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Rent the Backyard (YC S19) wants to build a studio apartment in your yard

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Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#121

Post by davnicwil »

tbyehl wrote: post #101
tbyehl wrote: post #97

Earlier quoted context omitted.

Worse than that, the article states that you have to buy them out as part of a sale. My house has an ADU and came with paying tenants. Zillow thinks my place is worth about $30K more than the average on my street... but I also have a pool (couple others do) and am the only one with a legit 5th bedroom, so I'm thinking the market value of that ADU is roughly nothing.

As another piece of anecdata, my previous home had a spacious and nicely finished detached garage in addition to a single-car attached. It values the same as other similarly sized homes in the subdivision without a detached garage. It definitely had value to me as a workshop/office/man-cave, but not-so-much the market at large.

Interesting. I sort of struggle to imagine anyone who wouldn't value an extra garage at anything - even if your need for it is just hypothetical or aspirational - or even just as cold storage space, which has not insignificant rental cost should you need it.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#122

Post by quickthrower2 »

gxespino wrote: post #90
quickthrower2 wrote: post #84

I don't like the idea of taking a free and simple house, which you can sell, and myring it in a contract with another company (no less a startup!) so that when I want to sell, I need to explain the agreement I have with this other party to annex the land. I reckon it would devalue the house. I think people would be better off borrowing the money and building their own. Where I live (not in US) you might spend say $10…

Who has time to manage a construction project? Just show me where to sign and send me my monthly checks.

There are existing companies that will manage a construction project.

Plus if you are doing this for the money you might want to shop around for a few quotes.

Send me the cheque’s is fine and I understand (I’ve used Adsense before!) but this affects the house you live in and for most people their biggest asset. so a bit of forward thinking is wise here.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#123

Post by quickthrower2 »

Empact wrote: post #100
gxespino wrote: post #90

Earlier quoted context omitted.

Who has time to manage a construction project? Just show me where to sign and send me my monthly checks.

Definitely appreciate that many will benefit from farming it out, so I think this company substantially expands the addressable market, but in support of DIY (as someone who was raised in the house my father built), building your own such modest project is very achievable, particularly if you farm out electrical and plumbing concerns. With respect to managing contractors, my understanding is that roughly daily superv…

Why do you have to supervise the work of the trades but not this startup? Why are they more trustworthy? If they are ... then you can probably get someone else who is trustworthy to do the job for straight money rather than owning part of your house.

If this startup did what they did but just arranged finance as a broker and acted as a letting agent I think it’d be a better deal. The issue I have is the splitting ownership and income. I don’t think that’s in anyone’s interest.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#124

Post by oftenwrong »

sburl wrote: post #76

Hi everyone, my name is Spencer and I’m one of the co-founders of Rent the Backyard. Rent the Backyard was founded to help homeowners who want to earn extra income from their underused backyards but don’t want to spend a ton of time or money to make it happen. Rent the Backyard provides a turnkey solution — we handle all the logistics of putting a studio apartment in your backyard — helping you earn $10-$20k per year…

>without needing to borrow money and become a part-time construction manager.

I doubt this makes it worth it for most Bay Area homeowners. They could take out a loan, build an ADU, and keep 100% of the rental income, paying off the loan completely in a shorter timeframe. They can hire property managers as-needed.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#125

Post by nradov »

tbyehl wrote: post #97
quickthrower2 wrote: post #84

I don't like the idea of taking a free and simple house, which you can sell, and myring it in a contract with another company (no less a startup!) so that when I want to sell, I need to explain the agreement I have with this other party to annex the land. I reckon it would devalue the house. I think people would be better off borrowing the money and building their own. Where I live (not in US) you might spend say $10…

Worse than that, the article states that you have to buy them out as part of a sale. My house has an ADU and came with paying tenants. Zillow thinks my place is worth about $30K more than the average on my street... but I also have a pool (couple others do) and am the only one with a legit 5th bedroom, so I'm thinking the market value of that ADU is roughly nothing.

Zillow estimates are not to be taken seriously in circumstances like that. The point would only be valid if the valuation came from a professional appraiser.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#126

Post by wil421 »

nradov wrote: post #125
tbyehl wrote: post #97

Earlier quoted context omitted.

Worse than that, the article states that you have to buy them out as part of a sale. My house has an ADU and came with paying tenants. Zillow thinks my place is worth about $30K more than the average on my street... but I also have a pool (couple others do) and am the only one with a legit 5th bedroom, so I'm thinking the market value of that ADU is roughly nothing.

Zillow estimates are not to be taken seriously in circumstances like that. The point would only be valid if the valuation came from a professional appraiser.

My house gained $100k after I bought the house and Zillow realized it was renovated. A few other house have sold (including Zillow buying one) in my neighborhood and my house is on the high side of the average price.

It makes me wonder why the estimate gained $100k in 60 days. Once Zillow bought a house of course everything went up.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#127

Post by nradov »

iancmceachern wrote: post #85
JMTQp8lwXL wrote: post #17

I don't have a backyard, and nobody I know in my area that also makes six figures+ a year has one, either. This trend has been documented [0]. Granted, my cohort is all earlier in our careers. But with years of saving, much of it prioritized in 401k's, IRAs, and HSAs, I don't have enough left for a down payment on a single family residence. [0]: https://www.washingtonpost.com/business/2019/02/21/are-you-c...

Same here, and if I were able to afford a downpayment I would live in daily fear of an earthquake because I wouldn't be able to afford Earthquake insurance, and if I did I wouldn't have the 20% deductible in the bank. I'm convinced that most non-wealthy bay area homeowners are essentially betting their financial future on there being no earthquakes here until the house is greater than 50% paid off. Tenuous is a fitti…

California building codes have been pretty strong for many years. Only older residences are likely to suffer catastrophic structural damage when "The Big One" hits.

Earthquake insurance is a terrible deal. Instead of paying insurance premiums, put the money toward earthquake safety retrofitting and saving an emergency fund. There will probably also be some state and federal disaster zone financial assistance.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#128

Post by nradov »

JMTQp8lwXL wrote: post #75
sjg007 wrote: post #57

Earlier quoted context omitted.

I mean.. move and work from home? Or sacrifice some of the retirement savings to get a down payment? Or wait for the market to crash?

When the upper incomes begin to see affordability issues, you have an unhealthy market. I like life with minimal use of a car. Urban areas areas are far friendlier to a car-free lifestyle. Also, homes in the surrounding suburbs aren't that much cheaper to meaningfully change the numbers. Another 5 years of savings should do it. So, 10 years to come up with just a 20% down payment. I'd rather not compromise my future…

Building real estate equity is essentially a form of retirement fund contribution.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#129

Post by nradov »

timwaagh wrote: post #120
simonebrunozzi wrote: post #7

Earlier quoted context omitted.

I will try. In the US, there is the concept of Accessory Dwelling Unit - essentially, you can build a small shed in your backyard with a much simpler process, including the paperwork, permit, etc. If you are a homeowner, you can do that yourself - it means taking care of the permits, finding a construction company, etc, and putting money down, probably in the ballpark of 100-150k to do a good job. After this, you can…

if having someone rent the equivalent of a garden shed is all legal in the US, then they only need a few 'fools' willing to forgo 50% of rent to get rich. It is really quite cheap to build a shed (a few thousand in materials and it's really not that hard. construction companies are not cheap, but since people build sheds themselves all the time you would not really need them. in most non-US jurisdictions, this would…

ADUs in California aren't really sheds. They are still subject to the residential building code.

Re: Rent the Backyard (YC S19) wants to build a studio apartment in your yard

#130

Post by jaclaz »

sburl wrote: post #103
crimsonalucard wrote: post #22

In the bay, rent is so high this makes no sense. Why would I give away 50% of rent for something that can pay off my investment in one to two years? Even with the headaches 50% is not worth it. 20% maybe.

Unfortunately, a fully-featured unit is really expensive. For a unit like the ones we build (full bathroom with shower, kitchenette, on a full foundation) you'd be hard-pressed to build a unit for less than $100k. This number assumes you're spending a whole lot of your time working on the project. People are building these units and we're excited to see the stock of housing rise in the Bay Area but most people won't…

Ok.

Can we have a (minimal as you want) financial plan?

I mean, let's say that the building (by a professional contractor, with architect/engineers/whomever professional assistance, with all permits, etc., i.e. "turnkey") is going to cost to a "normal" person US$ 120,000 (or if you prefer 20% more than your $100K (which sounds to me appropriate, probably something in the 50-60 sqm or 500-600 sqm net surface).

Example of such an ADU:

https://crossconstruction.com/wp-content/uploads/2019/03/Des...

How much is the expected income (rent - taxes) per year? US$ 20,000 per year or 1,600 US$/month?

How much is the rate of the mortgage if you "simply" borrow the money from a bank? (let's say a minimal down payment of 10,000 and thus a loan of 110,000)

It should be (roughly) anything between 500 and 600 US$/month for a 30 years mortgage (fixed rate), let's make it 7,000 US$/year.

Besides the downpaynent of 10,000, at fixed prices (which is likely NOT the trend for rents in an area where people resorts to living in ADU's) you get 1,600 US$/month, spending 600, i.e. a net of 1,000 per month, so first year you get nothing (to compensate the down payment) and for the remaining 29 years it makes US$ 377,000 (29x(20,000-7,000).

With your formula, it is 30x10,000=300,000.

But - IF the rents ar going to increase in these 30 years - the difference will soon become huge.

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