When it comes to building a new home, the big question is, “how much does it cost to build a house?” Formulating an intelligent, adequate budget for your new home is an absolute must. It is essential to consider that building a house is not cheap, and several things will add up. There are many different variables you should consider before writing up your budget.
For instance, the cost of the land on which you are building, or even whether you want a single storey or double-storey home. Also, factor in whether you would like any modifications to the original floor plan or design, as changes often cost more.
It’s also essential to create a budget that factors in getting a home loan. But also, some leeway on top of that if you need to borrow more than you originally planned for. For this, do your research and contact industry professionals to inform all your decision making when asking how much it costs to build a home.
Before You Start
Okay, you want to build a house. Awesome. But the three little pigs did too. And we all know what happened to them. Two of the pigs had the dumb idea to build their houses out of straw and sticks. The other pig built a well-thought-out house of brick. When the wolf came along, the only place left standing was the one that was carefully built—brick by brick.
Buy the Property
First, this is a no-brainer, but if you haven’t already bought the property where your house will be built, find a quality real estate agent. These experts, also called buyer’s agents, will help you hunt down and negotiate a deal on land for the perfect location to build your house. A good agent will know where to find up-and-coming areas so you can plant roots in a spot that’ll make your home more valuable over time, which is what you want!
Make the Plans
Now, once you’ve found that lovely plot of land, get ready to make a lot of decisions! In each phase of construction, you’ll make dozens of choices that affect the cost to build your house! You’ll need to start with a well-planned, detailed vision of the home you want. And we don’t just mean the number of rooms and finishes. If you don’t decide on your budget, you’ll end up making a ton of change orders.
Change orders are work items that need to be added or removed from the original set of plans. They’ll send your budget through the roof and drive your builder crazy! (Don’t do this, people!)
To help you prepare for the decisions you’ll have to make at each stage of the home-building process, we’ve broken down the typical costs to build home into separate stages, beginning with site work and moving to landscape—and even the final sales price. While we can’t read your mind and predict how much it will cost to build the house you have in mind, we can show you what costs to expect and when. Let’s dive in!
Keeping Your Home Under-Budget
Start by categorising
One of the easiest ways to blow a budget is by simply failing to plan. Your contractor will help you work out your numbers, but educating yourself enables you to stay in the ballpark. Start by creating categories of the highest costs, like land costs, exterior costs and interior costs. Then use a spreadsheet to track the various subcategories for each heading. This helps you identify expenses that may have slipped your mind (don’t forget the price of moving!) and understand the bulk price for each major category.
Create a contingency fund
Never in the history of homes has a build been completed exactly as planned for precisely the amount intended. Speedbumps along the way slow you down and may also be expensive. Whether it’s an unforeseen land issue, bad weather or a change to some of your original finishes, time is money. Always keep a contingency fund for the things you couldn’t have planned for. A good rule of thumb is to multiply the budget your contractor gives you by 1.5, keeping the excess available, so you have a safety net throughout the build.
Stop scope creep
A couple of hundred dollars here or there might not seem like a big deal, but scope creep can completely blow your budget. Scope creep refers to small, incremental spending that drives up the overall cost of your build. It’s when you opt for more excellent finishes without plugging the new price into your budget or authorise your builder to spend a little more on paint than you’d planned. Once you have your budget set, stick to it.
Choose to splurge
There’s nothing wrong with a few pricey features in your home. But making a conscious choice to splurge on unique treatments or rooms in your home means budgeting for them ahead of time. When you allow yourself to upgrade the critical stuff, being more budget-friendly in other areas is more manageable. What’s more, a few personal splurges make you feel more satisfied when it’s time to move into your new home.
Opt for functionality first
When choosing where to budget your money, make sure to adopt a “functionality first” mindset. Spending more on a high-quality water heater, for example, might not seem all that exciting, but it’s an investment in the future of your home. Remember that aesthetics change, but the quality behind your walls will always matter. You can always repaint your living room or swap out your cabinet hardware, but a cheap furnace can cause you years of expensive repairs.
Track your new build budget
A budget is a lot like a diet: Sometimes, you don’t even realise that you’re blowing it. Tracking your spending is the best way to identify areas where you can improve and where you might be spending too much. If you’re old-school, a paper planner or notebook is an easy way to jot down purchased items. Or download an expense tracking app on your smartphone and upload your receipts.
Add sweat equity
When push comes to shove, the best investment you make in your home is your sweat and tears. Sweat equity is brilliant because it saves on labour costs and construction management premiums. While you should leave the complicated stuff to the pros, getting a little paint on your clothes can help if you’ve overspent in other areas. Focus on your strengths and put some of your work into the process, and you’ll save big on your final price tag.
Keeping your new build budget low doesn’t have to be a strain, but good planning will reduce stress. If you feel like you’re veering off-budget, some restraint and a few adjustments can help get you back on track. Just remember that you’ll be paying for your home for years to come, so the choices you make now will affect the way you feel about your new place later. Careful categorisation and good communication with your builder means you’ll love the result.
SNEAKY SOFT COSTS TO BE MINDFUL OF
To put it simply, soft costs are all costs that are not classified as direct construction costs, meaning they are out of pocket expenses. One way to mitigate these costs is by taking advantage of our in-house design services. The two main categories that homeowners recognise as being soft costs are paperwork/ fees and movable furniture.
Architectural and Design Fees
It’s common for homeowners to spend about 10-15% of their overall home building budget on architect and design fees. This is a staggering figure, as what is included in an architect’s price varies depending on the architect of choice.
One way to save both money (and headaches) is to build with an organisation, such as Barden Building Products, that includes design work in the build package cost. Not only does this save a large portion of the money, but it helps to streamline the process when the designers are working directly with the customer and the engineering department.
Inspection Fees and Permits
Paperwork can be a pain, but it is necessary to ensure that your house is built right the first time and by local zoning and building codes. Along with this vital paperwork, though, is a price tag.
It’s important to factor in the cost of arranging the inspections, acquiring the permits, and the experts it takes to do so. Your home builder is your best asset in advising how much these items tend to cost homeowners in your area.
When working with Barden Building Products for your home building project, our team of independent dealers quote inspection and permit fees, as well as taxes.
Land and Real Estate Costs
To build your custom home, you logically must have land to build on. The cost of procuring that land and real estate costs for the assistance in finding and procuring the land must be accounted for in the final price of the home building project.
Loan Fees
It’s extremely uncommon for a new homeowner to pay out of pocket for all of these expenses. Most likely, you’ll be taking out a loan as a financing option for making your dream home a reality.
We offer a Consumer Guide to Construction Financing that dives a little deeper into what type of loan is available and what the financing process most commonly looks like.
Taxes on Materials and Services
It is so important to account for tax when selecting your materials, as well as your subcontractors and service providers. This is one of the most common soft costs that new homeowners fail to account for.
When drafting your budget, be sure to look at the total cost after tax of all of your materials — rather than the retail or square footage price of what you’ve selected.
IMPORTANT HARD COSTS TO BUDGET FOR
Hard costs, put, include all of the labour and materials used to build the house and site work for preparing the lot for building.
These costs are based on the architectural drawings and include:
- Excavation and Foundation
- Building Structure
- Site Work
- Landscaping
- Change Orders
In general, hard costs are not as forgotten about as soft costs since they are easier to estimate and follow the standard elements of budgeting that homeowners are used to. With that being said, these hard costs still sometimes take homeowners by surprise.
Excavation and Foundation
After the land is selected, essential steps must be taken to prepare for the build, including excavation. Though every single build site must undergo a degree of excavation and foundation preparation, some areas are more costly than others.
When selecting land, it’s prudent to keep in mind the “buildability” of the land price. While less expensive land might seem significant upfront, if substantial excavation and preparation are needed, it may be more costly in the long run.
Additionally, the foundation itself has different costs associated based on homeowner selection. Full concrete, concrete slabs, concrete crawl spaces, and more all have other budget considerations.
Building Structure
This cost includes ALL labour and material that is required to complete the structure.
It is common for homeowners to the only factor in material costs while neglecting to consider the labour.
Site Work
Separate from the initial site work, the following factors must be considered:
- All utilities (sewer, water, electric, gas) installation
- HVAC systems
- Paving
- Grading
- Drainage
The material for the materials above is also included in the hard costs, NOT just the installation price.
Landscaping
Not all homeowners opt for landscaping during their initial builds. But those who have included landscaping elements on their architectural drawings need to be mindful of the cost of grass, trees, gravel, mulch, fertiliser, and any more as applicable.
Change Orders
This is a home building catch-all term for any additional expenses related to the construction of the home.
Often, this can include insurance costs and additional material costs. What is included in the change order costs varies from home builder to home builder — so be sure to open up the lines of communication early and inquire about what items may be included.
Ensure that you are working with a builder that you trust, as sometimes unnecessary costs will accrue here if the builder has quoted your build with a lower price to make up for the missed revenue with change orders. If you’re seeing an unusually high number of change orders, it’s a sign your builder is not reputable.
When utilising the panel building process, the chance for large change orders is minimised due to the exact amount of materials needed to be calculated by engineering in advance. Rather than utilising estimations that change hands throughout the building process, we use advanced software and experts to guide the project along the way.
There’s a difference between being miserly and being frugal. My grandmother was darn-near miserly, refusing to install an air conditioner in her home even though she was regularly uncomfortable and had plenty of money to pay for it. In contrast, my uncle told me, “It’s okay to be frugal, but don’t go overboard – live, so you enjoy your life too.”
Planner for Building a Home
Find a Mortgage Lender
Your budget for building a home starts with your current budget. The first thing you need to know is how much of a loan you can get from the bank. Gather your tax returns, sources of income and savings account statements. Be prepared to make your case. If you’re approved for a large loan, resist the temptation to borrow the total amount. It may or may not be in your best interest to max out your limit with the bank. Where you’ll build, your income stability and the strength of the housing market in your area should be taken into consideration as your budget for a new house.
Find Your Neighborhood
Real estate values greatly vary from neighbourhood to neighbourhood and from city to city. If there’s a particular area you want to live in, do some research on the average cost per square foot of the area’s homes. Find out what the average lot price is in your desired neighbourhoods, then determine how many square feet you need. This is a quick and easy way to discover what areas you can and cannot afford. A quick check of selling prices in your desired neighbourhood and a phone call to a few developers selling lots gets you the information you need. When you’re done, you’ll have a close estimate of what you need to spend.
Preliminary Budget Estimate
While you’re still in the preliminary stage but have a general idea of how much you can spend, start to look at the details. You need to answer questions about access to utilities, zoning requirements, building permits and fees, excavation and grading required, neighbourhood covenants, construction materials, taxes, a geotechnical report and more. Create a spreadsheet with everything from the lot’s cost to the faucets’ cost in your bathroom. Don’t let this overwhelm you. Remember, you can go back and change fees in the early stages of planning. A reputable builder can help you finalise all the details.
Contact a Builder
Once you’ve done all your homework, you’re ready to speak to a builder. Interview a number of them in your area. Finalising preliminary plans should be built into the builder’s cost. Some subdivisions work with a preferred list of builders. However, there shouldn’t be anything preventing you from bringing in your builder, as long as any neighbourhood covenants are considered. If you correctly budgeted and planned, you may save money on builder’s fees since you’ll already have done some of the work.
Review All Contracts
Be sure you carefully read all contracts and agreements. It would be a good idea to have a real estate attorney review any documents. While this is a cost that needs to be added to your budget, it is worth the peace of mind. There have been instances when a homeowner has unwittingly violated covenants and paid a hefty price to fix the problem. Additionally, it helps ensure your rights and the obligations of the builder are clear to you. Be careful about giving deposit money to a builder. Make sure you have vetted your builder fully. Check references and reputation with your local home builder’s or real estate association.
When constructing your home, be frugal, but don’t go overboard. You have to live in the home you build. You want to enjoy it, you want it to reflect your personality and priorities, and you want it to be a comfortable space to spend your time in. During the construction process, it’s essential to watch your bottom line and live within your budget, but you don’t want to cut corners that would negatively impact your long-term quality of life.
When setting your budget, there are a few final things to consider – what are your goals? Is this a family home or an investment property? Is it a forever home, or are you simply updating as your family’s needs have changed?
If you are building an investment property, we recommend speaking with a couple of local real estate agents to discover what’s selling – i.e. are you overcapitalising in your area or have you selected a low budget that utilises the potential of the market?
You should also consider where you will live during construction – will you be renting? Staying with family or friends? This is an essential factor to consider in your overall budget.