Author Topic: Buying a lot, building a house - any costs we're not thinking of?  (Read 4750 times)

ToughMother

  • Stubble
  • **
  • Posts: 234
  • Location: Western Mass.
Hey there all,

On my way to F.I.  Currently own a small house, but a dream has always been to design and build a small house with a view of a mountain.  I wanted to get your input on the categories of costs one incurs when buying land and having a house built.

We're looking for land now (in an area where land is scarce and pricey esp w mountain view).  One piece is a combo of open, flat lot surrounded on two sides by woods/wetlands that has a partial (but sufficient) mountain view.  Location is good for us both getting to work.

It will need septic but water and electric are at the street.  Good solar exposure and back up wood and/or propane makes sense.

Other costs:
All the permitting/inspections
driveway
landscaping
digging a basement
fence cost (beagle!)

a. what costs might I be missing (I don't want to miss a one!)
b. what costs from your list typically are/are not included when you estimate house cost at XX per square foot?

Thanks in advance to all you real estate wizards...
ToughMother
« Last Edit: June 19, 2015, 05:43:48 PM by ToughMother »

Jeremy E.

  • Handlebar Stache
  • *****
  • Posts: 1946
  • Location: Lewiston, ID
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #1 on: June 19, 2015, 05:40:14 PM »
having electric and water at the street, you still need to get meters and have them brought to your house.

If you want to design the house yourself, you may need to hire an architect and maybe a designer, possibly a structural engineer as well.

If you're using a construction loan, there is higher interest that you pay until you can convert to a normal mortgage loan. Also other miscellaneous fees that go along with getting the loans.

You will have to pay to live somewhere else while it's being built, while also paying on the construction loan, so it's like paying for 2 places to live at the same time.

I would talk to some local contractors and ask them what they think your project would cost. They are probably familiar with the area and a lot of the costs you will incur.

Good Luck!

CatamaranSailor

  • Stubble
  • **
  • Posts: 153
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #2 on: June 21, 2015, 08:39:04 AM »
Having built our last house, I will throw in my two cents....

The most important thing is to build your house on paper first. I can't stress enough how expensive even small changes are once you begin construction because everything relates to something else. Moving walls, adding space, changing the floorplan is simple on paper, expensive when you get started.

The second thing is to schedule your contractors well. I never really understood the meaning of "times is money" until I had a construction loan ticking and had a couple of delays with subs.

As far as unforseen costs while building...there shouldn't be many if you work up a complete budget with accurate estimates and bids from your subs. Still, we built a 15% hedge factor into our estimates.

I would suggest you go pay to have a full soils test/engineering review done prior to building your foundation. From the foundation on up, you can control your costs if your budget starts to get wacky (looking for deals on cabinets and fixtures for example) however if your soils require an engineered foundation, you'll want to know that first rather than five years down the road when your foundation is failing. I don't know about your area, but where we built, soils testing was voluntary. I was amazed by how many builders started digging a foundation for a $400k house without giving any thought to whether the soils were good or not.

Here is a list of a few things that sound small but can add up pretty quick:

  • Porti-Potty for the site
    Temporary water and electric (some of my subs needed 220 which was additional)
    Dumpster
    Theft/Liability insurance for the duration of the built. Homeowners doesn't cover construction!
    Temporary fencing or lockable storage for building materials (until you get dried in)
    Reinspection fees if you fail any inspections (we didn't but some munipalities will charge you extra if the have to come back)
    Gutters and landscaping
    Window coverings
    Light bulbs (sounds crazy but when you first move into a house you'll be shocked at how many ##$%@#@# light bulbs you need to buy).
If you want a real reality check, go to Lowes and walk every single isle while reminding yourself you'll need anywhere from 1 to 10000 of every item you see in there!

Last but not least, I don't know if you are planning on doing any of the work yourself. If you are a pro (electrician, HVAC, whatever) by all means do the work yourself. However, my biggest mistake was doing too much of the work. I learned a lot, but it added time to the schedule (interest never stops on the construction loan!) and when I added it all up, I would have been better off paying to have more of the work done professionally and getting it done quicker. (That and I ended up with a bunch of tools I only used once). I know MMM is al about insourcing but building a house is a lot like a ballet and timing is critical.

You can save yourself a shit ton of cash by:

  • Acting as your own general contractor (managing budget and subs)
    Painting and landscaping yourself

Everything else....find kick-ass subs who will get in, get out and do the job right.

Final note....it should be obvious but never pay a sub until the job is done and has passed inspection. Write that into the contract. Some subs will tell you they need 50% up front to "buy supplies." Don't do it! Go buy the supplies yourself and store them on-site if you feel the sub is worth it. Otherwise it's a red flag.

Good luck! Building is frustrating, nerve wracking and totally a blast!

Mr. Frugalwoods

  • Bristles
  • ***
  • Posts: 296
  • Location: Greater Boston Area
    • Frugalwoods
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #3 on: June 21, 2015, 10:01:45 AM »
Howdy Fellow Bay Stater!

I've been researching rural property... a lot.  The biggest wildcard in these discussions is the sitework.  A lot of architects and online house plan sites don't include _any_ of the sitework in their $XYZ / sqft estimate.

For septic, make sure you make your offer contingent on a perk test that allows you to build the type of septic system you are willing to shell out for.  With modern system design you can almost always add a system -- but the cost can be prohibitive.  So you'll want to put a dollar amount of cost estimate in your offer contingency.  Something like:

"Contingent on perk test allowing non-mechanized septic design estimated at no more than $25,000 by XX engineering firm"

Otherwise, you could end up with a site that "technically" can get a septic but might cost $60k and require constant electricity to operate.  Nothing like having the power go out for a week and the toilets don't work :-)

Get an estimate from the power company on how much it will be to run power to the site.  Sometimes this can be shocking.  Also consider that to preserve your view, you may want to bury power which is more expensive.

Depending on where you are in Western MA, you might have ledge problems.  If you require a basement, you'll want to do some exploratory digging to make sure ledge isn't lurking 4 feet under the surface.  You can blast your way down to basement depth, but it'll cost a pretty penny.  The same contractor who comes out to dig your perk test can also likely do this digging.

If your driveway will be any longer than standard, cross/climb any grade, or venture near a stream, make sure to get an estimate on that work as well.  It can add up fast, especially if you need culverts and/or a water quality study.

Speaking of water... I hear wetlands and I think flood.  Make sure to verify that you aren't in a flood plain for insurance purposes.  Flood insurance is about to be a giant problem, and I personally would not buy any property that would require it.

Internet, Internet, Internet.  Is it available?  How much will it cost to run?  Talk to neighbors, don't rely on what the companies tell you.  If you realtor tells you that satellite is just fine, they are a moron.

Feel free to shoot me a PM with the property's address and I'd be happy to do some virtual digging.  Our property search is turning into quite the hobby for me, and I freaking love this stuff.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #4 on: June 21, 2015, 10:29:10 AM »
I would count on the construction to take much longer than you'd expect to complete.

For electric, since it's going to cost you something to bring it to your door, maybe consider going solar. It's much cheaper than it used to be. It's cost-competitive in many locations, and even cheaper when it's rolled into your mortgage. And if you're building it into your house in the first place, the installation and design can mesh together nicely.

Solar water heating is also pretty cost competitive too.

There are tax credits for solar energy. I think the federal is 30% or 35% of the total cost, and then many states add on to that too. Once the panels are paid off through the energy savings (anywhere from 5-20 years depending on specifics) the energy is free after that.

music lover

  • Pencil Stache
  • ****
  • Posts: 653
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #5 on: June 21, 2015, 11:56:03 AM »
You can save yourself a shit ton of cash by:

  • Acting as your own general contractor (managing budget and subs)
    Painting and landscaping yourself

Everything else....find kick-ass subs who will get in, get out and do the job right.

Final note....it should be obvious but never pay a sub until the job is done and has passed inspection. Write that into the contract. Some subs will tell you they need 50% up front to "buy supplies." Don't do it! Go buy the supplies yourself and store them on-site if you feel the sub is worth it. Otherwise it's a red flag.

Good luck! Building is frustrating, nerve wracking and totally a blast!

Just a couple comments on those points. If someone has never acted as their own GC or doesn't have any experience in building, then the chances of saving money by being your own GC are slim. There are hundreds of decisions to be made and it's simply not that easy. I know people who have tried and failed. If someone lacks building knowledge, then it's easy to make a mistake or to watch a mistake being made and not even know that it's a mistake.

I agree on doing the painting and landscaping yourself.

Regarding hiring "kick-ass" subs...it sounds easy, but it's not unless you have real knowledge of the business. Good contractors know who the good subs are and they use them. Good trades know who the good contractors are and they tend to stick with them. An inexperienced person acting as their own GC will have a tough time prying one of them away from a contractor who brings them 15 jobs a year.

Most trades won't do the entire job without getting a little bit up front. It may only be 10%, but to expect a trade to complete a job in full without receiving a penny is ludicrous. They have to protect themselves from flaky builders and homeowners, and a deposit is the only way they can. Try ordering cabinets without a deposit...you'll be told to get lost. In most cases, 10% up front, and another 20% - 30% when a milestone has been reached is reasonable, with the remainder of the payment coming once the job has been completed.

babysteps

  • Stubble
  • **
  • Posts: 119
  • Location: Southern Tier NY State
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #6 on: June 21, 2015, 02:36:11 PM »
Time is money.

My (only partly joking) rule of thumb is that a given job will take twice as long as estimated, plus one unit of the estimation.

So if you are told "4 weeks", that's pretty definitely going to done in 9 weeks or less (4 weeks x2 plus one week)
If told "a month", you could be looking at 3 months.

The unexpected will always come up! Agree with working on paper as much as you can.  And ask your mechanical contractors what they think about your plans before you sign off on them, the architect/house designer doesn't always spec (or allow for) what the HVAC (or any other specific trade) people suggest.  Ask around for any 'quirks' in local code - cabinet set-backs to stove tops, paperwork to certify heating is sufficient, and many other items can be vastly different one municipality to next. 

Speaking of specs, make sure they are actually complete and specific, not just boiler plate.  An example: once had subs, suppliers and architects all pointing their fingers at each other for fireplace openings that didn't accommodate the spec'd fireplaces, and no easy way to supply required make-up air. 

Helps a lot to have subs/contractors who know local code well.  Also, a few (not many, but some) municipalities have a code culture that seems to be difficult just to be difficult - think Kafka-esque.  Avoid if possible!

Have fun planning :) And building!

CatamaranSailor

  • Stubble
  • **
  • Posts: 153
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #7 on: June 23, 2015, 09:50:23 AM »
You can save yourself a shit ton of cash by:

  • Acting as your own general contractor (managing budget and subs)
    Painting and landscaping yourself

Everything else....find kick-ass subs who will get in, get out and do the job right.

Final note....it should be obvious but never pay a sub until the job is done and has passed inspection. Write that into the contract. Some subs will tell you they need 50% up front to "buy supplies." Don't do it! Go buy the supplies yourself and store them on-site if you feel the sub is worth it. Otherwise it's a red flag.

Good luck! Building is frustrating, nerve wracking and totally a blast!

Just a couple comments on those points. If someone has never acted as their own GC or doesn't have any experience in building, then the chances of saving money by being your own GC are slim. There are hundreds of decisions to be made and it's simply not that easy. I know people who have tried and failed. If someone lacks building knowledge, then it's easy to make a mistake or to watch a mistake being made and not even know that it's a mistake.

I agree on doing the painting and landscaping yourself.

Regarding hiring "kick-ass" subs...it sounds easy, but it's not unless you have real knowledge of the business. Good contractors know who the good subs are and they use them. Good trades know who the good contractors are and they tend to stick with them. An inexperienced person acting as their own GC will have a tough time prying one of them away from a contractor who brings them 15 jobs a year.

Most trades won't do the entire job without getting a little bit up front. It may only be 10%, but to expect a trade to complete a job in full without receiving a penny is ludicrous. They have to protect themselves from flaky builders and homeowners, and a deposit is the only way they can. Try ordering cabinets without a deposit...you'll be told to get lost. In most cases, 10% up front, and another 20% - 30% when a milestone has been reached is reasonable, with the remainder of the payment coming once the job has been completed.

Sorry, but the number of people acting as their own GC are pretty impressive.

http://blog.armchairbuilder.com/8698/how-many-owner-built-homes-built-in-2013/

"Owner Built Homes

This brings us to the number weíve all been waiting for.  And the drum roll pleaseÖthe total number of new owner built homes completed in 2013 is 42k (7% of the total).  If you look at this number in a vacuum it really doesnít sound all that impressive.  But when you compare it to the number of contractor built homes, you start to realize the significance.  Forty-two thousand owner built homes versus eighty-one thousand contractor built?  Seriously?  Thatís more than half as many people who chose to build their own home versus hiring a general contractor for the full process.  Note: This doesnít mean the owner built homes didnít have input or help from a general contractor or builder consultant.  Itís common practice, and recommended, for people that decide to go this route to have access to a local pro builder to ask for help in locating trade contractors, estimating, bidding, and scheduling. "



Lot's of people act as their own CG and do an outstanding job. There are a lot of horror stories of GC's mismanaging a job and then leaving the owner in the lurch with very little recourse. Try suing a builder who went bankrupt and took all of your money to fund OTHER projects.

A person managing their own build has a lot high vested interest in how the project turns out. If a person takes their time, does their research and manages the build carefully, they can absolutely do as good or better job then a CG.

As far as subs are concerned, when I was building I did exactly what you alluded to...I went and asked builders who they used...they were perfectly happy to let me know who the best guys were. Yes, I did have to work around their schedule, but that's what being a GC is all about.

As far as paying subs I never had a single issue with the including the clause "after the job is complete and has passed inspection." Not one.

Now I will say, I was always ready to purchase materials for the sub (like I said in my post) and have them ready once he/she was ready to start work AND I was always ready to cut them a check they day the inspector signed off on the work. A Subs main concern is that you won't have the money ready when they are finished so I made sure to let them know they would not have to wait to get paid. You are correct when you say subs wouldn't want to wait until the job was 100% complete which (again) is why you tie payment to inspections. Plumbing for example. You have a rough-in...then an inspection....inspection passed...pay the plumber for the rough-in portion.

Buying cabinets from a building supply store is not the same thing as hiring a tradesman. If I want my cabinets from Lowes and they need to order them and want 10%...up front. No problem. The risk is a lot smaller than hiring an electrician to do a $14,000 job and handing over $7,000 upfront with nothing more than a piece of paper saying they'll show up. That's not ludicrous, that's *ucking insane.

(When I hired my electrician, I had all the materials ready. He wasn't out a dime. He showed up and in two days had the house roughed in. We had the rough electrical inspection done and signed off. I cut the electrician a check while the inspector was standing there. The electrician was thrilled. Did the same thing with all the other subs. I got excellent service, did not have a single issue and passed all inspections. Nothing ludicrous about it at all).

Building is a complicated process and there are a ton of decisions. But someone with decent project management skills, who takes their time in the bidding process, who can deal with the myriad of little hassles that come up can end up with a fantastic home and save themselves a considerable amount of cash and do it without a GC.
 




ToughMother

  • Stubble
  • **
  • Posts: 234
  • Location: Western Mass.
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #8 on: June 23, 2015, 08:35:52 PM »
Just wanted to say THANK YOU to everyone for this fantastic list (wow! Sailor14!! not to mention the offers of land help (Mr. Frugalwoods!!!).  I'll be back in touch with you fine folks!

We got outbid on a piece of land this weekend, but it was a good education... It had many good cost-saving qualities (water and electric very close, no long driveway, clear and level site, no flood problems, avail internet, not too far from highway for commuting, etc) and people were bidding their "savings" on these issues into the price.

I have no interest (or time!!!) in being a GC, but it's very helpful to hear about the qualities and contracts for getting subs/materials/time.

Thanks for the education as always, my fine MMM community.  If you think of anything else, please don't hesitate to pass along your wisdom.  THANK YOU!
« Last Edit: June 23, 2015, 08:37:45 PM by ToughMother »

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #9 on: June 24, 2015, 05:33:31 AM »
I searched the thread for "zoning" and didn't see it. Worth reading the local zoning ordinance and what zone the property is in.

Blindsquirrel

  • Pencil Stache
  • ****
  • Posts: 657
  • Age: 1
  • Location: Flyover country
Re: Buying a lot, building a house - any costs we're not thinking of?
« Reply #10 on: June 24, 2015, 07:16:36 PM »
buy a foreclosure and fix, waaay cheaper