How can we estimate how much it would cost to build our own house?
September 10, 2007 7:48 AM   Subscribe

How do I decide if it is worthwhile to build my own house? Where can I find out how to do estimates of time and cost, or who can do that for me?

My wife and I are looking for a house in a particular neighborhood in Montgomery County, MD. Prices are crazy there, with listings and recent sales at more than $500/sq ft. Many houses that have been purchased there recently have been bought by builders who tear down the old house and build ~5000 sq ft houses in their place, which are bigger and more expensive than we would ever need. We are thinking of waiting a few years to see if prices go down, but there is a property for sale that, if we could get it at a reasonable price (for the area), could be a tear-down where we could then build our own home.

We have no idea how much this would cost, or the process that would be necessary. I saw these threads (1,2,3) from past questions, but they didn't quite have what I needed. It seems to me that the required steps would be:

- Buy property

- Get permits to tear down and build

- Get design for new house

- Tear down old house

- Build new house

What I am looking for is a process by which we can estimate if it is cheaper to buy and build than to buy an existing property. So, here are my questions:

Did I leave out any or mis-order any of the steps above? How do I estimate how much might each step cost or how long it would take?

Alternatively, how do I find a professional who is familiar with these steps who can help me make an impartial, conservative estimate ahead of time, meaning before we commit to buying the property? I assume this would be a builder or architect in the area? Would I have to commit to using them to build the house? How much would this estimate cost?

What am I missing here, or what else should I be asking?

posted by procrastination to Home & Garden (7 answers total) 8 users marked this as a favorite
Look for nuances in the building code. As an example, in Santa Cruz county, California, if *one* structural wall is left standing after a teardown, the new structure will be a 'replacement structure' and not a new one (within certain limits). This has gobs of advantages.

To get through the planning process in your administrative area you can often hire expediters; the more arcane and ridiculous the laws, the greater the likelihood that such a person can be found for hire. They are usually ex-employees of the planning bureaucracy.
posted by jet_silver at 8:41 AM on September 10, 2007

Reordering steps: To get a building permit, you'll need design drawings, so you could reorder those steps. The fact is, you (or the contractor) will probably be making several trips to the planning counter, (and maybe city hearings, if you want to do something outside what's allowed automatically), so it might be more accurate to add a step or two.

My impression is that most people who do tear-downs are in the business one way or another -- architects, contractors, etc. -- so they save money on at least one step. Building your own house is a fairly epic process even for people who do none of the work themselves. Check out Tracy Kidder's book for one couple's experience. So my guess is that it won't be cheaper, because no doubt a few enterprising contractors / would-be developers, who can do most of the work themselves, have probably noticed the property too, and if they could tear-down and rebuild for a good profit, the land price will get bid up. But good luck figuring it out; I'm interested to hear the answers you get here.
posted by salvia at 8:42 AM on September 10, 2007

We built our own home in Texas, about 20 years ago. When we first moved there, my husband was introduced to a very diverse group of men, a contracter, and handy man, a lawyer, a guy who dug ditches and did dirt work, an insurance guy etc. Over the course of several years he had coffee with these guys several times a week. When we got to the point that we were financially able to think about buying a house, we enlisted the aid of the contracter and did it ourselves. He was the contracter of record on all the paperwork, and we paid him a small fee ($1000.00, I think) to oversee our work, but my husband did all the leg work and handled the subs. Our friend was invaluable in making contacts and dealing with the inevitable scheduling difficulties encountered.
We did as much of the work ourselves as possible (all the painting and interior woodwork, much of the plumbing, some electrical). We worked with the subs to their satisfaction on the things that needed signing off on (electrical) and just left some of the work, like the framing and drywall and bricks to the subs, since they are much better and faster at that sort of thing. We had a pretty tight schedule, since we wanted it done over the course of my husbands summer break from teaching at the university, and we were able to build, from scratch (no tear down involved) a nice 3 bedroom, 2 bath home in a suburb of town in just about 11 weeks. It remains to this day, one of the coolest and most rewarding things we've ever done and given the need, I would do it again in a heart beat. It was much, much more fun than the remodel we did on our house in Los Angeles, which we bought at auction for a really good price, but that we had to do to make it habitable.
posted by jvilter at 9:20 AM on September 10, 2007

Sorry, I guess that didn't answer your question at all and was just a chance for me to stroll down memory lane. My point was, it is possible to save money on the project, and quite a lot, depending on your skill set and the amount of time you have to devote to the actual hands-on stuff.
posted by jvilter at 9:22 AM on September 10, 2007

Best answer: One of those threads was mine. I’m currently in the early stages of building (framing) the new house. It’s been a long process but it’s a blast. When it isn’t amazingly frustrating, that is.

You’ve got the steps right, though as someone else said you’ll need the design before you can get a permit.

Before you go buying property though do your homework. Talk to the building inspector in the town to see what limitations you might face in building. Then talk to the other departments. Then, after you buy the property, do it again now that you know the layout of that particular lot.

We thought we did all our homework, we didn’t need any variances, we dotted our Is and crossed our Ts. Then we applied for a permit and… BANG… automatic four month delay, no way around it, while we dealt with the zoning board of appeals to get around an obscure law that only applied to people tearing down an existing structure to build a new one who had less than 50 feet of frontage facing the road. It was crazy. We’d get over one hurdle only to hit another. One department would tell us one thing, another department would say the opposite. Things would take a month “just because that’s how long it takes.”

Eventually we got our permit.

Before you buy the property find out about any easements or rights-of-way that might limit where you can build. Are you on a private septic? Is there a public water source nearby? If so, that may really limit what you can do as well, at least in Massachusetts.

So check the laws. You might not be able to do what you want to do, or you might have to jump through hoops to do it. If you can leave one wall and/or the foundation you might be able to call it a renovation and it’ll be a LOT easier to get a permit, depending on the local laws.

If you know someone it the town, or you know someone who knows someone, it might help speed things up. In researching what other things were built in my town I noticed the laws didn’t seem to apply to certain developers.

If you want to build a custom home an architect would be the person to talk to. Just interview a few who have worked in the area, tell them what you have in mind, and they should have an idea of the costs to build in the area as well as the local laws. Whatever they tell you it’ll cost, add another 20%. Custom homes designed by architects will cost more to build. You shouldn’t have to pay for the initial interview, though if you decide to go further you might have to pay an hourly fee.

If you’re looking to do it cheaply and quickly, look into modular homes. They go up in a few weeks. Find a builder in your area who builds them and they can give you an idea of the cost.

Keep in mind the builders who “flip” a property, tear down the existing home and build the 5000 sq foot McMansions are building them out of particle board and vinyl siding. They build them as cheaply as they can so they can make a big profit. I can’t wait to see all these 5000 sq foot homes in twenty years. If you’re planning on staying in yours a while you’ll probably want to put more money into it.

Will it be cheaper? That’s hard to say. It really depends on what you want, the cost of the property in the area, and a whole bunch of other things. A complex custom home with the best materials, no way. A box-shaped modular on the existing foundation, maybe.

There’s also the fun and satisfaction of being involved in a project like this. I can’t possibly put a price on that part of it.

Feel free to email me if you want to know more of the dirty details.

Also, read “House” by Tracy Kidder.
posted by bondcliff at 11:38 AM on September 10, 2007

I'm in the middle of the process, too.

In my case, design plans and contractor bids were step 1. My purchase and construction loans are rolled together, so I needed the plans, cost estimate, and appraisal for loan approval.

Seconding bondcliff on making yourself familiar with the zoning rules and finding an architect and contractor who do a lot of work in the area. They know the requirements for variances, easements, etc.

Like you, I knew exactly where I wanted to live. Could I have bought for less than what I'm paying to build? Yes. But it would have been smaller and/or needed some renovation. It also would have been a less desirable location within the neighborhood. Since I'm planning to stay in the house for the long-term, it seemed better to me to pay a few thousand dollars more and live in the house I want. At the end of the day (even with the market downturn), my realtor, mortgage broker and appraiser all think I should come out with a house valued at more than I've spent on it.

Feel free to email me if you want to know any more about the process as I've experienced it so far.
posted by weebil at 12:29 PM on September 10, 2007

Best answer: No single architect or builder will necessarily have all the answers you're looking for, but they can recommend people who will. Eventually you'll need to coordinate with a whole network of professionals to design and estimate cost, secure funding and regulatory approvals, and manage construction. You're basically performing all of the steps that a real estate developer performs, but on a smaller scale. In some ways this is easier, but you also lose out on economies of scale. Development is a business of risk, which is why successful developers make big returns on their investments; in your case, you can't afford a big risk so you'll probably err on the side of caution. Make sure that whatever you estimate, you have a contingency plan that allows you to spend 25% more and still come out ahead. Having an "escape route" at every stage of the process, where you can recover your equity and pay off your debt, is usually impossible, but there are several key steps you can take to limit your exposure.

First, sign an earnest money option agreement with the landowner that gives you 30-90 days for due diligence. This takes the land out of the competitive market at minimal expense and doesn't require you to make a rash decision. If you purchase the property, the earnest money should apply towards the purchase price; if not, you paid the owner to keep it off the market while you did your research.

Second, plan ahead as much as possible. Work through your worst-case financial scenario and make sure that you can still cover the debt service. There's not much worse than putting time and effort into a project and then losing it all to loan default and bankruptcy. Take inflation and interest rates into account on future cash flows, and don't forget that your time is valuable too: put a number to it, and include it in your calculations.

Third, rely on experience. You don't have any, so find someone who does; roughly 1 in 10 people are employed in construction-related fields, so chances are good that you can make connections through family and friends.
posted by Chris4d at 6:12 PM on September 21, 2007

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