A backyard guest house may seem like a luxury few can afford, but this home improvement project can cost roughly the same as a kitchen renovation—depending on the type you choose. That said, it’s not quite as simple as buying a “she shed” from Costco and assembling it on your property over the weekend. Despite their petite, tiny-house size, backyard guest houses aren’t IKEA furniture, and they do require careful consideration and planning—not to mention a foundation, insulation, and building permits—even if you’re buying a small modular unit.
Whether you need a place for your in-laws to stay or you want to make some extra cash turning your tiny house into an Airbnb rental, we’re laying out all your options in this guide to adding a backyard guest house to your property. While it may be a considerable investment in terms of money and time, it will be so worth it when you welcome your first guests into their private suite.
Plan a Custom Build
If you have your sights set on a custom backyard guest house design, you’re most likely to get what you want by building from scratch. However, this is the most expensive and time-consuming option. On a cost-per-square-foot basis, building a small guest house is no cheaper than building an entirely new house.
The national average to build an on-site home is $100 to $200 per square foot, according to HomeAdvisor, so the cost for a 600-square-foot, one-bedroom guest apartment would start at $60,000. A 150-square-foot single-room cabin with just sleeping quarters could cost as little as $15,000, but building a structure that small will rarely give you a good return on investment. Most experts recommend building a guest house with the largest allowable square footage for an ADU (accessory dwelling unit), or at least 500 square feet, to get the most bang for your buck.
Location is the biggest factor when it comes to price—the more expensive a place is to live, the more it’s going to cost to build—with the materials coming in second. New construction of a backyard guest house is best left to the pros, so labor will be at least half to a third of the final cost, but can be as much as 60 percent.
A guest house’s construction can take anywhere from four months to a year, with the weather and site conditions largely determining the building timeline. Keep in mind that this is just the timeframe for construction. The designing, permitting, and bidding for contractors takes at least six to 10 months.
Convert an Existing Structure
Interested in giving an existing garage or shed a second life as a backyard guest house? It’s a budget-friendlier option than building new. Remodeling costs for this type of project range from $6,000 to $27,000, according to HomeAdvisor, with the national average ringing in around $16,448. Structural changes like adding windows, insulation, drywall, ceilings, and flooring make up the bulk of the costs here (in addition to labor), but if you want to transform a bare-bones space into a fully equipped apartment with a bathroom and kitchen, expect to spend significantly more.
Here’s a breakdown of the estimated costs:
- One-bedroom guest house with a window, ceiling, flooring, heating and cooling, insulation, and furniture: $10,000 to $15,000
- One-bedroom suite with a bathroom: The cost of a one-bedroom, plus at least $3,000. If you’re adding plumbing, you’ll pay up to $1,800 more.
- One-bedroom guest house with a living room, kitchen, and bath: $15,000 to $30,000
Conversion projects can be completed fairly quickly, taking as little as four to six weeks, but if you’re adding interior walls or installing fixtures for a kitchen or bathroom, the timeframe could double and potentially take up to five months to complete. Acquiring the proper building permits usually adds two weeks to the timeline, but this can be much shorter for smaller jobs.
Buy One Ready-Made
Getting a modular structure that comes as a kit is the cheapest option for a backyard guest house—some products cost just under $6,000—but that price tag rarely reflects the final cost. There’s a lot more to these structures than just ordering one online and plopping it in the backyard (as much as we wish that were the extent of it!).
First, you need to adequately prepare the site where you plan to install your structure. This entails leveling and grading the land and installing the foundation. While a small garden shed can sit on an on-grade foundation of concrete blocks and lumber, anything larger than 160 square feet needs a stronger foundation to avoid sinking into the ground. For this, you could use a concrete slab (costing $5 to $10 per square foot) or a pier-and-beam foundation (about $7 to $14 per square foot). For a 600-square-foot cottage, a foundation will cost at least $3,000, but this can vary greatly. HomeGuide puts the average cost for a concrete foundation of this size at $3,900.
A second major consideration is whether or not the structure is insulated. That once-wildly popular tiny house on Amazon does not have insulation, so it would only be suitable to use as a backyard guest house in moderate climates. Insulating this particular model, a builder told Realtor.com, would require building a wall cavity that would take the same amount of time and effort as just building a home from scratch. HomeAdvisor puts the average cost of installing insulation in a 500-square-foot area at $150 to $700, plus an additional $200 to $500 for labor.
You can, of course, buy prefab sheds that are well-equipped with insulation for short overnight stays. What they may lack in customization, they make up for in features, ease of construction, and relative affordability for an ADU:
- Studio Shed: The company’s Signature Series single rooms start at $13,592 for an 80-square-foot basic structure. An insulated 160-square-foot single room costs about $23,000, while a 240-square-foot dwelling with a bathroom and kitchen would be at least $70,000, depending on finishes and customization. These prices don’t include the cost of the foundation, which buyers would need to hire a contractor to install.
- Kanga Room Systems: A modern Kwik Room ranges from 80 to 196 square feet, and the shell kits for the smallest size start at $15,555. Installation can be completed in just a couple of days, but many reviewers note that the process can drag on for nearly a year.
- Jamaica Cottage Shop: The Writer’s Haven cottage is uninsulated, but it only requires a foundation of 6 to 8 inches of crushed gravel. The interior measures 168 square feet, and costs start at $15,503 to have it delivered fully constructed.
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