Backyard Cottages, or ADUs, are a relatively new type of housing that can be built in a back yard and are ideal for families that want to create a separate living space for aging parents or renters. Some downsizers build a cottage on their property, move into it and use it as a smaller home for themselves, then rent out the main house where they used to live. This provides both a more efficient place to live, and rental income. And at Seattle’s current rental rates, this can be substantial.
Last evening I went to a workshop about Backyard Cottages for an update on new trends.
Here’s What’s new:
Costs are going up about 20% per year. Currently 800 sf two-level backyard cottages are costing from $350,000 to $425,000 to build, depending on finishes, construction, and site requirements.
Previously the main driver for backyard cottages was for parents to age in place, as the costs of building one compared favorably with the costs of nursing home care. Now, most of the requests for cottages is from people who want to add a rental unit in their back yard. Rented out at prevailing rates, present construction costs can produce a 5% cap rate on this investment.
Several local cities allow back yard cottages, and each has different rules.
Seattle’s present rules say you can build a cottage on a lot that is 4000 sf or larger, can be a maximum of 800 sf including garage and storage, and a maximum height of 23 ft. or 2 stories and a pitched roof.
Seattle’s proposed new rules would permit cottages up to 1000 sf and a height of up to 25 feet on lots as small as 3200 sf. They are also considering allowing 2 ADU’s on a single lot, and removing the requirement that the property’s owner live onsite.
If you are curious about this approach to downsizing, feel free to contact me. I am happy to discuss the real estate factors involved and how it affects your property.
The workshop was presented by Bruce Parker of Microhouse, and Stefan of Stefan Hansmire Builds. Photos courtesy of Microhouse.