|
|
|
Detached Buildings and their Return on
Investment
How to determine the ROI on a Detached
Building Project
By Mark J. Donovan
|
|
Question: I live
in a metropolitan area. The neighborhood is upper middle class, with a
range of ages and sizes of families. It is an area that children, who
grew up here, years ago, are returning because it has remained a very stable
environment and good for raising children and pets. It is situated
right next to a growing university, and the price of housing has not been
affected by the downturn in national home market values. Properties
are in the $450K to $800K range with some very nice ones exceeding $1
Million.
|
| There are very few
detached buildings on residential sites in our housing development (i.e., a
green house, detached garage or workshop). There are also few swimming
pools.
My question is that I want to build a
detached greenhouse and workshop building on our property however my wife
says that I will not get a full return on investment (ROI). The cost
of building the greenhouse/workshop is around $5K - $7K on a piece of
property worth around $650-$700K. The plan is to build it to match the
lines and siding of our existing house. |
 |
It will take up approximately 20-25% of
the usable yard. So how do I get some hard facts about such an endeavor
and its ROI?
|
Answer:
Your best bet is probably to talk with some local realtors about the
interest in homes with detached buildings. In my opinion, if the detached
building is designed to serve multiple purposes, and is aesthetically
attractive, you have a good chance of getting your return on investment and
maybe even more. From my experience there are many potential homeowners out
there interested in having homes with extra storage space, or play rooms for
their children that are detached from the main home. |
|
Having additional separate space that has water and electricity also opens the
possibilities for small office space for self-employed homeowners.
In addition, at around 1% of the value
of the property the investment is "in-the-noise". If someday you decided to sell
the home, just convincing your prospective realtor to take a 1% lower commission
rate will enable you to recover your investment, and that's at today's home
prices. Usually there is some give in real estate commissions so keep this in
mind.
|
Finally, you also have to look at
the non-economical side of this project as well. If you enjoy woodworking
and gardening then a $5-7K outlay amortized over 5, 10, or even 20 years is
relatively a small investment in a hobby.
My advice, check with your local
building inspector and read any covenants you may have in your housing
development to ensure there are no restrictions to detached buildings on
your property. If the building inspector accepts your plan and there are no
covenant restrictions, I'd say go for it and enjoy your new space. |
|
For more help on building a new custom home, see HomeAdditionPlus.com's
New Home
Construction Bid Sheet.
The
New Home Construction Bid Sheet
provides you with the knowledge on how to plan a custom home building project,
and what to look for when hiring contractors for your new home construction. It
also includes a detailed cost breakdown table and spreadsheet for estimating
your own new home construction building costs.
How to Finance your Home Remodeling Project -
can help provide funds for your new home improvement project if financing is
required.
Related Building Home Addition Information
Additional Home Remodeling and Building Resources
Free Out Building Addition
Price Quotes with No Obligation!
Fill out our 3-5 minute quick and easy form, and receive a free price quote
on a Out Building addition from one of our prescreened and licensed
home addition contractors. This process is free and there is no obligation to
continue once you receive your home addition price estimate.
|
|
|
