Will a guest house be a beneficial part of your property?

Guest houses are often associated with lavish luxury homes. You might picture a sprawling mansion with a smaller—but still spacious—secondary residence perched on the edge of a perfectly manicured lawn.

With the advent of the "tiny house movement," this vision isn't necessarily accurate. Many homeowners have found that they can fit a cozy detached living unit on their property.

These guest houses, also known as accessory dwelling units, provide an opportunity for homeowners to collect rental income or provide a unique place for visitors to spend the night. Some homes have been nicknamed "granny pods" because they allow an aging parent to live close to family members but still have a degree of independence.

If you're interested in adding a guest house to your property, you can first assess the resources already available to you. You might be able to convert an existing garage or garden shed to living space, and this option is usually easier and more economical than constructing an entirely new building.

Many things have been ingeniously converted into residential space, and guest houses give you a chance to express this creativity. Tracy Anderson, writing for the home improvement professional Bob Vila, says some options include converting an old rail car or shipping container to a quirky and inviting space.

No matter what kind of guest house you're planning, it's important to make sure you're following all of your community's zoning rules. Erin Danly, writing for the legal site Avvo, says homeowners associations and subdivisions often forbid these structures from being included on the property. You'll need to make sure to pull any necessary building permits for the project and follow rules such as how far the guest house should be from property lines.

At a minimum, the guest house needs to be considered safe and fit for human habitation. Will Van Vactor, writing for the legal site Nolo, says this usually means the structure will have to abide by the same building codes that apply to the construction of larger homes.

Checking these rules will alert you to any hurdles you might face in building a guest house. Many communities don't have set rules on accessory dwelling units, and this type of structure might run afoul of certain rules, such as requirements that the building have at least one room of a certain size. Local rules may also require that the property owner live in either the main residence or the guest house.

It can be challenging to make a guest house which will be comfortable for visitors, particularly if you're trying to fit in a kitchen and other amenities in order to rent out the space. Danly says an architect will be an invaluable part of the planning process, helping you to design a structure that will meet your needs and complement your property.

A guest house can result in some considerable expenses, so you'll need to prepare for these at the outset. The construction process may involve establishing new water, sewer, and electrical lines to serve the structure. It can also be difficult to find financing for this type of project, since lenders may not be willing to provide a loan for the construction of a guest house. If you are planning to rent out the property, you might want to set up different utility accounts so that tenants are responsible for their own services.

One benefit of a guest house is that you can open it up to tenants and collect rental income. Short-term rentals allow you to host guests for only a brief period of time, but you'll want to make sure the property is prepared for these visitors. Jamie Wiebe, writing for the National Association of Realtors, says this includes keeping the home clean, getting professional photos to accompany the guest house's listing on short-term rental websites, and furnishing the property.

Long-term tenants can provide a steadier income stream. However, you'll have to be comfortable sharing the property with renters, and must promptly address any maintenance issues that come up. You'll also need to screen any tenants to avoid potential conflicts.

Research other rental properties in the area to help you set a reasonable price per month, or per night if you prefer a short-term rental option. It also helps to consider any rent funds as supplemental income. If you rely on collecting a certain amount of rent each month, you might find yourself coming up short if a tenant leaves or the guest house is vacant for longer than expected.

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