The lawyers that we've gone to are telling us that we are required to pay for them to open an LLC and put the home in it (lawyers are saying the paperwork for an LLC is $1k) and we are trying to stay simplified and not pay the extra amount for the LLC so we can take action on the real estate deal. 

I'm in Central Oregon which is one of the hottest and fastest growing markets in the country and that has a lot of people feeling optimistic, but I like what you said about those extra expenses and how quickly they can add up.

The details:Location: Denver, Colorado located in very hot real estate market in an excellent location within 2 miles to downtown.Land cost: $475,000 currently with small 900sqft home on property Mortgage/holding cost: mortgage is $2800; I will be renting home on property for $1750/month (so I will be paying $1000/month out of pocket holding cost) while we go through the permitting processPermitting process: estimated to run 6-8 months in Denver before build can beginLooking to build five, 3-story townhomes on the lot, 1550 sqft each (about 500 sqft per floor), with detached covered garage in rear of lot for four of the units.

Also, it's a way to cut back on doing those extra things for her if you decide to..."

I would like to be able to get as much done as possible and even be able to start construction on the day of settlement.Pre-Hab Work PhaseHire architectHire structural engineerApply for building permitsDesign KitchenChoose tile, flooring, cabinets, door hardware, light fixtures, railings, front doors.Measure windowsGet estimates from 3 GCsGet estimates from 1-2 ECsGet estimates from 1-2 PlumbersI think I might be jumping the gun on getting Permits…don’t you have to own the building for that?

In addition to the bedroom/bathroom work, we also added a covered front porch without a permit that we planned to disclose on the sellers disclosure at the time of sale rather than getting permitted.

In my opinion, the only things that can justify price hikes are adding an extra bedroom or adding amenities to the property.

With the time it would take to develop this, I can justify the extra expense it’s just hard to pull the trigger on it.

My analysis is similar to what @Dan Heuschele          FYI: I went to The City of Vista meeting two weeks ago and they are considering reducing permit fees on Granny and Second Unit (Granny with Kitchen).   

My plan is to secure the permits for the lot split and the new construction before I approach a builder.