work harder for you — while still fitting local laws.

Every homeowner’s situation is unique. If you’re focused on generating income, a fully permitted ADU offers the strongest long-term upside. If you want flexible space without major permitting headaches, a guest house or addition may be the better route.

With Central Oregon’s evolving housing laws and growing demand for versatile properties, there’s never been a better time to explore which option fits your goals — and your property — best.

FAQs

Q: Which option adds the most value to my property?

An ADU typically provides the best long-term return due to rental potential and buyer demand. Many buyers in Bend now see a permitted ADU as a major selling point.

Q: Can I convert my garage into an ADU?

Yes. Garage conversions are one of the most cost-effective ways to add a secondary dwelling. You’ll need to upgrade insulation, plumbing, and electrical systems to meet residential standards.

Q: Do guest houses count toward my property’s square footage?

Usually, yes — they increase total living area — but they’re not considered separate dwellings for rental purposes.

Q: What if I live in rural Deschutes County?

You can still build, but rural ADUs must comply with Senate Bill 391, which restricts locations and requires wildfire safety measures. Guest houses and additions are easier options in rural zones.

Q: Can I live in my ADU and rent out my main home?

In Bend, yes — since the city removed the owner-occupancy requirement, you can live in either the ADU or the main home, as long as both meet code.