Things are changing in the property front, and with the cost of housing on the rise and the rental prices out of this world, it’s challenging for those wanting to get on the property ladder, rental property investors, or empty nesters who are looking to downsize.
What’s currently extremely popular is adding a guest cabin, a tiny home, or something like a park model home to your property. But proper planning is the key to turning your vision into reality. So many times, a project like this can be stalled due to unexpected ‘site development’ costs that weren’t part of the initial plan.
Here are the five most common hidden costs of placing an additional dwelling on your land, and how to budget for them.
Permits and Fees
Before your shovel hits the dirt, you need to check with your local government to see what permits are required and the fees associated with them.
These’ll be upfront costs that a lot of landowners aren’t prepared for.
What it is:
These fees are charged by your city or county to review your building plans, ensure they comply with zoning codes, and conduct inspections throughout the construction process. Some areas also charge ‘impact fees’ to cover the cost of your new home on community resources like roads, schools, and emergency services.
The Cost:
This can range from a few hundred dollars for a simple permit to several thousand, depending entirely on your location and the project’s complexity.
How to Budget:
Your very first step should be a call to your local planning and building department. Ask for a fee schedule for an ‘Accessory Dwelling Unit (ADU)‘ or ‘secondary structure’.
Get this in writing.
Tips:
- Thoroughly research your local zoning ordinances online or at the planning office before you purchase a unit.
- Know the rules for minimum square footage, maximum height, and property line setbacks.
- Have a property survey to confirm your boundaries (approx. $500-$1,500).
- Have a soil percolation test for a septic system (approx. $700-$1,200), or even legal fees if you need to apply for a zoning variance (can run into the thousands).
Utility Hookups: Water, Sewer, and Power
Sometimes getting utilities to your new structure is one of the largest and most technically complex expenses.
What it is:
Running new electrical lines from your main panel, a trench for a new water line, and connecting to a sewer main, or installing a new septic system. If you’re on a well and septic, you’ll need to ensure your existing systems can handle the added capacity, which they often can’t.
The Cost:
Trenching alone can cost $5-$10 per foot. This would be something you could DIY, which may save you a nice sum of money, but connecting to a municipal sewer line can be exceptionally expensive if the main is far from your build site. You may find that upgrading your electrical service panel is needed, and this can run you about $1,500-$3,000.
How to Budget:
Get at least three quotes from licensed plumbers and electricians. They can assess the distance and complexity of the job and give you a realistic estimate.
Clearing the Site and Laying the Foundation
Your land must be ready to safely and legally support your tiny house, container home, or perhaps it’s a park model home. This is rarely as simple as parking it on a flat patch of grass.
What it is:
Costs for clearing trees or brush, grading and leveling the land, and installing a proper foundation. For park model homes, which are often heavier than a tiny house on wheels, a permanent foundation like concrete or a stem wall is typically required by code.
The Cost:
Land clearing can be a few hundred dollars or several thousand if large trees need removal. Again, you can DIY this step, but when it comes to a proper foundation system, the cost can be between $5,000 and $15,000.
How to Budget:
Have a general contractor or foundation specialist assess your specific site. The topography and soil type will heavily influence the price.
It’s Gonna Be ‘Taxing’
When you are adding value to your property, you will be subject to tax reassessment and charges, so don’t forget to put this in your budgeting plans.
What it is:
Adding a new, permanent structure to your property increases its assessed value. When your county assessor finds out (and they will), they’ll reassess your property, leading to a higher annual property tax bill.
The Cost:
This depends on your home’s value and your local tax rate, but it could mean hundreds of dollars more per year.
How to Budget:
Call your county assessor’s office. Ask them how adding a structure of a certain square footage and value would impact your current tax assessment. They can often give you a rough estimate.
Tips:
Along with increased tax, you want to include an estimate from your insurance provider about any riders you need to put on your existing policy, increases in insurance coverage, or liability insurance changes.
Landscaping and Final Touch-Ups
You are now at the point where Mom and Dad are ready to move into their new downsized home in your backyard, but you have the remnants of a construction site, so you want to have a tidy up so it’s a lovely walkway instead of muck.
What It Is:
The cost to reseed grass, lay sod, plant shrubs for privacy, or install a pathway or driveway to the new entrance. Aesthetics will help give you an adhesive look pleasing to the eye and make everyone feel at home.
The Cost:
This can be a few hundred dollars for seed and mulch to several thousand for new hardscaping like a stone path.
How to Budget:
Include a line item in your overall budget for ‘final landscaping and cleanup’. Even a minimal amount of $500 is better than being surprised.
Tips:
The single most important step you can take is to add a contingency fund of about 20% on top of your total estimated budget. That’s always the safe number. It doesn’t mean you’ll have to spend any of that 20%, but it’s important that it’s there.
Here’s a great example: The site work will cost $20,000, and the budget is just above that. Then you’re hit with some unforeseen issues (which are, by the way, common), such as hitting bedrock while digging for piers, or discovering poor soil conditions. This will delaying the whole project, and it’ll cost extra money, which, if you didn’t account for, will actually stop the project in its tracks.
A contingency fund is what separates a finished project from an abandoned/half-built one.
Conclusion
Adding a second dwelling to your property is extremely exciting. If you have the space for it, it’s actually amazing. Very practical!
But beyond all this excitement, there’s the law. What you need to know is what the regulations are in your particular county. You need to know the zoning and building codes. Knowing all this will be the groundwork for starting any such project.
Happy adding to that 2nd dwelling, and hopefully, with you now knowing which mistakes often surprise people, you won’t run into any issues because you’ll be fully prepared!