For a tract house, probably. Not “custom”.

SoCal is a pretty big area! In my area of LA you are looking at some crazy numbers - around $2 mill just to buy the tear-down lot to build that new house on. In my area I don't think $300 is enough for a nice mid level custom.

Thanks for your responses. I am hesitant because I have been quoted $150 to $600psf. I was told $300psf would get me something nice but without the higher-end modern details.

I own the existing house and land. In your experience, what could I build for $1m? A 2500sf house? Has anyone recently built a home that could share realistic numbers for what I can expect before I get plans drawn up?

The houses in my area sell between $1.5m and $4m. Most of the homes in the 2.7m-4m range have been remodeled and are move-in ready.

If houses sell for 1.5-4M, then you can expect to spend more than that to produce the same results.

rileyestrada, are there any new construction tear-downs for sale in your area? Those will give you the best cost comparison. You can take the selling price and subtract what the builder/flipper paid for the lot and get a rough idea of what it cost to build.

I just looked at Redfin and found a couple. Once I subtracted the land cost the new build is at $575/sq.ft Another came in at $541. These are flips, so I would want better finishes if it was my own house.

chispa, how do you factor in the profit for a flipper or spec builder?

My new disclaimer: I try to be polite but direct and sometimes my writing style doesn't convey.

"Is $300 per foot accurate?" yes for some. Depends on complexity. In burn areas and the bay area of course I'm hearing as high as $600.... starting, Truckee $300-$1000+. My NorCal builds presently range from under $200 to over $300. I would expect higher in parts of SoCal. The variance on the low numbers from area to area are typically labor cost related.

Plus permits, impact fees, utility connection fees, heavy grading, design, etc.

Can you really get something built for $150/psf in SoCal? Maybe the tract people can.

Remodeling is more expensive. Flips, especially in CA, are often done without licenses and permits, with a mix of trained and parking lot labor pool skills so have fun. There are great exceptions. That means have them disclose permits, contractors licenses, all work performed. Get the aftermarket 1 year warranty and hope the quality is deeper than the paint. Inspections are critical.

@Chispa Thanks. I did something like that. The only tear down on the market in my area is $1.2 on a busy corner. Builders won’t even touch it. It has been on the market over a year. I did some calculations on my own (Zillow) with some of the flips in my area and the difference in sell price is $1m to $2.5m. (The area demands nice finishes and the target market looks for quality.) So investors are asking for $1.5m to $2m more than what they paid for the original house. So, I was wondering what the actual hard and soft costs were for the remodels and what the profits were for the investors. It seems like a house on every block in my area is under construction. I don’t think everyone is paying more than $1m unless the house location is prime.

@Jeffrey R. Grenz, General Contractor Most builds consider ROI (return on investment) right? I want to keep the equity I have built. So, whatever I spend on construction, I want to keep my my original profit at least. In other words, if I sell my house today I will put $500k (over what I paid) more in my pocket. After I build a new house, I still want to be able to see that $500k.

Some of you suggest that I would pay the same to build as to buy. Is that from experience? Could you share or elaborate? Did you spend the equivalent or do you know others who have been through the process? @Mill... @Live...

C Marlin, I'm not factoring in, or separating, the profit for the flipper or spec builder, because the OP would have to pay profit to the builder too. Just doing basic math when you get to see what they paid for land cost and what they are now asking for the finished product.

Rileyestrada, do you have a relationship with a realtor in your town? They could be a good source for some data on your local RE market.

@rileyestrada

Typically, if you're building to enjoy the property, current value+ demo+ new build will cost more than the market value at completion with some exceptions. That's why flippers flip but don't build new. When they build new in my market in a neighborhood of big lots with old teardown homes selling for $1 mil, they build big in order to amortize the fixed costs and get into the $2mil+ market. Small doesn't work often.

I am starting one custom shortly on a $450K teardown with a $1+ mil build. The home won't and doesn't have to appraise, but it will be lived in to enjoy. The last three we built for clients wouldn't cut it as "spec" homes as they had too many upgrades and few "builder spec" items so they cost more than the market would bear.

Thanks for all your help. We are trying to rationalize an ADU to help supplement construction costs as well as future income. The rental income would fetch 3-5k per month. So it would take ten years to recoup about 500k. We could match (save) that with another 500k. We are heading for retirement so I am afraid it’s too late in the game to spend everything we have on a house. Do you know of anyone in a similar situation and made it work?

@Chispa The realtors I have spoken with seem to just want to sell my house or want me to buy what they are selling. One suggested I could negotiate a trade with the investors that did new builds/remodels. If there was a house worth the price, I’d buy it. My current interest rate is 3.5 and my taxes meet the California tax deduction limit. A new house would mean higher (triple) mortgage and taxes.

Not in SoCal so take my comments for what they are worth. But we bought a tear down, tore the house down, built a new house. At the end the appraisal on the house was several hundred thousand over what we paid all in for lot and build. Our market in Vancouver is now shifting and I suspect a year later we are looking at more of a break even if we sold. It is hard to predict what markets will do.

Although not in SoCal a lot of what you are describing is what we did when we built. We also have a rental suite in the home and wanted to stay at 1 million. Wasn't entirely realistic.

@A S Thank you for chiming in. Your build sounds like a success. Are you glad you made the leap? Would you have done anything different?

No for us this was the right move. Risky and took on a lot to make it happen but absolutely what we wanted overall.

The only thing I would have done slightly different is the suite. We could have made it a bit more desirable from a cost perspective to us and the return on rent would have been huge. It’s a one bed and den and mostly below ground. Had we done a bit more thinking on it and the location on site it could be fetching easily quite a bit more. That said we have lovely tenants so maybe a bird in the hand ...

@A S Thanks for the insight. I had been thinking the same about how much I should put into a rental —if the bit of luxury would get the return on investment. Your experience is helping my decisions. My partner is all in.