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How much does it cost to build a 500 square foot guest house?

Building a guest home from the ground up will cost you around the same as it would to build a new house on a per square foot basis. With an average of $100 to $200 per square foot, this means a 500 square-foot guest house could cost you $50,000. You can choose to build a smaller guest house to save money.

upnest.com - Cost to Build a Guest House: What to Know - UpNest

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Want To Build a Guest House?

You’ve likely dreamed of having a guest house whenever your in-laws, relatives, or friends from out-of-town want to stay with you. Running into your father-in-law grabbing a snack in his underwear or having to wait in line for your own bathroom would make anyone long for a guest house. Fortunately, building your own guest house may not be so out of reach. Building an accessory dwelling unit (ADU) such as a guest house might be easier and more affordable than you think. An ADU can be a great way to supplement your mortgage through renting. And as multi-generational homes become more popular, you can save money on assisted living care by having your aging parents move in. Younger generations and those just out of college also benefit. Staying in a guest house can help them save up money while still maintaining privacy and independence. Building a guest house has a lot of potential benefits. But, before you get started, learn how to avoid the pitfalls and get the best return on your investment, including the cost to build a guest house.

Can I build a guest house in my backyard?

Before you begin drawing up blueprints, you want to be certain your city’s laws allow you to build a guest house on your property. You may need to apply for permits. Building a guest house is essentially building a smaller version of a house. You’ll need the right permits to create a foundation and to legally install plumbing and electricity.

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You’ll also want to fully understand your city’s zoning laws. Zoning laws determine the allowed square footage for your guest house, maximum guests permitted, the distance between the main house and guest house, and how many parking spots you’re allotted. Your zoning laws also dictate rental limitations. For many, the ability to rent out your guest house is a huge motive for building the unit in the first place. You want to be sure you’re able to actually use it as a rental. You might run into restrictions in terms of long-term renting and, in particular, short-term renting. With the rise in popularity of Airbnb and similar short-term rental companies, many cities set restrictions to prevent their housing market from being turned into hotels. Additionally, if you’re part of a homeowner’s association, you’ll need to run your guest house plans by them first. HOA’s have their own specific rules when it comes to new construction and renting.

Is it worth the cost to build a guest house?

Whether you’re planning on using your guesthouse for relatives to stay, renting it out for some extra cash, or hoping to increase your home’s value, a guest house can be a great investment. You may even consider moving into the guest house yourself and rent out the main home, earning you even more money. That’s why the cost to build a guest house is usually outweighed by such benefits. But, before you build you’ll want to be clear on your budget and the design of your guest house. For instance, custom builds can be more expensive and take longer to construct. In terms of design, if you’re planning on moving your aging parents in you’ll want to make the guest house accessible. You may design the layout to be one level or have fewer stairs.

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If you are planning to use your guesthouse as a rental, research your market first. Do you live in a popular area vacationers will want to stay? Are you near a college campus where university students are looking for housing? Make sure you have a market before you build. You don’t want to spend your time, energy, and money only to have your guesthouse sit empty, earning you nothing. While renting your guest house can give you a sizable ROI, keep in mind you’ll be taking on the responsibility of the landlord. Make sure you feel comfortable with landlord duties. This includes vetting renters, fixing repairs, and possibly even evicting tenants. You also will want to manage your expectations in terms of construction time. Building a guest house from the ground up can take anywhere from four months up to a year. And this doesn’t include the time for design planning, obtaining permits, or hiring contractors. These tasks could add on an additional six to ten months.

How much does it cost to build a guest house?

The cost to build a guest house varies considerably based on your design, materials, and location. Generally, if you live in an area where the cost of living and real estate is more expensive, your build will cost you more. Similarly, the higher quality of materials and the more customized design, the more expensive the construction. Building a guest home from the ground up will cost you around the same as it would to build a new house on a per square foot basis. With an average of $100 to $200 per square foot, this means a 500 square-foot guest house could cost you $50,000. You can choose to build a smaller guest house to save money. However, you’ll get the best ROI on a guest house that’s at least 500 square feet. A less expensive option than building from the ground up is to convert an existing structure into your guest home. An old shed or garage makes for great guest house options. The cost to transform your garage into a full-on functioning guest house will range between $15,000 and $30,000. This cost includes adding plumbing, connecting to sewer and gas lines, adding a kitchen, windows, exterior door, and proper ventilation. If you’re looking for something even cheaper, your best bet is to go with a ready-made modular structure. These types of guest homes come in a kit you can build yourself. Some of these units cost only a few thousand dollars, you’ll also find luxury modular units that run up to nearly $100,000. Keep in mind, you’ll still need to cover the costs of insulation, heating, electricity, a foundation, and plumbing. With both new construction and conversion projects, be sure to budget for an architect or contractor who specializes in ADUs. Working with a contractor will help you maximize your available space and prevent you from making design decisions you may have to correct later, costing you even more money.

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Can I get a loan to cover the cost to build a guest house?

You have several loan options to get you started on building your guest house.

Construction Loan

One option is a construction loan. A construction loan is a short-term loan, usually for a period of a year. With this type of loan, you may be required to make interest payments while you build your guest house. Or, the loan may be structured where you need to pay off the entire loan by the end of construction. Construction loans are considered riskier, so you may face a higher interest rate.

HELOC

Another loan option is HELOC or home equity line of credit. A HELOC uses your home’s value as collateral and operates similarly to a credit card. You typically can access HELOC funds for five to ten years, drawing the amount you need as long as you stay under your limit. After this period, you pay back any outstanding balance with interest.

Cash-Out Refinance

With a cash-out refinance, you replace your old mortgage with a new one that is more than the previous loan balance. The difference is then paid to you in cash, which you can use to finance the cost to build a guest house. Note, a cash-out refinance typically comes with a higher interest rate. If you’re on the fence about whether building a guest house is worth the investment, consider talking to an experienced real estate agent. A skilled agent can give you more insight into your local housing market and if there’s a demand for properties with guest houses. Your Realtor can help you estimate the potential ROI for whenever you decide to sell your home, providing guidance on how much money, time, and energy is worth putting into an ADU investment. When you’re ready to talk with a real estate agent, UpNest can connect you with top local agents. UpNest, which is owned by parent company Realtor.com, is a no-cost service for home sellers and buyers to find the best real estate agents locally. The UpNest platform allows you to compare multiple agents in your area so you can compare reviews, commission rates, previous sales, and more. Our network agents have been carefully vetted and often offer competitive, lower than average commission rates to UpNest customers. There is no obligation to sign up with one of our network Realtors, but when you can potentially save thousands on commission – why wouldn’t you? If you’re ready to get started, just enter your zipcode below!

Agents Compete, You Win.

upnest.com - Cost to Build a Guest House: What to Know - UpNest

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