How to Create a Budget for Your Custom Home?
Hey everyone, Brian Freeman here with Freemans Construction. Hey, today is the first video in our custom home building cost guide series and today we’re going to cover budget.
Budget for Custom Home
So budget for a custom home. There’s a couple of different scenarios that we have owners come to us with that are looking to build a home. The first one being that they already have land. So they’ve already bought it, it’s already closed in their name. They need to build something. So they, a lot of times, will have an idea of what they’re looking to build, right? So certain size, certain needs for the family and certain level of finishes.
Step 1: Site Costs
So what we’re going to look at first to determine what can be built and this is why it’s so vital to get tied in with the design build contractor because they know what it cost to actually build. So you can design something that’s going to actually hit budget. So we’ve got to look at the site cost first. So what’s it going to cost to improve the land. A lot of times you’ll be drilling a wet water well, you’re going to have to put a septic system in. You’re going to have a 10,000 gallon water tank that’s got to go in. We’re going to end up with soils compaction, grading. There’s landscaping, could be a water meter, could be a sewer tie in, sewer extension. All kinds of different improvements that have to happen in order to actually get that site even buildable. So to get the utilities and not to mention the electrical too, that could be a major thing. So you got to look at those first.
How Much Are Site Costs?
So if you’ve got land we’re going to really tear into the site costs, do some due diligence there with the county or the city and figure out what that looks like. Then we can go ahead and go, okay, well we’re going to spend $100,000 on site costs. We’re going to spend a certain amount on design, certain amount on plans and then we’re going to go ahead and figure out what our permit fees are going to be. So once we have that figured out, that’s going to leave us with a number left over on what we can actually spend to build the house.
What Level of Finishes?
So once we have the finishes figured out of the house, hey, what level do you want? What’s the floor going to look like? What are the bathroom finishes going to be like? Tile, are we going to do quartz countertops, are we going to do… How big is the garage going to be? We look at all these different things. So as far as beams in the house, any type of finishes that are kind of discretionary, it’s in addition to having an actual structure.
How Much Will it Cost to Build a Custom Home?
So we look at those and then we can figure out based on an average price per square foot on actual jobs that we’ve built, we can back that out. So if we’ve got $600,000 we’re working with, we can divide that out by actual the living space of the home that we want, garage size and porch size and then we can come up with a very, very close number prior to even actually drawing plans as to what we’re going to spend. Being that we’re building every day, that data that we have from these other jobs and other prices really help in assisting to get to that point. So that’s first scenario.
Second scenario is you got to buy land. So there’s just one additional step to what we’ve already talked about. So we have to, when we’re in the buy process, we’re looking at those site costs to see what we’re going to spend on those. So then that allows us to make an offer on the land accordingly. So seeing we know where you want a 2,500 square foot home and our budget’s 500,000 and based on the finishes that we have, we can build that. We’re going to kind of work backwards. So we want that house, we got this much site improvements, we can pay this much for the land. Bunch of different scenarios on price and site costs, too many to actually go into specifically. But that’s one thing that we specialize in is actually valuing that on the front end and doing that analysis so you can get the right land bought at the right price and then build the home that you want.
Budgeting for a Custom Home
So that is budget. It’s super important to work with a design build contractor. I mean, we’ve had a number of people come to us with plans already completed. They’ve had them drawn by a draftsman or architect prior to talking to us. Structural engineering is already done. I mean, they’re invested in these things probably 20 grand or so. Come to us and we bid it out through our design agreement or a letter of intent that we have. When we get the numbers come back in and maybe they’re a hundred thousand, 200,000 or even $300,000 over budget you can’t cut enough out of the finishes out of the house. You can’t cut the nicer floors, or the nicer beams, or larger garage. You can’t cut that out enough to pull the price down in order to actually hit the numbers that they’re wanting to hit for their budget.
Why Work with a Design-Build Contractor?
So you end up scrapping those plans, basically throwing them away. All the time, effort, and money that was put into those and you have to redraw. Just a lot of hassle, a lot of frustration, you’re already emotionally wrapped up and actually almost feel like you’re living in this house and now it’s got to be redone. So super important to establish the budget for every aspect of the project in the front end for land site costs. You get your plans and design and actual build cost and the best way to do that is working with a design build contractor before you start any step of the process. So this is the end of the first series video, which for the budget and we will see you in the next video.