Many people have a dream house that they have wanted to live in since they were a child, but sometimes, that house either doesn’t exist or isn’t on sale; or maybe you are looking to build and sell houses to make money.
Whatever your reason, there are many costs to building a home and it can obviously be very expensive. Before we get started, it is wise to first understand what the expected costs are so that you can properly budget for your entire project. Obviously, there is a significant amount of variance in figuring out the cost for the project due to variables such as city laws, labor laws of your state, land prices, size, and design.
Given the range for what something may potentially cost when building a new building, it is difficult to directly state the cost of your project through blanket statements; however, getting a ballpark from online sources such as this one is a good start, and there is also further importance in having a checklist of expenses when getting started.
What are the expenses you should expect when building a new home?
In 2017, the National Association of Home Builders (NAHB) provided the average cost to build a house $237,000.
They did this by conducting a survey that gathered information from 4,267 home builders of the average price each given phase of a house building project and also surveying for the average size of all the project.
This survey was conducted specifically on the construction of single family homes. They found that the average construction cost of all the projects was around $237,760. They also found that the average size of all the projects was 2,776 square feet, and the average lot size used was 11,186 square feet.
Though price varies between house to house, using the costing provided by the NAHB is a good benchmark for understanding the price of building a house. To answer the question of how much you should expect for the cost of building a new house, this NAHB average will be referenced several times.
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Site Work Expenses are an Important Cost to Build a House
Site work expenses include a bunch of potential different expenses that you must pay, usually as a result of some sort of regulation. This includes things such as building permit fees, impact fees, water inspections, sewer inspections, landscaping, land clearing, and possibly more depending on your situation.
Site work expenses have a massive variance as but ultimately is mostly reliant on the number of square feet that your property is using, and the amount of professional work needed. For example, if you are needing to clear land the average cost would be between $1.28 and $2.00 per square foot. If you have a special case such as having greatly uneven terrain to build on, it may cost you an extra $15 per square foot to even it out. We recommend you get a full site plan before building the house.
If you are in a wooded area, the price will also be increased considerably. If you have an abnormal case, it would be wisest to refer to your contractor to figure out any other unaccounted costs. To reference the NAHB study has noted that the costs of site work include, building permit fees, impact fees, water & sewer fees/inspection, architecture/engineering, and some petty cash used for miscellaneous items that may pop up. The NAHB study found that, on average, this portion of the project cost home builders $15,903.
Framing will set up the skeleton of your house, effectively creating the physical representation of what a home’s blueprints would display. This will frame the outlines for all the spaces within a house and show the size of every given room that you are planning to have in the house. NAHB has classified this section of expenses to include framing (including roof), trusses, sheathing, general metal, steel, and once again a small section for miscellaneous purchases that may be needed.
Like everything else when building a house, square footage is a large factor in the cost of framing; however, the number of rooms, doors, windows, and walls will also play a large role in the overall cost of framing the house. All said and done, NAHB has found that the average cost of framing will total $41,123. So don’t forget to include framing in your cost to build a home.
After the framing of the home is completed, there is structure provided by the framing that allows for the construction of the exterior to begin. Forming the outside of the house before the inside will allow the water system, electrical system, gas system, etc… to be given better structure when that part gets built. The NAHB’s exterior expenses include the costing for exterior wall finishes, roofing, windows, and doors (including garage doors).
The exterior expenses of a house are actually more dependent on the overall surface area rather than the raw square footage of a house. Furthermore, the price of your exterior expenses will increase with more doors and windows that need to be installed. For exterior expenses, the NAHB has found that on average, home builders should expect to pay $33,066 to get this part of the project done.
System Installation Expenses
Once the exterior has been established, system installation can proceed to provide the house with modern necessities such as water and electricity. The system installation expense scales on the number of rooms that are expected in the final product of the house. The level/grade of heating, ventilation, and air conditioning (HVAC) that a building has will also make a substantial difference in the cost of system installation. Overall,
NAHB has included plumbing, electrical, HVAC, and small category of miscellaneous purchases as the factors that make up system installation expenses. The final cost of system installation should cost $32,746 on average.
Interior Finishes Expenses
Among all the categories of expenses, the expenses of the interior finishes are probably the largest aggregate cost of any section of a home building project. The interior finishes close up all the open wires and pipes. This part of the project allows the home to be substantially more aesthetic along with making it a much more livable space.
Obviously, a home should include rooms such as restrooms, kitchens, and most of the time a means to install a room for laundry and dryer. Interior finishes also complete the plumbing and electrical for the house as it installs all the light and water fixtures such as ceiling lights, sconces, faucets, toilets, showers, and other related items.
Some houses may be built with a fireplace which adds another extra cost. For interior finishes expense, the NAHB survey categorized the following as components of interior finishes: Insulation, drywall, interior trims, doors, mirrors, painting, lighting, cabinets, countertops, appliances, flooring, plumbing fixtures, fireplace, and miscellaneous purchases add to the cost of building a home. The NAHB found that on average, the interior finishes expense usually totals about $67,939.
Final Steps Expenses
Once a home is built, finishing touches must be added allowing for the house to be more presentable. These are usually additions that are done to the exterior of the house such as a driveway, mailbox, porch, patio, and lawn. According to NAHB final steps expenses are broken down into the categories of landscaping, outdoor structures (deck, patio, porches), driveway, clean up, and miscellaneous purchases. These final touches will cost the home builder an average of $16,591.
Is There More to the Cost of Building a Home?
In many projects, there are unique cases and instances that will require the home builder to make extra purchases that are not part of the standard categorical purchases involved with building a home. According to the NAHB, these purchases average out to cost about 2% of the total project with an average cost of $4,722.
The Other Costs to Building a House
The above explains the costs of building a house from a construction point, but when you are building a house, there are more costs involved that should not be forgotten. The cost of constructing a home makes up roughly 55.6% of the total cost of building a house, from production to sale. If you plan on personally living in this house, only some of these costs will apply to you, but if you are looking to build and sell a home, all the following costs should be noted (costs are based on NAHB averages):
Finished Lot Cost (including financing cost); $91,996:
This is the second largest cost to building a house. If you want to build a house, you must first find the land/lot to build the house on. Lot prices have significant variance and is hugely dependent on your state and area. It is hard for you to hold a lot of expectation with the use of this average.
Financing cost; $7,636:
Unless you plan on paying for your entire project up front in cash, you will likely need to finance the project. With that in mind, almost any time you decide to finance something, the act of financing will raise the cost of the purchase.
Overhead and General Expenses; $21.835:
If you are in any business, there are expenses that exist as the ongoing cost of operating the business. This cost, in respect to the costing averages made by the NAHB makes up about 5.1% of the entire cost.
Marketing cost; $5,314:
In order to sell your finished product, you must list the house and set up advertisements for it.
Sales commission; $17,448:
When selling the house, chances are you will be using a broker. Any time you use the services of a broker, they will take some commission based on a percentage of the sale.
Obviously, if you are trying to make a business off the building and sale of a house, then you are going to need to place a mark up on the final price of the sale.
When everything is said and done, the average sale price (combining all the above costs, construction costs, and profit) is $427,892; which is roughly $154.14 per square foot.
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Should you Really Build Your own House in 2020?
If you are trying to save money when building a house, using the services of Zumbly can be very helpful. Zumbly assist you in finding fixer uppers, calculating ROI, and also rating houses on their expected investment value. Fixer uppers can really come in handy incase of emergencies during or after the construction of your building.
Using Zumbly before building a house may allow you to do building comps on other high value investment properties so that you may try to imitate the successes of other buildings. Zumbly will also help you with figuring out what areas have stronger demands for houses allowing you to be able to locate the home you are building in a much more ideal location. Using these comps and ROI calculator, you will have a much easier time deciding how you want to invest your money as it will show you what is most optimal for you.