elder cottages housing a long term investment

Elder cottage housing can be used for many things in addition to housing an aging family member, it may be part of a long term investment strategy generating rental income.  Where backyard cottages are allowed by local zoning laws they have distinct advantages over most investment properties. Their construction may often be financed with an inexpensive equity line of credit and they don’t have land costs. As a result, rental cottages can reasonably be expected to generate a net rate of return more than double most rental properties.  


A hypothetical $300,000, 2 bedroom, 1 bath, house may rent for around $1,500/Month with tenants paying utilities. Factoring in taxes, vacancy and credit loss, but for the sake of simplicity ignoring depreciation and maintenance,  we have a annual net income of approximately 5% of purchase price.  A hypothetical 2 bedroom, 1 bath, backyard cottage would have comparable rental income but the cost of the cottage would be in the range of $100,000 - $125,000, yielding a return on investment greater than 10%.  


While construction costs are fairly consistent across a region rental rates vary greatly by neighborhood. For this reason backyard cottages in good neighborhoods can generate higher rates of return. A quick check on craigslist can help to get a handle on rental rates in your neighborhood. Microhouse can help put together a proposal regarding your project construction costs. We work with a tested team of engineers, surveyors, and contractors that can insure a smooth design and construction process.  We can also recommend lenders to aid in financing your project. 


Microhouse 
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