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Calculating Home Building Costs
How to Calculate Home Construction Costs
By Mark J. Donovan
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Let me first dispense with the
fact that I am not going to be able to tell you what the exact cost will be
for building your home. Calculating home building costs includes many
variable factors that make it impossible to have one standard formula that
fits all home building projects. This said, I can however provide you with
the knowledge and information you need to calculate your own home building
costs.
When calculating home building costs contractors like to quote on a cost per
square foot basis.
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Calculating the cost per square foot
on a home building project involves dividing the total cost of the home
construction project by the number of square feet in the project. For example,
if a new 3000 square home costs $400,000 to build then the cost per square foot
is $133. Note that normally the cost of the land is not included in the cost per
square foot calculation.
Depending upon the home building materials used, the cost per square foot can
vary dramatically.
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If for example you are building a
starter-like home with no bells and whistles the cost per square foot could be
below $100. If on the other hand, you are building a custom home with a high-end
kitchen, e.g. using granite countertops and high-end cabinetry, the cost per
square foot of the home could exceed $200.
Calculating home building costs can also vary with local home building market
conditions as this can affect construction labor rates. One way to get a sense
of the cost per square foot on new home construction in your area is to check
the local real estate magazines for new home sale prices. Make note of the new
home prices and respective square footage. Also check the real estate magazine
for typical building lot prices. By subtracting out the average building lot
price from the new home prices, and then dividing by the square footage of the
particular home, you can arrive at a typical cost per square foot home building
rate for your local area. Keep in mind, however, the type of building material
used in the compared new homes. Also realize that building lot prices vary
depending upon location, property size and the quality of the lot. Thus the cost
per square foot for calculating home building costs in this manner should only
be used as a rough reference point.
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Another major home building cost
variable is the shape of the home. For example, a standard two story colonial
home can be much cheaper to build than a ranch home of similar square footage.
The reason for this is that a large ranch home has a much larger roof and ground
footprint, which requires a lot more roof trusses and roofing material and
concrete, respectively. In addition a large ranch also requires more land, which
may require more lot clearing.
Other major variable factors that you
must account for when calculating home building costs are local and regional
building codes and fees.
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Photo by Mark Donovan |
Many municipalities levy development
impact fees that can vary wildly depending upon where you live, and the current
home building situation in that area. In addition, covenants and building
restrictions can also impact your home building costs and plans.
Weather conditions can also impact your home building cost calculations. Poor
weather can stop or delay home construction projects, and if not planned and
budgeted for properly can impact your home construction’s bottom line
dramatically. Every home building cost estimate should include a 5-10%
contingency line item to help mitigate weather and other unforeseen cost
impacts.
Unforeseen ground work can also impact home building costs. If for example,
while excavating for the foundation ledge is encountered blasting may be
required. By making up front soil samples and site inspections your excavation
and foundation contractor may be able to assess ahead of time the need for any
blasting.
To conclude, when calculating home building costs it is important to identify
every phase and feature of the home building project, along with a list of the
associated variables. For each phase of the home building project, a complete
list of the building materials and labor required should be recorded in a
spreadsheet, and alongside each item their associated costs. In addition, a
separate line item for each variable, along with an associated cost, should be
recorded. By creating this type of comprehensive bottoms up cost spreadsheet,
you can most accurately calculate your home building costs.
For a more comprehensive new home building
checklist, see my
New Home Construction Bid Sheet. The New Home Construction Bid
Sheet provides a request for quote checklist section that you can provide to
prospective building contractors. It also includes a comprehensive new home
construction cost breakdown table, in Microsoft Excel format, that allows the
contractor to include his projected new home construction costs for every phase
of the project.
How to Finance your Home Remodeling Project -
can help provide funds for your new home improvement project if financing is
required.
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