Im Sandkasten baut meine Tochter ein kleines Haus.

Im is a contraction of in dem.

• in = in
• dem = the (dative form for a masculine or neuter noun)

So im Sandkasten literally means in the sandbox.

German very often contracts:

• in dem → im
• an dem → am
• zu dem → zum

Because this sentence describes a location, not movement into a place.

German uses in as a two-way preposition:

• dative for location: in the sandbox
• accusative for direction/movement into: into the sandbox

So:

• im Sandkasten = in the sandbox → location, so dative
• in den Sandkasten = into the sandbox → direction, so accusative

Here the daughter is already in the sandbox and is building there, so im Sandkasten is correct.

German often puts the place, time, or another important element first for emphasis.

So:

• Im Sandkasten baut meine Tochter ein kleines Haus. focuses first on where
• Meine Tochter baut im Sandkasten ein kleines Haus. focuses first on who

Both are grammatical. The first version is just giving the location special emphasis.

Because German main clauses follow the verb-second rule.

That means the finite verb must come in the second position of the sentence.

In this sentence, the first position is taken by Im Sandkasten, so the verb must come next:

• Im Sandkasten | baut | meine Tochter | ein kleines Haus

Even though meine Tochter is the subject, it comes after the verb because the first position is already occupied.

Meine Tochter is in the nominative case because it is the subject of the sentence—the person doing the action.

The verb is baut (builds / is building), and my daughter is the one building, so she is the subject.

Because meine already works like a determiner.

In German, possessive words such as:

• mein = my
• dein = your
• sein = his/its

usually take the place where an article like der/die/das would go.

So you say:

• meine Tochter = my daughter

not normally:

• die meine Tochter

This is the direct object of the verb—what the daughter is building.

• ein = a
• kleines = small
• Haus = house

So ein kleines Haus means a small house.

The adjective klein gets the ending -es because:

• Haus is neuter (das Haus)
• it is singular
• it comes after ein

So the correct form is:

• ein kleines Haus

German adjectives usually change their endings depending on:

• gender
• case
• number
• what determiner comes before them

Here:

• Haus is neuter
• the phrase is singular
• it uses ein
• the case is accusative

For a neuter singular noun after ein in this pattern, the adjective takes -es:

• ein kleines Haus

Compare:

• ein kleiner Hund = a small dog
• eine kleine Katze = a small cat
• ein kleines Haus = a small house

Yes, baut is present tense.

German present tense can often mean either:

• builds
• is building

depending on context.

So this sentence could mean:

• My daughter builds a small house in the sandbox or more naturally in many contexts:
• My daughter is building a small house in the sandbox

German does not need a separate form like English is building.

Yes. That is also completely correct.

The difference is mainly emphasis:

• Im Sandkasten baut meine Tochter ein kleines Haus.
  Emphasis on where

• Meine Tochter baut im Sandkasten ein kleines Haus.
  Emphasis on who

German word order is more flexible than English, but the finite verb still has to stay in second position in a main clause.

Because all nouns are capitalized in German.

So in this sentence:

• Sandkasten = noun
• Tochter = noun
• Haus = noun

and they all begin with capital letters.

This is a standard rule in German and helps you spot nouns more easily.