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Money, money, money

You are probably wondering how much it would cost to build a small house in your backyard. Unfortunately, there is no precise answer because it depends on a lot of factors, but here are some things to keep in mind:

  • As far as cost per square foot goes, other things being equal, building a small house is not cheaper than building a big house because fixed costs (project management, etc.) are exactly what they are: fixed.
  • Per square foot cost of building a smaller house is also higher because there is more work per square foor that needs to be done compared to a bigger house (in a bigger house, a lot of space is just taken by the floor, but in a smaller house, there is more cabinetry, etc. per square foot, meaning more complications, so the labor cost would be higher).
  • Yes, permit fees for building an accessory dwelling unit ("ADU") are smaller than fees you'd pay for a brand new house.
  • Costs may vary, especially at the time of uncertainty, so don't count on the original estimate. Between the time I started working on the permit and the time it was approved (3-4 months) prices of some materials doubled, which raised my original estimate by about 15% (yes, I am looking at you, lumber!).
  • If you can, do not build during pandemics. There are a lot of things in addition to cost of materials that will cause you pay more compared to normal times. For example, due to supply issues, a lot of things (doors, lights, cabinets, and such) are not available. Like, you can't get them at all. Or you'd have to wait months (and there's a chance they wouldn't come). Sales are also few. When I started, I assumed I would build an IKEA kitchen with their standard 20-30% discount because IKEA used to have sales on kitchen cabinets several times per year. Since COVID started there has not been a single sale (and no sales were expected in the foreseeable future).
  • You will be required to install solar panels, even if your primary house already has solar, so add about $10K to the cost just for helping the Earth. And while at it, add another $1,500 or so for a whole house fan (but you will like it, I promise!).

I know what you're thinking. You are probably still wondering how much, right? Okay, here is the breakdown assuming you will hire a general contractor to manage everything from A to Z:

  • Original design, planning, permit submission will cost you in the range of $4K-$7K. Yes, you can find a drafter or an architect to get your plans done for about $1,500 (or even less), but there is more to it than just getting the plans done. Think: solar plan, roof trusses, plumbing, and so on. There will be many aspects that would require help from an expert, or someone with more experience than you have.
  • Permits and other fees may differ but think in the range of $3K-$5K, depending on what exactly your municipality will want to get from you (ever heard of lawful review fee? me neither, but it cost me $800).
  • If the size of your ADU is 750 square feet or more, Sacramento Country will impose additional fees (don't remember now how much, but I think in the $2K-$3K range). I suspect each municipality has a similar threshold.
  • There may be additional fees, like moving the fence, assessment of property lines (if they are in dispute).
  • Construction prices can vary dramatically. I had quotes from $120/sq. ft. to $190/sq. ft. (the latter was an outlier and the guy later asked for $142/sq. ft., but the average price seems to hover around $150/sq. ft. or so). This was pre-COVID, so I assume prices went up due to the costs of materials. And this assumes pretty much the basics: no marble floors, $500 toilets, or $3K doors,  and no major complications.*
  • Non-essential landscape work would be extra. So are appliances. Furniture is included (kidding!).

Now, how do you actually pay for it? I paid cash. I assume there is a way to finance construction, but I have no experience with that part. And that's all I have to say about that.

* Update (4/29/2021): Talked to my contractor today, and apparently prices went even higher, so do not be surprised if you get quotes of over $250/sq. ft. 

Courtesy @GrandOldMemes

Hopefully, once COVID-related issue go away, things will return to normalcy, but I would not bet on it.

** Update (9/20/2021): I have been wondering by how much my proprty taxes would go up once the building is complete. So, I finally got my updated tax bill and it looks like the assessed value of my property went up approximately by the cost of building the house addition. I was afraid it would go up all the way to the market value, which would be a few hundred thousands more, so I'm releaved it was as expected.

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Location: Sacramento, CA, USA

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