Analyzing Costs: How to Build a Home – Step 5
The next step in our blog series, How to Build a Home, is to analyze your overall costs. By adding your estimated rough cost to build to the lot cost, you will have an idea of the overall project cost. Comparing this estimated total cost for the completed home to your overall budget from step 1, you can decide whether to move forward or to re-evaluate the house/lot combination.
Depending on how far over budget your estimate is at this point will determine your course of action. If the estimated rough costs are slightly over the amount you want to spend (5% or less), you might decide to lower your product specifications to bring the costs down to your budget. Things like cabinets for example, can range drastically in price. The last kitchen we priced out ranged in price from $5k to almost $20k depending on the type, finish and layout we used. By adjusting your specifications for those types of products, you can shave tens of thousands of dollars off the price of your new home.
If the estimated rough costs are significantly higher than your budget (more than 5%), you will want to re-evaluate. Maybe a nearby lot is available that’s slightly smaller or you may decide to switch to a smaller house plan.
Margin of Safety
It’s a good idea at this point in your home building process to keep a margin of safety in your budget. Because your cost estimates are rough at this stage, and you really haven’t started getting into the details, it’s a good idea to leave extra money for unforeseen circumstances. Things like subsurface rock or soil conditions can get expensive. By keeping this margin of safety in the budget, you will be able to take care of these costs when they come up.
So if your rough estimated costs came in under budget, you can proceed to the next step. If not, you will want to go back to step two and three in our blog series on How to Build a Home. You can either find another lot, look for a more affordable house plan, or both. Stay tuned to our blog…in our next step we will cover the actual lot purchase. And if you haven’t stopped by our ESTORE yet, check it out. We have some great money saving resources for your next home building or remodeling project.