Tiny House People - rental ideas/feasibility/reality check needed

[jennipurrr]

I am looking at a house that has a garage / shed thing just like this one except unfinished (only has electricity). I would love to turn it into a space like this.

http://www.vacationrentals.com/vacation-rentals/82722.html

Have you all seen any other examples of people doing this with a shed? Ideally I am looking for ideas that incorporate a sleeping area, bathroom and (optional) tiny kitchen.

The deal is that the house is in a historic area which does not allow new construction of spaces like this, but does allow owners to do basically anything with the interior as long as they do not change the look of the exterior. So, we would be working within the confines of an old shed, haha. Another house we are considering has an old carriage house which has been used as a shed/garage for many years also but it has more sq ft to work with.

Anyone have an idea of how much this would cost? The major expenses I see are heating/cooling/plumbing. Also, the shed would need to be insulated, sheet rocked, fitted with cabinets/appliances if we go the kitchen route.

The shed/cottage would produce between $3000 - $4000 income year renting it out 14 days a year or possibly double that should we actually did the little kitchen and had a grad student live in it on a long term basis. I don't think we want to have someone in long term though. At this time in our lives we have plenty of room for guests in the house, but if we had kids, it would make a nice guest space or office space.

Is this a crazy idea?

[SteveinMN]

the house is in a historic area which does not allow new construction of spaces like this, but does allow owners to do basically anything with the interior as long as they do not change the look of the exterior.
So you would be transforming this shed without adding doors or windows? Or enlarging the ones already there? Does that enlargement count as "change the look"?

Beyond that, what does the "historic area" or the city/county/whatever say about using the shed for a business? Is the area zoned for that kind of business? The local authorities may okay lots of things owner-occupiers can do and not so keen on adding businesses which likely will bring traffic. Have you talked with an insurance agent about business insurance for such a venture?


Anyone have an idea of how much this would cost? The major expenses I see are heating/cooling/plumbing. Also, the shed would need to be insulated, sheet rocked, fitted with cabinets/appliances if we go the kitchen route.
You just picked about the three most expensive expenses there are! And it all will have to be retrofit/remodeled in, which is even more expensive. You don't say where this place is. Around here (Minneapolis/St. Paul, Minnesota), you'd be hard-pressed to put a decent house up for less than $125-150 per square foot using tradespeople and not talented uncles. You're talking remodeling, which is more expensive still -- and a smaller footprint, which tends to drive the price up still more. You also may have to meet codes for commercial dwellings which would not apply to your own home.


The shed/cottage would produce between $3000 - $4000 income year renting it out 14 days a year or possibly double that should we actually did the little kitchen and had a grad student live in it on a long term basis. I don't think we want to have someone in long term though.
Using your figures (well, $3500 for 14 days) comes to $250 a night. Is that realistic for your area? What kind of hotel room can one get in your area for $250 a night (not "rack rate", either; what real people will pay. Check Travelocity or such). Would what you're offering here comparable? And keep in mind that $250 a night is gross income, not what you'll net out after paying for electricity/heat/cooling/water/sewer; insurance; promotion/advertising; money held for repairs/improvements; furnishings, bedding, etc.; handling reservations, billing, and customer service (needs more pillows at midnight); etc. Those expenses need to be covered whether or not the place is occupied.


Is this a crazy idea?
With all due respect, but since you asked, I think it is.

[ToomuchStuff]

When adding plumbing (tearing out concrete and going through the yard for waste connections, possibly uphill to a sewer), and kitchens, you should look at remodeling costs for your current area. (codes dept. might be able to help) Cost wise, I am betting it would take you better then 5 years, to recoup your initial investment, before making money. I've known about two converted garages in the area I drive, and a friend rented one years ago. They did that one, but moving the kitchen and doing the garage, before moving into it, and gutting/redoing the house. (couple year project) It saved them from rent and they were always within project site.
Around here, a shed is typically no bigger then 12x14'. Bigger then that, and you start talking pole barns. Sister in laws brother did that, on some property, over YEARS, so I have no idea of the costs (but historic districts don't typically like long term projects, IMHE). Shop in the front and house in the back (acreage and farm equipment)

[Float On]

I think its a great idea.
We stayed at a B&B once and the room we picked was an old single wide garage at the back of the property (old alley entrance). It fit the bed and night stands, a small dresser and a small bath (with whirlpool tub). They added a tiny deck with table/chairs. I think there was a microwave along with a coffee pot. We probably paid $99-120 per night and from talking with the innkeeper it was usually booked solid. If it's in an area that could be a draw I think the cost of re-doing it would be worthwhile.

[Miss Cellane]

First, I'd check zoning regulations to make sure you can rent the shed out.

Then, I have to question why only 14 days rental a year? That's the big sticking point, if you ever want to recoup your investment.

My cousin built a large, two car, two floor garage. The second floor is his home office, so it's finished with drywall and flooring, etc. It has electricity, but no water/septic, and a space heater. Just the garage and finished second floor cost over $25,000. It was worth it to him, to have a home office (he's a general contractor) and a place to put the cars out of the snow. And he did most of the work himself.

So, I think it could be a great idea and earn you a little extra income and give you a place for your kids to stay, but if you want to make back what you are going to spend on the conversion, you will have to rent it out a lot more than you are currently planning.

As for renting, if you rent long-term to one person, you clean the place once and furnish it once. You explain how things work once. The long-term renter might take care of laundering sheets and towels, even if you provide them. If you are renting to different people weekly, you clean weekly, you change the linens weekly (more laundry too), you explain how things work weekly, you answer more questions, you have, in general, more work.

Another option, between the weekend guest and the long-term renter is the corporate guest, or short-stay apartment. Someone who rents the place for a few weeks or months, so you don't have all the work of weekly rentals, but who isn't there for months and months on end.

[lhamo]

Cute little space! The loft bed approach is going to limit your clientel, though -- not everybody wants to climb up and down a ladder to get in and out of bed. I'd carry major liability insurance with a setup like that, too.

If you don't intend to have someone there long-term I would not bother with a full kitchen. Most short-term people will be fine with a sink, microwave, toaster and coffee pot, plus MAYBE a hot plate. Full kitchen would really increase the cost of the remodel and if you are only using it for short-term stays/family guests I think it would be overkill.

I just watched an episode of "Income Property" last night that featured a duplex that two sisters were redoing so one unit could be an executive rental. It was a large apartment, but you might find some of what they discussed relevant, if you can find that episode on their website or hulu or something.

Personally, I'd probably go with the place with the larger carriage house and do a regular, full sized rental. More bang for the buck invested. I do like tiny houses, though.

[jennipurrr]

Ok...so maybe my idea sounded a little crazier than it is because I didn't fully explain the situation/location. To address the questions...

Doors/Windows - we would definitely be adding a new door. The next door neighbors and the link example have a nice french door. I would like something like that. Windows...had not thought about windows. The historic district has specifications for doors and windows. We would likely not have any trouble to get approval as an inlaw suite, etc.

I am not sure the exact size of the shed/garage, but it is big enough for a car to fit in and looks very similar to the one in the link. The downside to the house with the carriage house is its location. It is on a busy street/main road through/to campus and is only one block away from the edge of the historic district. Here that means one block away from apartments and "party houses" which can pack in 10 undergrads and are not subject to the occupancy limits of the historic district.

The historic code allows for renting to no more than two unrelated people. I do not imagine this sort of space accomodating more than two people and wouldn't rent to any group larger than that. They do not like short term rentals (which is what I would be doing) so if I did that, I would have to do it discreetly. Many people in this area do short term rentals discreetly.

The rental income for just renting it 14 days a year (7 home football weekends) is underestimated. I live in a college town and the house/shed is located about half a mile from the football stadium. For example, the Holiday Inn Express here has a rate of $330/night, all 14 nights required, so $4620 plus taxes and fees. It is about 4 miles from the stadium so that would entail $20 - $40 parking and if one has been drinking always the possiblity of a DUI. Lodging located within walking distance is scarce and pricey. I have known on big games a person to put cots in her living room for $100/night per cot. There is a house (grand and beautiful, not a shed) across the street from this neighborhood where the owners rent for $10,000 (you read that right) a weekend.

It might be an option to have a long term guest in off season, but I was kind of hoping not to have a lot of traffic in/out. There is always demand from students who are on their last semester and don't want to rent an entire year, or doing a co-op, etc.

We have two short term rentals nearby so we are experenced in the reservations, etc. There would be an ongoing cost for the linens and the upkeep. I would not want a seperate meter or anything like that, and hope to tie it in to our utilities. I wouldn't think the cost would be much for water/electric if it wasn't in use much of the year as our weather is mild, but not sure about that...

I guess its a pretty localized market as far as what stuff costs. The next door neighbors have redone the same shed as a home office, so they may be my best bet to speak to for accurate numbers for my area.

[Gardenarian]

It sounds like it would make financial sense. Putting a bathroom would be your biggest cost, so I would get an estimate on that first thing.

I am renting out my cabin sometimes, and it is really tricky figuring out how to insure it, how to claim it on taxes, etc. VRBO (http://www.vrbo.com/) has a nice guide to renting.

[MamaM]

http://tinyhouseblog.com/tiny-house/garage-conversion-into-tiny-home/

[iris lily]

You are in the south, right? Can you get by with electric baseboard heat? A window air conditioner if someone stays during the summer? If you can stay away from HVAC system, that saves a lot.

If you can avoid an HVAC system, then the main expense would be plumbing, including all that goes with it.

I can't help with costs because we've never actually fixed up our tiny houses, but for the outside. Well, we put in a new sewer at one place and that's $6,000, but you would hook into the property's existing fully functional sewage system. If you do none of the work yourself except perhaps for painting, I'd have to think this would cost at least $50,000 for 300 - 400 sq ft.

The cottage shown devotes too much space to the kitchen, the back wall of cabinets isn't necessary for a weekend rental. If you get RV sized appliances, that might be good. The loft bed is a bad idea and besides, you can work out sofa/converter beds, but sleeping more than 2 would be tight. Also you wouldn't need that big piece of storage furniture.

I'm guessing that roughed in plumbing for toilet and two sinks would be $5,000 - $7,000.

I'm trying to picture in my head the size of the single car garage I had at my first house. I guess it was big enough for an occasional stay.

[Mrs-M]

MamaM. Super-cool link! Thanks for posting.

[SteveinMN]

The historic code allows for renting to no more than two unrelated people. I do not imagine this sort of space accomodating more than two people and wouldn't rent to any group larger than that. They do not like short term rentals (which is what I would be doing) so if I did that, I would have to do it discreetly. Many people in this area do short term rentals discreetly.
Not to continually poke at the idea (it now sounds better than it did in your original post, though I wonder how good the football can be that people are paying that kind of money to attend)... I will merely point out that you can be lucky or not. Your insurance most likely will give you a very hard time about reimbursing any loss incurred when running a "discreet" business. I'm sure there's language to that effect in your policy now. So get insurance. Consider incorporating so that the business is run out of the corporation and you don't end up losing your house and your savings because someone managed to fall out of the loft (drunk or not) or slipped in the shower or shocked themselves or ... well, you get the idea. I realize there's risk in everything, but I'd think about how much of your world you want to risk for the few thousands you'll clear in remodeling and renting out the place.

Okay, back to everyone else telling you how good an idea this is... :)

[jennipurrr]

Steve, I really appreciate the constructive criticism! I want to hear all the "no, this idea is crazy and this is why" stuff...my DH is the one who usually has to deal with my random ideas.

We do have everything set up with insurance on our rental property, and we also have a personal umbrella policy. I bet the insurance would be completely different on the primary residence though and so that is something to investigate.

Football....ehhh...its not my thing (so glad the season is over!) but we have a very good team and it pays the bills in this town. We've won 3 out of the last 4 NCAA championships ;)

[HomemadeChange]

My DH would say Roll Tide and when will it be available?! Have you considered a composting toilet (not quite as scary as it may sound) http://www.woodlanddirect.com/Outdoor/Composting-Toilets and/or portable sinks http://www.portablesinkdepot.com/servlet/StoreFront ? These options combined with the previously mentioned window unit may save you A LOT of money. Of course, you may not be able to rent the unit for quite as much either. So it may be a matter of weighing out of pocket costs vs income produced.

[jennipurrr]

Haha Homemade Change, I couldn't charge someone on SLN those kind of rates! Do you all live in AL too or fans from somewhere else? I did have a secret on how to get the regular rate at the Candlewood Suites but I just put in a game this coming season and it is either sold out or the fixed it.

Composting toilets seem interesting...but do they smell? I have used basically outhouse type facilities before and they are so stinky I couldn't imagine having something like that...but this seems different.