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.
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