Investing In A Backyard Office
Working from Home (WFH), outdoor spaces are both a new trend in real estate. Remote-work policies and the ongoing pandemic have only exacerbated this shift in our lives and work. Investors in real estate must optimize their properties to WFH. However, they should also consider how to best utilize outdoor space — especially backyard offices.
The desire to have a home office is growing, and there are only so many indoor bedrooms and spaces you can use. Why not make the most of your outdoor space? This article will provide an overview of tiny homes and outdoor offices. It will also discuss the pros and cons and whether investors should get involved.
Backyard office development is affordable.
You already have operating costs for your land. Adding additional living space outdoors will not increase your ongoing expenses. There may be some electricity and water, but backyard offices are not an additional cost. Additionally, since you already own the land, your return-on-investment (ROI) is higher because total costs include labor and materials.
Here are some benefits to backyard offices as an investment.
Building costs – Backyard offices are very economical to build and even buy turn-key.
Landscaping – Because your tenants already cut grass and landscape, there is a very little extra cost to install a backyard office.
Land costs – You already own the land. If you want to install any number of backyard offices, your costs will be strictly related to labor and materials.
Building permits – In most cases, you will require a building permit. However, it might be less expensive if you are renovating an existing structure. To better understand the requirements, it is a good idea to consult your local municipality and legal staff.
The cost of building a backyard office
How much does it cost for a backyard studio to be built? It all depends on the square footage and the finishes. It all depends on whether you hire a contractor or buy a pre-made office or garden shed from a company that specializes in tiny home design.
You can expect to pay $3,000 for materials. You can expect to pay approximately twice as much if you hire contractors to complete the job. If you are looking to build a small wooden office, where all materials will cost $4,000, then you will need to hire a handyman, carpenter, electrician, plumber, and possibly a plumber to install a bathroom. The total cost of the construction in this instance will probably be closer to $8,000.
Prefab outdoor offices can cost anywhere from $10,000 to $100,000, depending on the size and finish. A 150-square-foot studio office in a backyard could run you around $30,000. It is important to check if the prices include delivery and installation. Some backyard offices also require a foundational structure or a cement footing. These additional costs are not included.
What role can backyard offices play in investing in rental properties?
Optimizing real estate investments for outdoor space and office space is crucial as we move towards a more emphasis on working from home. This is where backyard offices come in. How can backyard offices increase the net operating income (NOI) of your properties?
Imagine if you could build a 150-square-foot studio for $30,000 all in. You may be able to get $400/month rent, with very few operating expenses. If you do it right, this office could be yours. This scenario would result in a staggering 16% cap rate for your backyard office project. This is just one backyard office.
You could also build an office in your backyard. You can get $300 per month from existing tenants to rent one unit, while the other is available for rent for $400 per month to someone nearby who needs the additional office space. Each unit will cost you $10,000 to construct. This scenario will result in an $8,400 annual increase in gross income, plus $50 per month in utility costs. Your total NOI increases to $7,800, at $20,000. This means that your backyard offices have a cap rate of 39%. It's not bad at all!
There are many styles and types of backyard offices
There are many options for backyard offices. These are the most common ways that real estate investors use backyard offices. The design should include a desk with lots of natural lighting.
Repurposed Studio shed: This is where you take an existing shed or cabin and convert it into a small office space. This can often mean putting in flooring and windows. You can also repurpose larger detached garages in the same way, but it will often cost more because of their larger size.
Prefab options : A quick Google search will reveal a lot of companies that make prefabricated small or tiny offices that can be shipped to your home and then installed. Prefab garden offices are a good option if you don't have the time or the desire to build the office yourself.
DIY backyard studio or cabin: While this is the most cost-effective way to build a modern shed, it requires the most effort from you. You can build it yourself, and you don't need additional contractors.
Hybrid backyard offices: This scenario involves purchasing a new backyard shed or workshop from a hardware or carpentry shop. However, you will need to ask the builder for adjustments to the garden-office model. This could include adding desk space or changing the layout.
Shipping container: A shipping container can easily be converted into a backyard retreat or an outdoor office.
A backyard office can double as a guest room or house, depending on its interior design.