How do you estimate costs in the current home building market? You have to weigh a lot of different factors that all impact the costs of building a home. Just coming up with any estimate can be a monumental task.
The simplest and fastest way to estimate costs in the current home building market is by finding homes around the area that are identical or at least similar to the the size and style of what you’re dreaming of building. Take the selling price of that home and subtract the cost of your land, and you then have a quick and dirty guess about the potential construction cost. It’s certainly not the most precise method, but this general rule of thumb will at least give you a rough ballpark figure to start with.
Having said that, if the home you are using as a comp was built several years ago or even farther into the past, then you have to start factoring in appreciation costs given the rising costs of materials and labor. In some areas, labor costs are soaring, but a good guideline for most markets is going to be anywhere from 2 percent up to 5 percent per year.
Another factor that goes into the costs of building a home are the interior features of that home. Consider an example of you hoping for a totally finished and furnished basement when your reference comp home doesn’t have this. You’ll have to manually factor that into your cost estimate. Just a bit here and there might drive your price by thousands of bucks.
Another good way of doing all this is by getting the help of a builder or construction company. If you can show them what kind of house intrigues you, they can likely develop a quick estimate. In many cases, given their experience and expertise, the estimate they provide you is likely to land really close to an actual building cost.
You might be wondering what to do if the home you intend on building is different from the homes that are already in your area. If that’s the case, then you can use this tip. Open a new tab in your browser with your favorite search engine and then use search phrases such as ‘house plans’ or ‘home plans’. You’ll discover quite a few sites with thousands of different house plans. These databases let you search by factors like size of home, the kind of home, number of rooms, and more. For a nominal fee, you can then download the blueprint that you pick out. This is what you can use to get an estimate or quote from a construction company or home builder, many of which do quotes free of charge or obligation.
You can also do the same thing for searching by ‘home building kits’, at which point you’d only have to get quotes for labor. That is, unless of course, you just do it yourself.
Regardless of how detailed you get in your planning and research stages, you need to leave yourself some breathing room in case of cost overruns you can’t anticipate. A good guideline is saving up 10 to 15 percent as a contingency in order to make sure that you have enough money that covers overruns.