May 30, 2010

Backyard Cottages: Threat or Menace?

Here’s an article sent in by burbed reader nomadic, who writes, “The RBA needs backyard cottages too!  I bet Worried Mom would be happy to live in a cottage in her backyard while she rents out the main house to cover college tuition for her kids.”

This is another crazy idea from Seattle, which brought us too much coffee, Windows Vista, and not enough sunshine.  Why would we in the RBA (Real Bay Area) want to use them as a role model (we’re doing a great job this year on that last one)?

Seattle’s backyard cottages make a dent in housing need

John Stoeck sweeps the 437-square-foot cottage he's building behind
 his home in Seattle. The city changed zoning rules to allow cottages in
 single-family neighborhoods.

<< John Stoeck sweeps the 437-square-foot cottage he’s building behind his home in Seattle. The city changed zoning rules to allow cottages in single-family neighborhoods.  

Lynn Watkins, left, and her partner, Yolinda Ward, built a 
600-square-foot cottage behind their four-bedroom Craftsman-style house 
after deciding the "big house" was too big.

>> Lynn Watkins, left, and her partner, Yolinda Ward, built a 600-square-foot cottage behind their four-bedroom Craftsman-style house after deciding the "big house" was too big.

By Judy Keen, USA TODAY

SEATTLE — John Stoeck is building a one-bedroom, 437-square-foot cottage on the spot where his garage stood before a tree fell on it. Construction costs: about $50,000. When the cottage is finished this summer, he plans to rent it for at least $900 a month, which will make a nice dent in his mortgage payments.

His is just one of about 50 tiny cottages sprouting in backyards across the city as it tries to expand affordable housing options in established neighborhoods without resorting to high rises and apartment complexes. The city changed zoning rules to allow cottages in single-family neighborhoods citywide, rejected a proposed cap of 50 cottages a year and helped organize a design competition to spur creation of reasonably priced plans. The point is not just to allow the cottages, but to encourage them.

They may not making any more land, but would this work in the RBA?  Would rental cottages in the back yard make RBA homes more or less Special? A rental income stream is nice, but how does a tenant a few steps from your back door work for you when you want to slip out to soak au natural in your hot tub?  How can you water your own lawn when your cottage renter tore it out to put in a garden?  How can you enjoy being lord of your manor when you’ve downsized to a 600 sf Craftsman cottage, and you’re renting out The Big House to an Angry Renter?

Would this solution work for Worried Mom?  Could it work for you?  What would your city do if you put in a permit application for one of these beauties?  Renters, would you jump at the chance to live in a cottage in a SFH neighborhood instead of your current digs?

Then again, this is the RBA!  Maybe we can make it even more Special!  Instead of Backyard Cottages, we could have Backyard Garages, and incubate the next Web 3.0 startup! What’s even better than rental income? How about ground-floor equity?  After all, it’s your ground floor!

Comments (8) -- Posted by: madhaus @ 5:02 am

8 Responses to “Backyard Cottages: Threat or Menace?”

  1. SEA Says:

    John Stoeck’s place:
    437 Square feet, 1 BR
    $50,000
    $900 monthly rent

    Annual rent is greater than 20% of the investment? That would be great, but I think he forgot a quick Craigslist check to see how much such places bring in rent. My guess is that such a small place would probably rent for $600-500, depending on where it’s located. My garage is larger than 437 square feet. However $500 monthly revenue is 12% annual revenue (less some vacancy).

    But we all know that building $50k cottages in the back yard will improve the value of the home by at least $100k (since the annual rent should be closer to 5-6% of selling price; it’s automatic, right?). And if the $900 monthly rent is correct, the property value instantly goes up by over $200k.

    That’s called real instant equity! Just like Real Palo Alto or the Real Future Real RBA, it’s a sure thing.

    It’s simple math
    200k = Increase in value
    50k = construction cost
    $150k = profit

    It’s less than $500k, so it’s not a lot of money, but it might buy a car or two.

  2. Petsmart groomer Says:

    > That would be great, but I think he forgot a quick Craigslist check to see how much such places bring in rent.

    His house is obviously special, so $900 is totally justified.

    The main issue with these cottages is that the city changed the zoning rules. It makes cheating the IRS harder.

  3. Alex Says:

    I would definitely rent the main house in the RBA while the homedebtors live in the small cottage.

    I can just imagine already.

    Me walking out to the backyard in my jockstrap and yelling out to Worried Mom: “Hey woman, my toilet is clogged. Go get it fixed, yo!”

  4. Petsmart groomer Says:

    Of course in the RBA one would not want to spend only $50K for a backyard cottage when more expensive choices are available.

  5. madhaus Says:

    That’s insufficiently Special for the RBA. What you’re talking about, PG, are essentially trailer cottages. There’s nothing impressive whatsoever about a pre-fab “manufactured home,” in this case a manufactured minihome. Not only are these affordable to the low end of the spectrum, they will drag your house and the entire neighbourhood down there with it. You might as well rent your Big House to Alex if you want to see if gentrification is reversible.

    Perhaps you could inquire if Frank Gehry is available?

  6. Alex Says:

    You might as well rent your Big House to Alex if you want to see if gentrification is reversible.

    What? You don’t like the idea of me wandering about in the backyard in my wifebeaters and jockstrap?!

  7. madhaus Says:

    What? You don’t like the idea of me wandering about in the backyard in my wifebeaters and jockstrap?!

    You didn’t say anything about the tank top. Carry on.

  8. nomadic Says:

    There’s nothing impressive whatsoever about a pre-fab “manufactured home,” in this case a manufactured minihome.

    Not to mention the increased risk of tornadoes that will come with them.


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