Tuesday, April 4, 2023 / by Amy Brown
But when coming from other parts of the U.S. it can be difficult to wrap your head around the high cost per square foot as compared to your hometown.
There are several solutions to beating this conundrum with the most successful one being the short term rental option. While that poses its own set of issues within the city limits with the Home Stay Law, there are ways around it. Also, this law does not apply in the county so any of the suburbs would have that options barring any HOA restriction.
There are two ways to stay in the city, have a short term rental, and still comply with the law.
Option #1 Finish the basement space
Many of the homes in Asheville are built up and not out, therefore, having 3 living levels. While most basements will be unfinished, there are some that are and can easily be converted to short term rental apartments with separate entrances. Many new construction projects are also doing this as an inclusion now knowing that the passive income is a necessity in this area.
This is an example from a property that I have under contract for one of my lovely clients currently. The space does not have to be large. The basement rental unit totals 269 sf. A small apartment space like this one in a great location can easily rent for $100-150/night. With a 70% occupancy rate, you are estimating an annual income of $31,937 or $2,661 per month. For an $800,000 home with 20% down at today's interest rates of 6.3%, that would be a monthly mortgage payment of $3,962. With the supplemental income, your mortgage is now $1,300/month!
Option #2 ADU (Accessory dwelling unit)
While this option requires more up front capital, the long term income can be much greater as the average rent is higher.
An accessory dwelling unit can be a site built home or a tiny house structure. What it cannot be is a manufactured home.
This is a home that closed last year off of N. Liberty St. in the Chestnut Hill area. This seller decided to build a stick built home adjacent to his primary home. It has a loft bedroom with a full bath and downstairs small office or guest bedroom with a 1/2 bath, living room, and kitchen. Total square footage is 808.
The key is keeping it simple in design with single pitch roofs, minimalist floors such as stained concrete, and simple kitchen and bath designs. Remember, this is not your primary living space but a vacation space for someone else so don't get caught up in the small details, which only escalate the cost.
A separate home short term rental such as this one can easily rent for $400/night. I estimate that today's market value for this home is approximately $1.2M. With 20% down, 6.3% interest rate, the mortgage payment is $5,943/month. Since this is a more expensive rental, let's calculate a 55% occupancy rate at $400/night. That equates to an annual income of $80,300 or $6,691/month. Now you are getting paid to live in your own home, a profit of $748/month!
Part of what I specialize in is finding the right investment and figuring out how to make that lucrative. I also have a book of business designed to facilitate construction of accessory dwelling units, remodels, you name it!
Use me as a your financial guide through the real estate market!