Having a guest house is an intriguing option when purchasing a home. Recently a large demand in interest for vacation homes has buyers hoping to find a vacation home with a guest house. A guest house allows the homeowner to host in-laws, adult kids, friends, etc. to live or vacation with them. But is a guest house on a property worth the extra cost?
What will the Guest Home’s Main Purpose Be?
Guest homes can be versatile. It can host in-laws, kids home from a break at school or just coming to stay for the holidays with their own kids, friends from out of town, close friends you want to vacation with, it can be turned into an extra space to have a party in that is not in the immediate house so clean up is not such a hurried ordeal, and more.
Or maybe you see it as the opportunity to become a rental. Guest homes can be great rentals or short-term vacation rentals. Just make sure to check with the local zoning laws where it pertains to renting a home. You will also need to manage the rental and keep it in top shape or hire someone to do so.
There will still be some Invasion of your Personal Bubble
Even though your guests are in their own area of the property with everything they would need to stay comfortably on their own, they are still on the property. Consider your comfort zone as you are now sharing outdoor spaces together and there will be times when everyone is hanging out together in the common spaces of both homes. Or if you are renting you will be sharing some yard space with strangers.
Financing has More Requirements
Depending upon what you plan to use the guest home for, lenders may adjust the interest rate they offer, options they give, or the loan limits. If you plan to rent the guest home it could give you more borrowing power because it will be seen as an investment.
It is not uncommon for lenders to ask for a larger down payment on a property with two homes though.
Will it Increase the Home Value?
If you plan to sell the property sometime in the future, you of course will want the home to have earned some equity. Homes with guest houses are growing in popularity as more families choose to live in multi-generational situations, or people look at new ways to make passive income.
But, while guest properties are more in demand some buyers may find trouble securing financing on a property with two homes, so this makes the potential buyer pool smaller when you are trying to sell.
What are the Added Costs?
This is probably the biggest consideration to make when deciding to purchase a property with a guest home. There are several extra costs to having a second home on your land beyond the extra cost of the purchase price. There will be added utility costs, added costs of furnishing, roofing, painting, cleaning, etc. It will have all of the needs of the main home, just on a smaller scale, including an added insurance cost.
There are many great reasons to purchase a home or vacation home with a guest house, but also some things to consider before making the big investment.