This guest post is compliments of Andrew Statz of New Avenue Homes
In the true-fashion of a DIY lifestyle we have to wonder when it is appropriate to buy versus build. Eventually there may come a time with our shifting lives when we may need to up-size our living arrangements. Maybe a child is on the way, or a relative is coming to stay with you for a period of time, or a good friend is need of a place to stay, any of these situations can occur. So when deciding to move into a larger home, it typically involves months of stressful weekends looking at open houses, submitting competing offers, talking to your bankers and discussing financing rates and strategies, talking to your realtor, and checking online real estate listings websites numerous times a day. Let’s not even talk about the level of anxiety once you are a week away from closing. Waiting on inspectors and making sure you got the loan… these are all major stressors. Once the deal is done, you then get the “fun” job of packing up your life and moving it to your next abode and living out of boxes for however long it takes for you to turn your new house into your new home.
In certain scenarios, you don’t need to follow the situation I just outlined above. Instead there is growing amount of Americans who steer away from this process of buying a bigger house and focus on expanding the property they already have. These people with adequate land space and permits have chosen the accessory dwelling avenue. Accessory dwellings also known as “Backyard Cottages” or “Guest Houses” are a growing shift in the American cultural viewpoint that “bigger is better”. Instead of purchasing larger, more expensive homes, people are choosing to invest their money in their existing property. This shift from quantity of space to quality of space is in step with most progressive American’s as they turn away from mass-marketed fast food to quality local organic foods, from driving large SUV’s to more efficient and environmentally conscious electric or hybrid cars.
An accessory dwelling is basically a smaller house located on the same lot of the main house. Depending on your lot space this may be where you find this project to not be feasible, but if you have the space, keep reading. The next major challenge is permitting, depending on what amenities you plan to include in your accessory dwelling the permitting costs can increase significantly. Most backyard cottages have a built-in bathroom, but when it comes to installing full-kitchens permits costs can increase significantly; this is dependent on the county, and may or may not apply.
Now on the fun part: the design! Typically people tend to design the exterior facade of their backyard cottage to match that of their main house. However this does not have to be true for the purpose of the cottage. We’ve seen people build music studios, play rooms for kids, man caves, or the more traditional guest houses or in-law units. Either way these are just some examples of the plethora of options you can consider while you dream about your new backyard cottage.
Living in the SF bay area the costs of a backyard cottage can range based on the size and intricacy of what you plan on constructing. The sizes usually range from 250 square feet for around $120,000 to 750 square feet for around $250,000. Compared to the 2013 San Francisco Bay Area prices, 2014 home prices have grown 18% 1. So that means you can sell your house for 18% more and buy a bigger house that was previously out of your price range for also…18% more. Let’s say you’ve been saving for this process for a while now, but you still have to pay the agent that selling your old place the 5%, then you have closing costs, then moving costs. Assuming you are upgrading from a 3 bedroom to a 4 bedroom house, your old house in the SF Bay Area could easily be worth around $1 million dollars (for simplicity sake), that translates to $50,000 in realtor commissions alone, not even accounting for the other closing fees. Ultimately you are already at 30% of cost to build a sizable and nice backyard cottage. Furthermore, the money you invest in your backyard cottage only adds to the equity/ property value of your existing main house.
Ultimately the utility you achieve from having a separated unit from the main house is intangible. The freedom to blast music in your new music studio without waking the wife or kids, the privacy provided to guests and in-laws, these are all achievable without buying bigger, but builder smaller. So the question comes back to whether you are a builder or a buyer. We’ve seen that people who invest in their homes versus purchasing new homes typically are happier and are much more proud of the work they have put into their home compared to those who treat their house just a stopping point along to their next house. Builders invest in their homes, which translates to investing in their communities. Are you a builder?