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Budget | Custom Home Building Cost Guide

Budgeting for Custom Home Building

Today I want to cover how to accurately budget to build a custom home. The key points I will go over are:

  • Why you want to budget.
  • When you want to start budgeting.
  • The steps on how to budget.

How to Determine Your Budget

The first step is knowing what you want to spend once you’re all in on your project. To be able to accurately determine that number you need to keep the following costs in mind to know what your budget will include:

  1. Land
  2. Site Development Costs
  3. Permits and Fees
  4. Plans and Design
  5. Build Costs

Step One: Determine the Land Costs

Determine the land cost and list that amount. You may already own the lot or still need to make a purchase, in either circumstance, write out the value. For example let’s say your budget is $1 Million, hitting that number starts with your land cost.

Step Two: Evaluate Site Costs

Evaluate the actual site costs to improve that land. The lot must be buildable, so calculate what it will take to prepare the land for a new home build, such as:

  • Connecting to Sewer & City Water
  • Dig a Well
  • Install a Septic System

Step Three: Permits and Fees in San Diego County

Permits and fees differ depending on the jurisdiction in which the land lies within San Diego County. Sewer and city water fees will be different from the permit costs to dig a well and install a septic system. Investigate what permits and fees will be required to complete the site costs on the property. Once you have those, the actual site costs and cost of the land added together, you will know where you land for step four.

Step Four: Plans and Design

Let’s say the all-in number for the first three steps is $300,000. If we stick with our budget example of $1 million that leaves us $700,000 to:

  • Build the Home
  • Pay Permits & Fees for the Build Portion
  • Solidify Plans & Design

How did we get to $700,000? See the example below-

Example Budget = $1 Million

Land Cost + Site Costs + Permits & Fees = $300,000

$700,000 = What Your Budget is to Build a Custom Home

What Affects Custom Home Build Costs?

There are several factors that go into designing a home that stays with the budget. A couple of those factors are below.

Factor 1: Structure Design

The structure itself can be simple or complex, thus affecting the price to build. For example, a home shaped like a single or stacking two-story box with a very simple gable roof keeps costs down.

Things that increase building costs but are not limited to include the following:

  • Many walls are cut up and don’t stack easily on top of one another
  • A complex roof system
  • Added decks and roof decks
  • Covered patios

We can control our build costs by avoiding a complex structure.

Factor 2: Home Finishes

Controlling the finishes in the home will also help control the budget. Price points per square foot differ drastically based on finish level. To work within a $700,000 budget, you need to understand the ratio between your finishes and your project size. In order for your home to meet the square footage needs as well as anything additional such as a home office or recreational space for your family, you need to design the cost of your build by building a:

  • Larger square footage home with a reduced level of finishes.
  • Smaller home with an increased level of finishes.

Why You Want to Work with a Design-Build Contractor

The build costs can differ quite a bit from the costs for plans and design, which is why working with a design-build contractor can be very useful. Architects and draftsmen are excellent at drawing and designing, however, design-build contractors have a good pulse on current costs and market trends. They can provide valuable insight into what must go into the plans and design to avoid any sticker shock come bid time. Sometimes bids on a set of plans designed by an architect or draftsman can come in anywhere between $50,000 to $200,000 over budget. The contractor on this team will bring experience to guide you within the lines of your budget during the design phase. Once you get the budget established everything else falls together from there.

Do You Need More Information?

If you’d like more information on the cost to build a custom home, our popular custom home floor plans, or even if you would like information on how to buy land, we have many guides including a “How To Buy Land” guide on our website with lots of information in it. You can download those resources on our website. Thank you again for your time today and have an excellent rest of your day.

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