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Guest House Building Cost: What You Need to Know

Guest House Building Cost: What You Need to Know

A guest house, regularly referred to as an ADU (accessory dwelling unit), is a secondary housing unit on a single-family residential lot. Generally, a guest house is completely detached from the main house, although that is not always the case. In the last decade, building guest houses or granny flats on a property has become a more common trend in the country. What with seemingly ever-rising housing and rental rates, many have found it convenient to create a space on their property for their elderly parents, children out of college, visiting friends, or as a rental unit.

In January of 2016, California enacted granny flat laws that were intended to make it simpler and more cost effective to build a guest house on their land or to convert an illegal additional dwelling unit into a one that is now legal. The three bills were:

  • Senate Bill 1069 which decreases or eliminates parking requirements and utility hook-up fees, and quickens the approval process for second units attached to a primary residence.
  • Assembly Bill 2299  requires local second-unit ordinances to include ministerial, non-discretionary approval for any second unit that meets city requirements.
  • Assembly Bill 2406 streamlines the process for homeowners converting an existing bedroom into an attached studio living unit.

Homeowners will still need to hire a contractor and obey local building codes, but these new regulations make it better for those who wish to build a guest house no bigger than 1,200 square feet. Although building a new detached guest house can be quite an expensive undertaking, there also may be opportunities to save money by converting a pre-existing structure into a legal permitted guesthouse at a much lower cost than an entirely new dwelling. Regardless, if you are looking to add a guest house to your backyard, you should know the types of ADU’s, the guest house costs to build, and the benefits of building a guest house.

Types of Guest Houses

If you are wondering how much it costs to build a guest house, much of that will have to do with the structure you chose. Although one might typically think of a guest house as an entirely separate unit, there are a variety of additional dwelling unit designs and concepts, depending on your property, budget, and existing home. It is important to note that the secondary housing unit is what really defines a guest house, at least more so than its specific structure. That said, some features that help define guesthouses are:

  • Guest houses are add-ons and or adjacent to the central housing unit.
  • Guest houses are considerably smaller in size than the average home in the states. As mentioned, in California they may be no bigger than 1200 square feet.
  • Guest houses are generally developed at a later point than the original construction of the primary residence

Types of guesthouses include:

  • Detached new construction guest houses – Often referred to as granny flats, casitas, backyard cottages or laneway houses. Detached guest houses are the most common type of ADU. They are stand-alone structures that, as their name implies, are entirely apart from the primary residence. They can be constructed over an existing building, like a detached garage, or built separately. The cost of building a granny flat or guest house is typically more expensive than other builds since you are going from scratch and not utilizing any pre-existing structures.  
  • Garage conversion guest houses – Some homeowners decide that they do not utilize their garage space enough, or just fill it with junk. In such cases, the garage area may be remodeled into a new attached guesthouse.
  • Above garage or workshop guest houses – Sometimes referred to as carriage houses or garage apartments, these guesthouses are commonly built above a detached garage although in some cases it may be attached to the primary residence.
  • Bump out guest houses – Some homeowners find it more convenient to add additional space to their already existing home. This add-on or bump-out will often still have its own private entryway and kitchen or kitchenette.
  • Modular guest houses – With modular guest homes, the vast majority of the construction occurs in a factory, and only the finishing work and foundation work is done on site. These types of guest houses are popular since they are far less expensive and take less time to install.  Typically, the average modular guest house that is approximately 1,200 square feet would cost $65,000 to build and install.

What Size Guest House Should You Build?

When estimating the likely average cost of your guest house, it is important to remember that they are more expensive per square foot than building a primary residence. This is because a much more significant percentage of the house’s blueprint is meant for features that cost more, like a kitchen or a bathroom. One also has to figure in the average cost of permits, fees, utility hookup, hardscaping, and landscaping. In California, where building is expensive, the cost of a guest house build can be anywhere from $200 to $500 per square foot in addition to all those fees mentioned above. Therefore, a 1,200 square foot guest house that costs $200 per square foot would end up being north of a quarter million dollars. Even if this is within your budget range, you also need to consider that a 1,200 square foot guest house may be too large for your property and might dominate the extra space. If you do not have a big backyard, you have to weigh how much of that space you are willing to sacrifice for this new guesthouse.

Before you ever break ground, you should have a good idea of what the purpose of the guest house is for, and who is planning on using it. If it is for older in-laws, you may need features that accommodate elderly with disabilities such as ramps, wide doors, or special bathrooms. If it is a rental, it should have all the features and amenities of a house, but just on a smaller scale. If it is for personal use and occasionally for guests, then that guesthouse likely does not need its own kitchen. By having a solid grasp of your intentions behind building the guest house, it is easier to decide what features you want to be installed and how large you want to make it.

The Benefits of Building a Guest House

When weighing the potential costs of building a guest house, it is crucial to keep in mind the potential benefits that might outweigh the costs of construction. They include:

  • Additional space – The most obvious benefit of adding a guest house is the fact that you have extra space for either family members, in-laws, guests, renters, or yourself. For those who will only occasionally use it for housing, a guest house is a perfect space to utilize as an office, music studio, or an adult clubhouse.
  • Additional income – If you decide to use this space as a rental, a guest house can generate extra income for your household. The great thing about the guest house is that most of the cost is upfront. Once it is built, the additional $10,000-$30,000 of annual rent money comes to you without much effort or cost at all. This piece of space that was previously just sitting there can now be used to help you increase your wealth.
  • Hardscaping and landscaping upgrades – Often times, it takes a large project such as constructing a guesthouse to get around to addressing your out-of-date hardscape or landscape. Maybe you want to remove your lawn because of the cost of upkeep, or you want to fix your driveway that is cracked. A guest house gives you the opportunity to make alterations to the exterior of your property that you otherwise would not address.
  • Future non-rental use – There may reach a point when you no longer need all the space of your current residence. The kids are grown up and out of the house, so now you are not utilizing your home as it is meant to be used. A future option might be to use the guest house as a retirement spot, while you rent out the primary residence to a family that can use the space. You still get to remain on your property but make even more money than you would by renting the guest house.  
  • An introduction to being a landlord – For those who are interested in possibly investing in real estate, a guest house provides a much lower cost opportunity to see if you have the disposition to be a landlord.
  • Increases the value of your property – Like a new paint job or a remodel, a guest house home improvement project naturally increases the value of your home. Although it does not count towards the total square footage of the primary residence, a guest house is a great incentive for someone looking to rent or to have a separate space for adult children or in-laws.
  • Comfortability – When hosting visitors, a guest house gives them a space that is private and allows them to feel more like they are at home. While it is lovely to have friends and family, especially for any time longer than a few days, you want your space and privacy, and they likely desire their own privacy as well. A guest house allows you to host without feeling overwhelmed or crowded in your home.
  • Privacy – Guest houses can be fantastic spaces for your kids to play or spend time in when you feel like you need time alone. It also offers a safe haven, if you need some time to yourself and want to get out of your house.

What you need to know before building your Guesthouse

Before you break ground, consider the following questions to save you from paying more in the future for changes, remodels, or fixes.

  1. Would I live in it? This is the very first question you should ask yourself when designing your guest house. It should be an extension of your house’s feel and design, even if it is not physically attached to the house. You should build a guest house that you would want to stay in and make it a space that you would like to utilize.
  2. How is the lighting? It is all too easy to forget about the lighting of a space, until it is too late, but it is such an essential factor to consider. If your main house is on a different part of your land, it may receive more or less natural light. If it has less, you may need larger windows, skylights, or additional lighting to prevent the guest house from feeling like a dungeon.  
  3. Is the floorplan intuitive? Even though the space is tiny, there should be a natural flow and logic to the design of a guesthouse. If there is a kitchen area, it should be easily accessible and have plenty of room to navigate as well as ventilation or windows nearby for smoke or the inevitable smells of cooking. Because a guest house’s space is so tiny, there must be storage spaces in creative or unique places.
  4. Have you handled all the necessary paperwork? – A mistake that property owners all too often make is to begin planning the guesthouse with an architect without first meeting with a real estate attorney and getting approval from either the city planner or the homeowner’s association. If you act without making sure all your permits and paperwork is accepted, you may have to destroy any work that is done prior to approval. As you might imagine, acting before you have the green light could exponentially increase the costs of building your guest house.


Building a guest house can be an expensive undertaking, but one that is well worth it in the long run. Such an investment can provide you with extra space, a source of income, and increase the value of your home. Be sure to plan thoroughly and know exactly what you want so that the cost of building a guest house, tiny home, in-law suite, or backyard cottage fits your budget.



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