Thinking of Building a House -- Am I Nuts?

Hey, guys!

I’m thinking about buying a lot and building a house instead of just buying a house. I have a few questions:

  • Is there any generalization that can be made about how much raw land should cost? I would buy a lot in an established neighborhood in town, about a third of an acre, with utilities at the street out front. Is there a rule-of-thumb, cost-per-sqare-foot, or something similar, for undeveloped land?

  • How much as a proportion of the ultimate cost of “house + land” should “land” be? IOW, I don’t want to over-spend on the land if I have to put a cheaper house on it, and then can’t get the value of the land back out at re-sale. Does that make any sense?

  • Am I completely insane to think about building a house? When you hear I’m thinking about doing so, do you think “how fun?” or do you think “has she lost her mind?”

Any and all advice and comment will be appreciated.

It will obvously vary over a huge range, depending on location. I know of areas where a buildable lot of one-third acre might be under $10k. Certain beachfront lots (Malibu?) might push $10M. Limiting it to “an established neighborhood in town” raises the question: “Which town?” Arriving at an accurate rule of thumb is unlikely.

Possibly not. But for this to make sense at any time - and expecially in the current economy and housing market - you’d better know a lot about houses and builders. Those who do this without much experience routinely find it takes something like 1.5 times the money and twice the time they expected.

  1. Yes, and no. There are certain ranges that pertain to where you live, but overall, it’s impossible to even ballpark estimate, unless you are familiar with the area.

  2. The typical ratio of lots to house is 1/3, at least in our area. You buy $100,000 lot, the house itself should be $300,000, for a total of around $400,000.

3)Yes, and no.

Be prepared. Be very prepared. Find an architect. Even if you think that you aren’t going to build that fancy of a house, they like doing smaller projects, too. You’ll more than get your money back for the quality of house you’ll receive.

Make sure that the lot you want is buildable, and get a survey.

Start going to open houses, a Parade of homes type show, a remodeling showcase. Figure out the types of houses you like. Find out who designed them, and who built them.

Start interviewing potential architects and builders. Check records, licensing, references. See some of the homes that they have done, inside and out, talk to former customers.

Get your plan. Look harder at potential builders. Get a bid from your three choices.

Look carefully over the bid, is it all inclusive?

Double the cost of original bid.

Make as many decisions as possible before you ever break ground. It’ll save you money in the long run, and you’ll know what to expect. It also minimizes delays.

This process should take minimally a year, but at the end you should have a lovely one of a kind home.

Some might say, well, you can go and find a builder with 3 options for the countertops, two floor plans, and five colors of carpet to choose from, and it’ll be built in 3 months.

True. But for a little more time and effort, without any more money, you can have a jewel.

I would not recommend being the contractor yourself, unless you can do this as a fulltime job for 3-4 months.

Any other questions, feel free to ask.

fisha-licensed residential contractor and built my own.

People are right about the price ranges. They could be anything. You have to do the research yourself.

I would very, very strongly recommend an architect as well. They can make the difference between a simply inhabitable house and one that is truly great. It might cost you a few grand but a good one is greatly worth it in the overall scheme of things.

Many contractors are simply used car salesmen in a different line of work. You can get burned HARD by them and it will make your life a living hell for a while. Interview several different ones and then ask for references. Call those references. They will tell you the good and the bad but you might need to spend 15 minutes on the phone with each of them with specific questions. The contractor that rebuilt part of our house after a massive tree strike was the best I have ever seen. Everything was on time and on budget for a 3 month, $260,000 project. I gladly gave him references for months. Many of them are not like that however. A bad contractor can screw up not just your house but also your like. Buyer Beware.

I think it makes a huge difference if you’re asking this question in the general hypothetical way or in the actual ‘Right now, while we’re still in the housing meltdown’ way.

So, you are thinking about buying land. You won’t be the General Contractor?

Or are you building a house.

If you’re saying that you’ll be paying other people to build the house for you, it sounds very lengthy and costly.

If you’re saying that you will be building the house, all I remember are two threads where you punctured your hand trying to clean a screen window and when you fell (almost?) through the ceiling. If you’ll be doing it, it sounds pretty painful. I’m not sure you could afford the medical bills. :stuck_out_tongue:

I’m asking this in a “I have a lot in mind but I don’t know if it’s overpriced; if I buy it it would be a minimum of one year before I looked at building” sort of way. But I don’t know if the lot is worth the price.

It may be overconfidence, but I’m pretty sure with enough time and attention I could be the GC. But I work full time and I don’t think I would have the time and attention to give it, at least not as much as it needs/deserves. So no, I probably would not, unless it was a substantial savings if I did so. But this is putting the cart before the horse; I’m not at all sure I’m even going to buy the lot. At a ratio of “land = 1/4 of total value,” I think the lot is too expensive, at least for the type of house I would buy. And that’s a concern for me: I am a single person, I would want a small-ish cottage-type home, between 1500 and 2000 sq. ft. I can’t buy – and don’t want – an “estate lot” costing 1/2 of the total amount I intend to invest for house and land.

Hey! I just owned up to my “handy”-impairment here; I’m not ashamed of it! (Well, I’m a little ashamed.) :wink: But no, I definitely would not do the work myself. As for it being llengthly and costly – I’m not hugely concerned about lengthy. I’m parked in an apartment that is very reasonably priced and can stay as long as I need. Cost? Sure, it’s a factor, and something else I don’t know enough about: Is it much more expensive to build your own house (meaning, have it built), by purchasing the land and hiring a contractor, as opposed to buying new construction that is already built? Because I don’t think that’s necessarily true. Though as you can tell, I really know nothing.

It is overconfidence :wink: I am an Architect and I wouldn’t try to be my own GC. It is a lot of work–a lot. A good GC is worth his weight in gold—okay not as much as a good Architect (shameless self promotion), but it is more work then you realize. People think Architects and Contractors are natural enemies, but the truth is that we both realize that having a good counterpart makes the job successful for everyone–Client, Architect and GC.

People always underestimate EVERYTHING when it comes to building a house. If you were married I would advise that this would put a serious strain on your marriage. Building a house is usually very stressful–doesn’t have to be. But if you are a person who is wishy-washy when it comes to decisions you will pay through the nose. You will be shocked at the costs of things that you never even see, these are all behind the walls, or below the ground costs. Not visual things–I never have problems convincing clients to spend money on nice finishes, but they all want to cheapen up the infrastructure and that is not the area to save a few bucks in my opinion. You will kick yourself for the rest of your time in the house!

**fisha **wasn’t just kidding about getting a bid and doubling it. If you change your mind part way through the process things get expensive. In other words oak floors prior to the bid are a very different price then oak floors after the bid for example. There are literally thousands of small decisions that need to be made everyday and quickly. Delays cost money and money solves problems and makes them go away. If you are the type that pinches a penny until it screams you will pay more then you ever anticipated. There are lots of negotiations on a project and if the GC or the sub feels they are getting screwed you will get screwed too. It is a fine line that is difficult for a lay person to navigate.

My advice–hire an Architect. He/she is your advocate and you are the client that they are there to advise and help you through this. Architects can also help you design the house the way you want with the touches you want–but you do need to be realistic about your budgets and what you are willing to pay.

Well, I built two of my houses but I grew up around construction workers so I already knew people who could do a good job AND who I trusted.

In my situation I’m pretty certain I came out ahead.
But hey, these days you can find a house that’s already built at a deflated price. There’s no way I build one now with ther market the way it is.
So yeah, Jodi you’re nuts!! But I mean that in a good way. :smiley:
The thought of making up your own floor plan does sound very romantic.

But actually building a house? Fun it aint.

No, don’t be ashamed. Us non-handy people need to stick together and be proud.

I don’t know much about it, but I’ll just share some of my thoughts and perhaps others will be by to correct me and give you better information. And perhaps real estate is different in your area.

I was thinking in terms of comparing a tract home with a custom-built home. And in your case, you’d have to start even further back in the process since you’d have to be sure that your zoning was correct for everything you wanted to put in the home, then you’d have to pay for the grading of the property. Everything you add to your home would have to be custom-ordered. In tract homes, the developer checks the zoning and does the grading for a huge piece of land, so this gets allocated over more units. And when the developer orders the parts of the house, there would be a discount since developers order in bulk. The design costs would also be spread over more units so that gets a discount as well. For those reasons, I think that a tract home would be appreciably less expensive than a custom-built home.

Perhaps you were comparing an existing custom-built home with one that you would build yourself? I guess that would depend on the choices of the builder.

As for lengthy, please remember that unless you pay cash for the land, you’ll be paying some interest on the loan while the home is being built, so there’s some cost that’s added as well.

Even if you pay cash for the land, there would probably be commitment costs in advance of construction.

Great advice in here! :slight_smile:

Things I’d add: In the current market, you might be better able to find a good GC than even a year ago because the crappier guys might very well be out of business at this point. That works to your advantage. Likewise, overall pricing is probably down compared to last year.

About the only way to determine whether the land you’re looking at is priced correctly is to comparison shop. Find out how many lots have moved in the last three months in that general area and what they went for. It’s likely to be a fair bit of homework, but it’ll probably be worth it.

Definitely get an architect and a GC. Managing that stuff is a huge responsibility that you can’t possibly do in the evenings and weekends. Quality people in those positions will make everything easier.

When you get to the design stage, try to focus more on the bones of the house and less on the finishing details. Too many people get caught up in selecting countertops, baseboards and paint colours and forget about whether they have a proper foundation, adequate insulation and HVAC, waterproofing, etc… Note also that most people in this day and age build to code, which is the bare minimum required to pass a building inspection. You wouldn’t settle for the bare minimum in a new car; why settle for it in your home? Get it built right and it will pay off in the long run.

Building your own will certainly be a tough job, but it can be cheaper and more rewarding if you do it right. Good luck! :slight_smile:

In my town outside of Boston, MA, the lots are generally worth 1/2 or more of the total value of the property. People regularly buy old houses in my neighborhood for around $400,000 and knock them down because the lot accounts for most of the value of those properties. It really depends on where you are. There are places where the lots are really cheap compared to the value of the structure and places where the lots are really expensive compared to the value of the structure. Your proposed “land = 1/4 of total value” rule of thumb wouldn’t work in my town unless you built a $1.5 million dollar house. But there are places where you can get a lot for $10K and build a house for $100K on it.

If your location has property records online, you should be able to find out what the land and building assessments are on properties surrounding the lot you want to buy. That would give you a good idea if the price for the lot you are looking at is reasonable or not.

If you’ll need a loan to buy a lot, make sure you can get a loan for a lot. We briefly looked into buying a lot in VA where we used to live, only to find out that the banks were very reluctant to give loans for undeveloped lots to individuals. We only found one that was even willing to consider it, and only with the caveat that the lot be built on within 5 years.

And as others have said, be very very careful who you hire. Friends of ours had a custom home built and it was a nightmare. The first builder stole $50,000 of their money and then declared bankruptcy. They never did get the money back.

Building a house is almost always more expensive than buying an equivalent pre-built home. Usually significantly more expensive.

When we were looking for a new home, I decided I wanted to design my own. So I did up a floorplan, 3-D walkthroughs, the whole bit. Houses of a similar size were going for around $300,000 at the time, and I thought I might have to pay $350,00 or so for the privilege of building new. The best estimate I got was almost half a million dollars. (This was before the real estate boom, and while contractors and workers were still plentiful, too).

We built our previous house, but we chose it from a standard floorplan the builder offered, which is a cheaper option. There was a limited range of customization (windows could be enlarged, garage dimensions tweaked by a few feet, etc). Even so, it was more expensive, but at least it was in the realm of reasonableness. So you might consider that option - find a popular builder and get quotes for their standard home models.

Don’t forget that when you have a new house built, you still have to pay for everything from landscaping to fencing to adding a deck. These things add up.

What you meant to say is “Paying someone to build a custom home is almost always more expensive…”

I built my own house. It’s not difficult, and it’s way cheaper than paying someone to do it for you. The vast majority of the cost of a house is labor. The only things I paid anyone to do was the excavation and well drilling. Even contracting that stuff out, the cost of my house was less than a third of the final appraised value. The hardest part was holding a full time job and still getting the house done in a reasonable time frame.

That said, if I couldn’t do everything myself, I’d hate to be my own GC. I know too much about how things are supposed to be done and how seldom sub-contractors do a decent job. By far the worst part of building my own house was trying to keep the two sub-contractors that I did hire in line.

I’ve never built a house, but from people who have, it seems it’s just incredibly overwhelming choosing every single detail of the house, from bottom to top. I think it would be exciting, but very tiring.

another vote for throwing most of the money into engineering. building a new or gutting an old home gives you the chance to put in good stuctrual, plumbing, elec. and hvac. all that is much easier to do in new construction than old existing structures.

think sprinklers! many places are cutting fire stations and fire departments. having your smoke/fire alarms wired in and sprinklers can save the lives in the house as well as the house.

you can take advantage of solar panels, having your house placed well for energy effic., collecting rain water, solar hot water, etc.

as a member of these boards i’m sure you will be doing a ton of research and reading. fun stuff!

We built our house, the one we’re living in now. I would never go back to buying an existing home. We got to tweak the plans a bit (expanding the living room, adding a closet) and got the paint and flooring and cabinetry and faucets we wanted.