How do you start to price building a home?

Question

Hi - I'm looking into different options to buy or build a luxury vacation home that can be used primarily as an STR to cover the costs and then be a getaway for my family several times per year. One idea we've been discussing is purchasing land by a lake and building a new home on it. How does one even start to calculate the cost of building a home? Talk to a builder and architect? And would a loan work fairly similar to a conventional mortgage, with a down payment and then conventional payback period? Thanks for any thoughts!

Bruce Woodruff · Answer

Unless you get a set of approved plans and have a GC bid them out for you, then you're just guessing. You can always use the $.x per SF method, but once again you're just guessing.

Guessing is fine if you can afford to be off by $100k.....

A really good, old, experienced GC could possibly walk the site and with some drawings, provide a closer 'guess' bit you're not going to get within $50k of the final number without those plans....and note I said approved. You can use all the $.x per SF you want to , but when the city (plan-check) changes one little thing, you're screwed. Ask me how I know......

Collin Hays · Answer

Get a blueprint drawn up, send it out to builders for bids.  Take your best bid and add 50 percent to it.

That should be pretty close.

Matt Mertz · Answer

Talk to some local builders.  One thing you'll probably discover is that you can build much cheaper than buying an existing home.

For example, we built our 3500sqft home in the Smokies for ~$285/sqft.  Good luck buying a cabin for that price now.  (We're custom building another now.)

As for the mortgage, one option is a construction loan.  We started by buying the lot with cash and owning it outright.  Then the loan required 20% down but the land value counted.  In our case, the lot was 20% of the construction cost so we didn't need to put any more cash down.  The loan had a one time closing fee and after construction was complete converted into a 30 year mortgage.

Be careful on the mortgage because ours is a 5 year ARM.  But we plan on having it paid off in 5 years so it doesn't matter.  You can find construction loans with standard 30 year mortgages.

During the construction process, the builder sends invoices to the bank to cover current costs and asks you to approve and then cuts a check to the builder.  This process continues until the construction completes.As for architect, be prepared to pay 10 - 25k depending on the size of the property.  In our case, it was an investment that was well worth it ($25k plan for a $1mil property that we absolutely love).

Focus your energy on vetting the builder.  I've heard so many horror stories about builders being late, delivering the wrong floorplans, shoddy work, etc.  This is the greatest risk in custom construction.

Nathan Gesner · Answer

In upstate New York, I suspect it's cheaper to buy existing than to build new.

Example: https://www.realtor.com/reales...

That house is less than 10 years old and only $131 per foot, whereas new construction will cost you $200+ per foot.

Bruce Woodruff · Answer

That must be a local thing. Out west, it is much cheaper to buy then to build right now.

Michael Baum · Answer

I would trust @Bruce Woodruff's assessment @Nick Hawthorne.

You can get that rough estimate per sqft, but it will come down to details in the end like @John Underwood said. Major allowances for overages which are bound to happen.

Matt Mertz · Answer

Guess I should have qualified my post by saying this is my experience specifically in Gatlinburg.  I just looked on Zillow and see some existing cabins for the high 300s/sqft but they're basically orange boxes with green roofs.

We had success custom building our first cabin and believe we can do it again with the second one by building something that stands out.

Brooklyn McCarty · Answer

Get some plans and get ahold of a few contractors and see what they think a quick estimate would be.

John Underwood · Answer

Builders I know price by the sq ft. Around here it is $175 to $250  sq ft depending on what builder you talk to.

Get an allowance for major things so that you know if your going over the allowed costs.

How do you start to price building a home?

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