Whether you need some personal space, have run out of space in your existing home and want to spread out or just want another source of income, a guesthouse or even a modest guest apartment can meet all of those needs. Just make sure you're doing it for your own enjoyment and not for some imagined pay day down the road.
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"People making additions and renovations or converting space to a guesthouse should be doing that because it's going to enhance their lifestyle and enjoyment of the property," says Frank Gregoire, a realtor and appraiser at Gregoire & Gregoire in St. Petersburg, Fla. "I don't think there are many cases where it makes sense to spend on an addition or conversion of space if your intent is to resell and recoup costs."Even the people who are going to build your guest home would advise against building it just to help make a sale. The National Association of Homebuilders, already facing a downturn in new home sales that dropped another 0.7% in July and left inventory at a 48-year low thanks to a lack of construction and demand, saw its builder confidence index drop last month after lingering in lukewarm territory for the past six months."Very little has changed in terms of housing market conditions so far this year," said NAHB Chairman Bob Nielsen, a homebuilder from Reno, Nev. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes and competing against foreclosed properties that they have seen for some time."Considering the stockpile of houses out there, its a wonder real estate brokers aren't marketing half of them as guesthouses in buy-one-get-one deals. The inventory of new homes on the market in July was 165,000, a 6.6-month supply dwarfed by the 3.6 million previously owned homes in the mix. The average new home price, meanwhile, hit $222,000 in July, while average existing homes sold for $174,000. That gap has widened significantly since 2008 as labor and material costs remain high. Those disparities haven't helped the value of major home projects either. A guesthouse can get costly, but a $232,000 luxury master suite addition that costs about as much as a small cottage only brings back about $122,000 (or 52%) in resale value, according to the 2010-11 Remodeling magazine Cost vs. Value Report. That beats a $75,000 sunroom, which earns back less than half its value once a house hits the market.With help from appraisers, real estate agents, builders and government agencies, we came up with the three easiest ways to get the guesthome you've always dreamed of without incurring a lifetime of nightmarish payments:
/* Promo Alert */ .aapAlertPromo { background:#fff url('http://i.thestreet-static.com/files/tsc/v2008/css/images/aap_articlePromo.jpg') no-repeat; width:340px; height:70px; color:#000; } .aapAlertPromo a.findout { width:180px; font: bold 12px arial,helvetica,sans-serif; margin-left:15px; margin-top:17px; color:#000; float:left; } #story .aapAlertPromo2 { background:#fff url('http://i.thestreet-static.com/files/tsc/v2008/css/images/aap_articlePromo.jpg') no-repeat; width:340px; height:70px; color:#000; } #story .aapAlertPromo2 a.findout { width:180px; font: bold 12px arial,helvetica,sans-serif; margin-left:20px; margin-top:23px; color:#000; float:left; } #story .aapAlertPromo3 { background:#fff url('http://i.thestreet-static.com/files/tsc/v2008/css/images/aap_articlePromo.jpg') no-repeat; width:340px; height:70px; color:#000; } #story .aapAlertPromo3 a.findout { width:180px; font: bold 12px arial,helvetica,sans-serif; margin-left:15px; margin-top:17px; color:#000; float:left; } #story p .aapAlertPromoNone { display:none; visibility: hidden; }1. Find an existing house and build it a partnerThe 2000s seemed like the decade of the teardown, with the cute little homes of yesteryear being razed for McMansions built like sets for reality television shoots.
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This vastly underestimates the little home's potential as a sturdy guest cabin or a larger vintage home's value as a primary estate. Exactly which direction a buyer takes depends largely on the community they're planning to build in. For example, the Department of Housing and Urban Development's Regulatory Barriers Clearinghouse says that almost all communities require permits to build guest housing, but some such as Greensboro, N.C., place different conditions on those permits depending on whether the original house is attached to the new guest structure or not.Approval of those permits also depends largely on the size of the lot involved. Sacramento County, Calif., requires at least a 5,200-square-foot lot before a property owner can even think about building a guesthouse. Providence, R.I., bumps that up to 25,000 square feet if you want to build servants' quarters, while Charlotte, N.C., shuns a specific lot size while insisting the lot be twice the size of the minimum required for building within the main residence's zoning district.It could also hinge on who you plan to have staying in said property on a regular basis."In your bread-and-butter neighborhoods, it's common to use them to generate income," Gregoire says. "If you have a higher-value neighborhood, it's common to use a guesthouse as overflow for out-of-town guests or to put your teenager in there." The regulation of said properties is as diverse as the places they're built in. Charlotte allows secondary buildings to be used as guesthouses, employee quarters or elderly and disabled housing. Providence, meanwhile, will allow an accessory unit, but only if it doesn't have a kitchen. Knoxville, Tenn., shares no such concerns when it comes to letting the guests cook, but limits homes with guest facilities to higher-density areas.Those same communities can also dictate just how large a guesthouse can be in proportion to the primary estate. Greensboro limits it to 1,000 square feet or 30% of the gross floor area of the main residence. Nashville, Tenn., and Ann Arbor, Mich., hold guesthouses to 25% the size of the main house, while Fort Lauderdale, Fla., slaps a 600-square-foot cap on guest quarters unless they're an apartment attached to the main home. In that case, they can be as much as 49% the size of the main living space, but can only have one bedroom and one bathroom.Those guests are also going to need somewhere to park, which is why Santa Clara, Calif., requires at least one off-street space for each guest residence. Ann Arbor is just a touch more conservative in requiring at least three off-street spaces for the main house and guest dwelling. Beyond the basic plumbing and electric, this is a lot of construction in a market that already doesn't reward such effort.If the thought of starting from scratch is a bit scary or if going with a pre-fab option seems to defeat the purpose, you may want to:
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Converting a garage loft to an apartment unit may be just the answer for homeowners hemmed in by zoning restrictions. In Seattle, a guest unit has to be attached to the main dwelling, which makes space over an attached garage ideal. Santa Clara requires that the roof, siding and windows of the accessory unit be consistent with the design of the principal residence. It can also be a cheaper alternative, as Remodeling places the cost of a modest garage addition at $61,000 and a slightly more upscale project at $90,000. That doesn't add windows or make many other aesthetic changes, but it also comes in at far less than a two-story addition ($165,000) or a master suite addition ($108,000 to $232,000).Just realize that you're building it for your guests and not for any notable bump in resale value. A modest garage addition retains 59% of its value when the house is sold, but that master suite and big two-story addition will bring back 63% to 65% of what a homeowner paid for them. If that retail value's a concern and all the work just seems fruitless during this uncertain real estate market, you could always ...
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"In Florida, it costs more to build something than it is to buy something comparable," Gregoire says. "There's an imbalance between supply and demand and, in a situation like that, it's hard to build something new and recoup the money."Buying property with an existing guesthouse not only removes the hassle of seeking approvals, running utilities to the property and running afoul of zoning restrictions, but it does away with some of the guesswork as well. Some of the nastiest surprises don't come while the guesthouse is being built, but when its first tax bill comes."The county property appraisers will base their assessment on the number of living units and the number of square feet of heated area," Gregoire says. "Having an additional guesthouse, rental apartment or in-law apartment is going to result in an increase in the taxable or assessed value of the property." >To follow the writer on Twitter, go to http://twitter.com/notteham. >To submit a news tip, send an email to: tips@thestreet.com. RELATED STORIES: >>How To Build Your Dream Home From Scratch>>7 Cheap Places For Foliage Friendly Homes>>7 Places To Get That House In The WoodsFollow TheStreet.com on Twitter and become a fan on Facebook.
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