Easily Estimate Your Cost to Build

hi guys michael with open book build here so today i want to share with you a quick way to determine the rough cost to build a new home as an owner builder in your local area now this isn't a hard fast exact cost to build but instead it's a rule of thumb method for determining an estimated cost before putting too much money and effort into the project you don't want to buy a house plan or a lot and find out that you don't have the resources to build a house as our owner builder students know the best way to get accurate costs is to bid the project out but that takes a lot of time and effort so this is a quick method to get an initial idea of your costs so let's work through an example to show you how this works so the first thing you want to do is find a local new home community that has similar new homes for sale like the one you want to build now this community should be owned by a single builder that's selling the home and lot together as a finished product this is a must as we'll be using a rule of thumb number for builder markup and lot cost as a percentage of sales price so we need to stick with a single builder community that sells the lot and house combination in a complete package next we need to find actual homes for sale that we can use as our data the process i'm going to describe here is if you're using a computer mobile will also work but the instructions are a little different with that so let's go to realtor.com enter your city and state and go ahead and hit search next go to property type and select single family home then go to listing status and select new construction now locate the home that best fits what you're looking to build and is in the community we just talked about make sure this home fits your needs as closely as possible with the foundation type either basement slab or other one versus two-story design two versus three-car garage and so on if this home comes close to what you are looking to build write down the sales price and square footage now hit the back button in the upper right hand corner of the screen click on new construction that you had previously selected and instead select recently sold scroll down through the houses that have recently sold and see if any of them are in the same community if you find one like the one you just found that is listed for sale compare the sold price to the price you just wrote down is the price higher or lower why are we comparing the closing price versus the listing prices of the same new home in some cases builders offer a base house that's stripped down and then you add in the finishes and features that you want this can add tens of thousands of dollars to the final price of the house so by comparing the listing prices to actual closing prices we can see how much of a difference there is and how much people are upgrading i would tend to use the higher of the two numbers for this estimate now write down the dollar amount and square footage of the higher priced option now in this case the cost to build is higher on the new listing versus the close price why because construction material pricing especially lumber has gone up like crazy over the last three to four months and in a typical scenario where costs aren't going up so fast i would expect the closed sales price to be higher because people add options to the base house price so for my example here the recent home sold that is like the one i want to build was 551 000 and the listing price for the same house currently for sale is 563 900. so i'm going with the 563 900 with a square footage of 1776 square feet again the higher dollar amount of the two so we know the lot cost for this type of builder is approximately twenty percent of the final sales price so twenty percent of the five hundred and sixty three thousand nine hundred would be a hundred and twelve thousand seven hundred and eighty and the current builder markup for this type of builder is roughly thirty percent so the builder's overall cost would be in the neighborhood of four hundred and thirty three thousand eight hundred now subtract off the lot cost of 112 780 and we're left with the labor material cost to build this home of three hundred twenty one thousand twenty dollars that's our rough cost estimate meaning if you were to try and build this exact house on your lot with the same setbacks and driveway it would cost you roughly three hundred twenty one thousand dollars now if we divide this by the square footage of seventeen seventy six we get an approximately 181 dollars per square foot to build a similar new ranch home with a two-car garage basement and similar finishes in west lake ohio so now we can take the square footage of our dream house plan and multiply it by our foot to get our rough cost to build in west lake ohio then we add in the lot price and this is the total estimated cost of our investment again this is an initial estimate that is making a lot of assumptions now some of you might be saying to yourself there's no way an owner builder can build one house and achieve the same cost as the builder i would agree to you to some extent but i want you to consider just a few ideas first the owner builder can look for closeouts on products one example would be remnant granite or quartz countertops these take time to select based on the material available and the size and the shape of your countertops but they can save you up to 50 percent or more another big idea for savings on products would be light fixtures we selected closeout or deep sail item light fixtures for the open book build prototype home and easily saved forty to fifty percent builders just don't have the time to deal with this type of bargain shopping and if they did they probably wouldn't pass the savings on to the customer anyway also remember that builders typically have manufacturer agreements that won't let them choose just any product that might be on closeout or on sale at the time another way owner builders say big is to utilize any connections they have in the business most people have a friend that can help or a relative maybe an electrician or a carpenter or plumber or maybe a person who works for a lumber supplier these connections can lead to big savings for the owner builder being an owner builder is a time-consuming job there's no doubt about it you need to manage the job site on a daily basis pay bills and schedule trades people and material deliveries and so on but for those that have the extra time in addition to managing it to do some of the physical labor themselves as well like painting or cleanup there are some really big savings to be had the other thing to consider is that builders have overhead costs that owner builders just don't have most new home builder budgets include line items for marketing and advertising and site supervision now these can add up to significant dollar amounts now take for example the sales function most builders include a budget for paying real estate sales people that represent the buyers now this can be two percent or more of the sales price then add in the one to one and a half percent the builder pays their own sales people and they can be paying up to three and a half percent just to sell the house on our sample house prelissilly discussed this three and a half percent commission would be nineteen thousand seven hundred and thirty six dollars this doesn't even touch the cost for marketing with signs online advertising print ads and so on so yes builders have an advantage when negotiating with trades people and suppliers but they don't have the same ability as the owner builder does to save on close out products or use their own physical labor that's free or work with friends in the business and overhead costs can really add up for the builders so if you're thinking about building your own home you may want to start by using this video with our rule of thumb cost estimating to start your initial planning before you invest in land or in house plans that's it for today guys i'm michael luckadu with open book build

Channel: Armchair Builder

Views: 134,174

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Id: TyPGPCXsAwQ

Length: 7min 35sec (455 seconds)

Published: Sun Mar 13 2022