A house is a fantastic asset that can increase your wealth in many ways, but the most overlooked area for creating value is your own backyard.
Most backyards are great areas for relaxation and recreation, but they are generally money takers, not money makers. Growing veggies or raising chickens for eggs is a great way for your backyard to offset some of your costs – and a great way to have fresh, local, produce and eggs – but it’s really hard to generate actual income or capital from these resources.
The short- and long-term rental markets in Portland, Oregon are HUGE, and the housing crisis is an issue that is not going anywhere soon. Portland City Government has recognized this issue and the financing options are in place to make it as easy as possible for you to join in the backyard rental revolution.
Airbnb thinks this is this market is so important they built a new corporate office right here in our fair city! Following is a more detailed example of how you can join in this effort and how much income you can generate.
On average, homeowners in Portland can build about 750 sqft of rentable space in their backyard.
- Average Portland residential lot: 5,000 sqft.
- Average open area: 3,300 sqft.
- You can build an ADU in your backyard up to 800 sqft or <75% of the existing structure’s sqft, whichever is less, which averages 775 sqft.
- A Home Studio (Guest Suite) footprint is allowed to cover 15% of your overall property (750 sqft on a standard 5,000 sqft lot). For greater detail about what you can build, and the restrictions in zoning, check out our blog post here.
So what does this mean for you? You can build an ADU or Home Studio (Guest Suite) and start renting by the night, month, or year. Average rental income from an apartment in Portland right now is $1275 a month for a 1 bedroom and $1450 for a two bedroom apartment. It’s harder to gauge what you can earn from short-term rentals, but average Guest Suite rentals are about $60-100 per night. At this rate you can cover the mortgage payments by renting just two weekends per month; rent more often and you can easily clear over $1,500 per month. If your house is in a close-in location, those numbers can be even higher.
The costs for an owner vary widely as well, but the key concern at the outset is the fixed cost of financing a construction project to get you in business. Rates are very good right now, and to build a rental unit like this can cost from $60,000 to $150,000 and higher depending on your desires. Starting at the low end, adding a Home Equity Line of Credit (HELOC) or refinance of your existing mortgage can add anywhere from $285-$1,100 per month to your bill. Covering that amount becomes very easy renting through services like Airbnb. How much money you make each month is up to you, it’s very easy to be cash positive with minimal effort.
Positive cash flow: WIN!
The real benefit in owning an Accessory Structure is building an asset which has multiple benefits in addition to the potential cash flow. You are adding real, habitable space to your property that adds to your asset value immediately. This means your home is now worth more, where before that empty backyard space was not counted regardless of how gorgeous you made it.
Renters building your equity: WIN!
You also benefit by having this increased asset value paid for by renters, building your equity for you. These effects compound and increase your net wealth rapidly. And don’t forget, you are now part of the solution. You are building your own wealth, preserving Portland’s character, and adding valuable, necessary housing that is desperately needed.
Being part of the solution to the housing crisis: WIN!
Join the Backyard Rental Revolution – Contact us today!