Our house sits on a 15,000 square foot lot in such a way that adding on to the structure shouldn’t be too big of a deal. Here’s a quick picture from our backyard for reference…
You see how much space there is on the left side of our house, that big grassy area that runs by the white picket fence.
Call me crazy, but I feel like the gods above are practically begging us to spend $100,000 and add some square footage to our abode.
There is enough yard there we should be able add about 700-800sqft of living space.
“But Ninja, why do you need more living space?” -you guys
Short answer, WE DON’T.
Introducing the Additional Dwelling Unit (AKA a mother-in-law):
As many of you know, prior to buying our house, Girl Ninja and I rented a mother-in-law unit above a million dollar home. It was a tiny one bedroom, but had awesome finishes and a view of Puget Sound. Check out how dope the main house was (the staircase running up the right side of the house went to our front door)…
We paid $1,200/mo (utilities included) to live there. Since our landlord paid cash for his house, he literally had no housing costs. That’s right, our rent completely covered his property taxes and utility expenses. We stayed there for two years and loved every minute of it.
If we could add a small, attached, two bedroom apartment (about 800 sqft) to our house for about $100,000 (works out to $125 per sqft), I can’t think of a reason why we shouldn’t. The math seems to work in our favor.
Let’s assume Girl Ninja and I pay $30,000 from savings, and borrow $70,000 at 6% on a 30 year term. Our housing payment would increase by about $513 in this scenario, increasing our total PITI obligation to about $2,200/mo.
Since Girl Ninja and I looked at renting in our current neighborhood two years ago, we have an idea where rent prices are, although they’ve probably gone up a bit.
We should fetch between $1,200 to $1,500 a month in rental income from this place.
(leaving us with only a $800 house payment).
Do you get what that means!?
We would be profiting $700/month minimum right off the bat. What’s more, rent prices over time would increase but our payment wouldn’t.
And don’t forget, the extra bedrooms and bathrooms would increase the overall value of our property. Booya for this idea not being a sunk cost.
Passive income is very attractive and lord knows I need to start diversifying outside of my retirement funds. This seems like the most reasonable way to do both.
I can rent out 800sqft of our house (while we live in the other 1900sqft) and have over half of our house payment paid by someone else.
Is this not the financial stars aligning before my very eyes?
Someone with knowledge shed some light on the situation. Is this a pretty awesome idea? Or am I totally overlooking something?
side note: Our current roommate/friend is paying us $400/month to live in a small 10ft by 13ft room in our basement (she has full access to our house).