In March 2025, Boulder removed a rule that used to box in thousands of homeowners: you no longer have to live on the property to rent out your accessory dwelling unit (ADU). For most Colorado owners, that turns a backyard unit into a straightforward source of monthly income. Here is how to rent one out the right way, from the rules to realistic rents to what you actually keep.
Can You Rent Out an ADU in Colorado?
Yes. In nearly every Colorado jurisdiction you can legally rent out an ADU, and the rules just got friendlier. Boulder’s Ordinance 8650, effective March 8, 2025, scrapped the old owner-occupancy requirement, so you can now lease both your main house and your ADU to non-owners on a long-term basis. Denver and a growing list of Front Range cities allow ADU rentals too, each under its own permit and licensing rules.
The fork that decides everything: “legal to rent” and “legal to rent however you want” are not the same. The real split is long-term versus short-term, and in Boulder that choice shapes the rest of your plan.
Long-Term vs. Short-Term, and Why New ADUs Are Long-Term Plays
Here is the rule that catches people. In Boulder, you can only run an ADU as a short-term rental (STR), the Airbnb or Vrbo model, if both the ADU and its STR license were in place before February 1, 2019. Build a new ADU today, and short-term renting is off the table. Even for grandfathered units, an STR is capped at 120 days a year, in stays of 29 days or less, on a property that is your principal residence, meaning you live there more than half the year. STR licenses run a four-year term.
For practically every new ADU, that leaves one path: long-term rental, defined as stays of 30 days or more. That is not a consolation prize. Long-term tenants mean steady monthly income, far less turnover and cleaning, and none of the nightly-rate swings short-term hosts ride out. It is also the model Colorado housing policy is actively nudging owners toward.
Scope note: the February 2019 STR cutoff is Boulder’s. Denver, Colorado Springs, and others set their own short-term limits, so confirm your city before you count on nightly income. We map the city-by-city differences in Boulder’s ADU rules.
How Much Rent Can You Charge in Boulder and Denver?
Real numbers, current as of 2026. In Boulder, a one-bedroom ADU rents for roughly $1,600 to $2,100 a month. Units near the CU Boulder campus or Pearl Street, or ones with parking, outdoor space, or furniture, push into the $2,200 to $2,600 range. In Denver, a 550 sq ft detached ADU averages around $1,650 a month, with desirable neighborhoods reaching $2,200 to $2,800.
On the bottom line, a Boulder ADU at $1,900 a month brings in about $22,800 gross a year, and roughly $17,400 net after typical expenses. A Denver unit near $1,650 nets close to $16,200. Those are recurring numbers, and they are why the rental case for an ADU tends to pencil out. We break the full return picture down in our Colorado ADU ROI guide.
Landlord Requirements and Licensing in Boulder
Scope: this section is Boulder-specific; other Colorado cities license rentals differently. Before you hand over keys, Boulder requires a rental license for any unit rented 30 days or longer. Getting one means a rental license inspection and, for many units, SmartRegs compliance, the city’s energy-efficiency standard for rental housing.
SmartRegs asks each unit to hit 100 energy-efficiency points plus 2 water-conservation points. The part owners miss is that the requirement depends on ADU type. An attached ADU does not have to meet SmartRegs on its own. A detached ADU does, at the time you rent it. Either way, your primary residence has to be SmartRegs compliant when the ADU goes up for rent. Owners who live outside Boulder County have one more requirement, a local agent who can reach the property within 60 minutes.
The upside: none of this is exotic. A new, well-built detached ADU clears the energy bar comfortably, which is one quiet advantage of building to current code instead of converting an old space.
Taxes on ADU Rental Income
Rental income is taxable, and the honest framing is that an ADU is a small business on your lot. You report the rent as income, then deduct the costs of earning it: a share of utilities, repairs, insurance, property management, and depreciation on the structure over time. Many owners find those deductions take a real bite out of the taxable amount, especially in the early years.
One caveat, because this is your money: tax treatment depends on your situation, how the unit is used, and how expenses are split between the ADU and your home. This is general information, not tax advice. Run your specifics past a Colorado tax professional before you file. Expect the county to reassess the added finished square footage too, so your property tax will rise modestly with the unit.
Maximizing Your Return
A few levers move the number more than people expect.
- Furnish for the mid-term market. A furnished 30-plus-day rental aimed at traveling nurses, relocating professionals, or visiting academics can beat a bare long-term lease, while staying clear of the short-term rules.
- Add the features that rent. In-unit laundry, a dedicated parking spot, and private outdoor space are what lift Boulder rents toward that $2,600 ceiling.
- Look at affordable-rental incentives. Colorado’s Division of Local Government runs a program that rewards owners for renting ADUs at affordable rates, trading slightly lower rent for grants or fee relief. For some owners the math beats market rent once the incentive is counted.
- Build it rentable from day one. The biggest return killer is a unit that needs rework to pass inspection or SmartRegs. Designing for the rental from the start avoids that bill entirely.
Build a Rent-Ready ADU With Olerra
The difference between an ADU that leases next month and one that sits empty for a year is usually decided before the first tenant ever looks at it. Olerra builds permitted, code-stamped detached ADUs that clear Boulder’s energy and inspection requirements out of the gate, in fixed-price modular models at 245, 490, and 735 sq ft. That means a unit you can license, list, and lease without a punch list of fixes standing between you and the first rent check.
Frequently Asked Questions
Can I rent out my ADU on Airbnb in Boulder?
Only if both the ADU and a short-term rental license were in place before February 1, 2019, and even then it is capped at 120 days a year in stays under 30 days, on your principal residence. New ADUs in Boulder are long-term rentals only.
Do I have to live on the property to rent out my ADU?
Not in Boulder, as of March 2025. The city dropped its owner-occupancy requirement, so you can rent both your home and the ADU to non-owners long-term. Other Colorado cities set their own rules, so check yours.
Do I need a license to rent out an ADU?
In Boulder, yes: a rental license with an inspection and, for detached units, SmartRegs compliance. Long-term rentals are stays of 30 days or more. Requirements vary by city, so confirm with your local rental-licensing office.
How much can I rent an ADU for in Colorado?
Roughly $1,600 to $2,600 a month for a one-bedroom in Boulder, and about $1,650 to $2,800 in Denver, depending on size, location, and finish.
Before You List
Renting out an ADU in Colorado comes down to three moves: rent it long-term, license it properly, and build it rentable from the start. Permitted. Inspection-ready. Built to lease. If you want a unit that checks all three on day one, schedule a call with Olerra or run a free property check to see what your lot allows.
Sources
1. City of Boulder, Accessory Dwelling Units (Ordinance 8650, owner-occupancy removed March 8, 2025). bouldercolorado.gov/services/accessory-dwelling-units (accessed June 2026).
2. City of Boulder, Rental Housing Licensing: Long-Term, and SmartRegs Guide. bouldercolorado.gov (accessed June 2026).
3. City of Boulder, Rental Licensing: Short-Term. bouldercolorado.gov/services/rental-housing-licensing-short-term (accessed June 2026).
4. Colorado Division of Local Government, Incentivizing Affordable ADU Rentals. dlg.colorado.gov/incentivizing-affordable-adu-rentals (accessed June 2026).
5. Boulder and Denver ADU market-rent ranges, compiled from current rental-market data, early 2026.
