Proactive Responses to the Recession, Part 3 – Accessory Apartments
Convert empty space in your home into a rental apartment for extra income. At a much lower cost than building a guest house, you can remodel a room in your home into an “accessory” apartment.
Converting home space into an apartment can be especially helpful for investors, as few investments can rival the performance of an additional apartment. The monthly income can be 2 or 3 times the monthly cost of the loan to install it.
These “accessory” apartments are also called guest apartments, in-laws apartments, family apartments, or secondary units. They are completely independent living facilities with separate cooking, eating, sanitation and sleeping facilities that are located within an existing single family home or in a separate structure on the same lot as an existing home. Because it is the least expensive option, I focus on the apartment that is added within an existing home.
Accessory apartments can be located anywhere in the house, depending on the availability of usable space. Spaces that have the most potential for conversion into accessory apartments include:
- Penthouses
- Part of the basement of a house with a divided hall
- Basement exit areas
- Attached garages
- Finished living areas anywhere in the home
- Houses that will aesthetically fit a small additional room.
Technical considerations
Some of the things you will need to consider include estimating costs and income, financing, zoning and building codes, and becoming a homeowner. In addition, it should include a bathroom and a kitchen, although a kitchen does not have to be too complicated. It may consist of a refrigerator and microwave for a smaller apartment.
You may also need to set up a separate utility service for the apartment, to comply with local regulations. Also, separating the accessory apartment from its own private area will likely mean a separate entrance for the tenants.
Costs
The New York Times reported (July 7, 1991) that when two school teachers, Nicholas and Gayle Mancuso, built their new home, they added a two-bedroom apartment to help with expenses. They rent the apartment for $ 650 a month, including utilities, which helps offset their monthly mortgage and $ 1,850 tax bill. The apartment cost around $ 10,000 to build, so after 16 months it had already paid for itself.
Studies conducted in Minnesota in 1982 estimated that costs to convert vacant space into apartments ranged from $ 26,400 for a “fully outsourced” job (an unfinished attic that required extensive remodeling work) to as low as $ 9,940 for a two bedroom apartment. in an old two-story house by an experienced do-it-yourself. Estimates for do-it-yourself labor conversions were $ 15,520 and $ 17,985 for split entry and basement conversions, respectively. Asphalt parking spaces were estimated to cost $ 500 per space.
Equilibrium average monthly rental costs, assuming modest do-it-yourself labor at the time of remodel, were estimated to be $ 228 for a second-floor accessory apartment in an older two-story home; $ 274 for a split input conversion; and $ 302 for a basement apartment.
Copy what others have done
Look for newspaper ads to find other converted apartments. Then come in and see how they look Feel free to copy what other people have done. Here are a couple of ads from my local newspaper: “Furnished studio apartment includes utilities $ 475 / month + deposit without pets” or “Room for rent with private entrance and bathroom, $ 400 / month, includes utilities.”