Jen M, Other/Just Looking in 95816

Do guest houses hurt or help a property's resale value?

Asked by Jen M, 95816 Sun Jan 18, 2009

I live in the Pasadena area and we are considering building a guest/mother-in-law house on our property. Do guest houses add or detract from a property's resale value? Would we be adding $100K and not be adding on to the general worth of the house when we sell (many years down the line)?

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6
Jen,

Guest houses are a tremendous bonus with the vast majority of buyers I have worked with. It can be a huge selling point with many cultures who want to have the grandparents living with them, but also lending some independence. It can also be an artist's/musician's/photographer's studio, or possibly rental income.
0 votes Thank Flag Link Thu Jun 26, 2014
Hello Jen,

First of all always do construction within the law, meaning submit your plans to the city before moving forward. Use licensed professionals to do the work too. No one can predict the real estate market when you decide to sell however, it has been my experience that any legal additions/constructions that are permitted do add overall value to your home when you decide to sell.

Much Success!

Von
0 votes Thank Flag Link Wed Jun 4, 2014
It depends on a couple factors...but generally the answer is yes. Some things to consider are:

1. A detached guest house does not have the same value per foot as the main house....in most instances. It is generally viewed as a percentage of the per foot value.

2. It also depends on how many bedrooms you currently have vs where you end up with the addition. For instance if you have a 2 bedroom home and now have a 3rd bedroom in the form of a guest house...this is most likely a positive thing. If you have a 5 bedroom home and are now adding a 6th....and all the other homes in your area are 4-5 bedrooms....the addition may not yield you much or could even be less than the cost of construction.

3. It really depends on how valuable on average homes are per foot where you live....for instance, in my neighborhood homes go for $250 to $350/ft. If I can build (and am doing so now) an addition to the house for $120/ft.....even if there is a discount off the value per foot from the main house....I'm still way ahead.

Bottom line is, look before you leap.....and ask you real estate professional before you start writing checks.
0 votes Thank Flag Link Sat May 31, 2014
In most cases it will help. It sounds like you may be considering building one. Some things to be aware of:

Is it common in that neighborhood to have a guest house? If not, the premium you might expect for having one might be limited. Reason being is that people typically look in areas where they can afford and if your home is priced outside of an acceptable range for the neighborhood it will be harder to sell.

Will you be eliminating a significant portion of the yard area? This somewhat related to the first question in that people may desire your neighborhood for large yards and/or pools, and if yours is limited by the guest house it could impact the value you would expect to gain from having the guest house.

Make sure it conforms to the styling of the main home and neighborhood, and be sure to use quality workmanship for the construction.

Make sure it is permitted and confirm whether it can be used as a rental, if that's your plan. Many areas allow "granny units" but not rentals. So, if you are planning to have the rental income from the guest house enhance the value, that will be something to consider.

There's more of course but hopefully that is helpful to you for now. Good luck!

Sincerely,

James Stevens
(818) 636-9394
james@jlsrealestate.net
0 votes Thank Flag Link Tue May 22, 2012
What I've found is that building a guest home will cost more than you'll ever get back. Your best bet is to buy a home with a guest home. But if you must, follow these suggestions.

1. The guest home is well cared for.

2. The guest home is permitted by your city or county.

3. if you buy a home and guest home with the above criteria. You'll get a better return because in most cases if you will not have to pay the full construction costs to build the guest home. Hint, buy a home with a guest home already permitted and installed.


I once appraised a home when the owner purchased an older home and built a home on the same lot. So the subject offered one new home and an older home on the same lot. At the time, the zoning permitted the two homes on one lot. Now the zoning does not permit the splitting of the two lots. Ouch.

The old home and the lot was purchased for $300,000. The new home costed $300,000 to build on the same lot. The market value for both was around $450,000 with support for both homes in the area and homes that offered guest homes and/or second homes located on one lot.

The bank will almost always have the appraiser appraise the main home and give contributory value to the second home with support from at least one comparable sales with similar amenities such as the guest home. In this case and in most cases when you are building new, it is a true money loser. If you are building from scratch and it is feasible to buy a separate lot or spit the lot, do that. If not consider your options. Figure out the value of a home and a second home near your home and the cost of a guest home and then decide what to do.
0 votes Thank Flag Link Mon May 21, 2012
Hi Jen,
I am a Realtor at Dilbeck in La Canada and I can say with certainty that a guest house that is built with permits is an added feature that would add value to your home. It most likely in this market would not be a dollar to dollar value, but I can say that many people find a guest house to be a great amenity and I have had several clients who desire this feature. Depending on the zoning of your neighborhood the guest house may or may not be able to be considered a legal rental, but in an era where many people are now desiring the extended family to live together, a guest house provides a great option. I hope this has been helpful. If you would like to talk further I would be happy to help!
regards,
Sue Eller Realtor Dilbeck GMAC (818) 668-4005 sue.eller@dilbeck.com
0 votes Thank Flag Link Sun Jan 18, 2009
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