Welcome back! I am going to share some invaluable information with you to hopefully put you on the right track, pay attention to what I am going to tell you!!!
First always double and triple check everything someone tells you, including what I tell you!
First there are three types of homes, a tract home which is a home built in a group of lots within the same development, a spec home (Speculative) which is built semi custom to market and sell and third is a custom home which is usually build customized to the owners specific needs and taste’s. (Style & Design)
The lot is the key to spec home building! The lot is the key to spec home building!
Why is the lot the key? Because the lot indicates design and position in the market! I bet your thinking “The lot can’t talk” but oh yes it can and it does!
Stand in front of a lot (Virtually is ok) look at it’s size and shape, would the size and shape indicate design? There are legal setbacks (Distance from street lot line to front of house) and legal offsets (which is distance from each side lot line to house) and the legal back set (Back of home to back lot line) this indicates the biggest footprint allowed by law!
If looking at the lot let’s assume we verified utilities were at the lot line and we have sewer, water, gas, electricity, phone and cable readily available so we are going to build a spec home of comparable size and style to those homes within a 1/4 mile to 1 mile range around us. (Think appraisal)
We still want to look outwards 1 to 3 miles for design ideas but square footage is dictated by surrounding homes as we don’t want to over build or under build.
Your costs include:
- Lot (8,000 sq. ft.) ($56k) 7.0
- Soils Report .30
Perk Test (If Required) .35
Well Drilling (If Required) 3.0
- Surveyor .75
- House Plans (2000 sq. ft.) 4 bed / 2 bath - 2 car garage .75
- Plan Review .25
- Permit Fees .50
- Assessment Fees 1.50
- Civil Engineering (If Required) .25
- Fire Sprinkler System Design (If Required) .50
- Excavation, Compaction and Grading 1.00
- Building Cost
(In California a single story home runs $82 per square foot and a two story home runs $92 per square foot.)
My cost examples are based against lot sq. ft. as a portion of cost, so if the cost for a two story home with upfront cost’s is roughly $108 per sq. ft. and you still have to carry builders risk insurance, liability, hard and soft cost’s, carrying cost’s and then make a profit of 15% you.
Don’t forget landscaping and escrow / closing cost’s.
In my example your $120 a sq. ft. before sales cost and final escrow cost’s! You have to have $129 per sq. ft. in comparable value before adding 15% for profit to make $150 per sq. ft. required in comparable market sales.
So any lot you find in my example which does not have 3 sold homes in the last 90 days and within 1/4 to 1 mile which sold for over $150 per sq. ft. would not work!
These numbers are probable incorrect I will correct it later!