Monday, June 23, 2014

Money Monday: Adding An Income Suite to our home

My husband and I moved into our home nearly 2 years ago. One year, and 364 days ago, I expressed a desire to build an apartment over our garage.

Currently, we do not have an apartment over our garage. We have talked about it tirelessly. But, we have never moved on it. By our rough estimation, it would cost nearly $30,000 to build, which for us, would be a significant investment. 

The Numbers
Build Out $30,000
Rent         $     500
Payback            60 months

For the size of apartment that we would be able to build over our garage, the current market rate is around $500.00. Given that rate, it would take 5 years of rental charges to earn that investment back, 5 years before we would begin to see a profit. 

For us, right now, that is a bit too long term. Given our financial philosophy, we are unwilling to take out a loan to pay for the work, so it would be several years before we could commence with the project. If we had an extra $30,000, it would be smarter for us to pay extra on the mortgage or to apply to a recast, so that our savings would be realized now. 

In addition, we may not be in this home for another 5 years. Our goal and plan at this stage of the game is to increase savings and continue to pay a bit extra every month on our mortgage in order to cut down on the length and total interest paid over the life of the loan. Once we move, we would like to turn this home into a rental. 

As much as I want a garage apartment, realistically I know that at this time it is not a smart decision. 
That is why I am so passionate about personal finance, because it is personal. There is no right or wrong answer because we each have our own goals and plans. 

What would you do? Would you build it? Do you have a rental? What are the pro's of owning a rental? What are the con's to owning a rental?


Denise said...

call me strange but I have never ever wanted a rental - it just seems like too much work. I do realize though the income potential but just not for me!

Brooke said...

i refuse to be a landlady (three's company anyone?) fortunately, i have the luxury of still being a rental investor, given the overnight rental market. we pay someone 30% of the earnings (and stats show they more than make up for it with marketing) to manage it for us. our first rental was purchased when the economy tanked and we were able to pay cash for it (It was the price of a new car). i would love to never take on debt, but that's where my hubby and i disagree. too much stress for me!