Where are you located? What do you consider “budget”? 400K-550K plus land? Because that’s doable In a lot of rural areas, with contributions from you, and modest aspirations.

This would likely be rural North Texas, not near Dallas. The "budget" part would mean that we were building with cost as the primary factor in mind, keeping the square footage under 3000, keeping the footprint of the house at about a 32x42 rectangle (or a 42x42 square with porch) or something, not using steel beams, not putting in 4 bathrooms, using stock cabinets, using hardieplank siding, using primarily ceramic tile and carpet with a little hardwood but not using other expensive materials like brick, marble, etc., having a straight run staircase, etc.

I guess the real question is, how much do these "money saving tips" actually save? I frequently see massive houses with intricate tile work and outdoor kitchens and a complicated footprint costing 800K to build; I'm not sure why a house half the size in a basic rectangle with a basic roof with no dormers should be 400K!

There are a lot of costs that are square foot independent so that 3000 sqft does not cost 1/2 of 6000 sqft. Not by a long shot.

Tile is not cheap - labor mostly.

The money saving tips could save $100k maybe - that depends a lot on your comparable though. If they have $40k in appliances and you are happy with $4k - that is $36k right there. I use this example because our $650k build has $40k+ in appliances.

Hardi instead of brick can certainly save $10k on a 3000 sqft build. Carpet instead of hardwood can be $20k if you go with really crap carpet and you are comparing to really nice hardwood.

But - remember - right now represents the most expensive time to build in history.... And tomorrow might be worse.

@David Cary I’m confused by your last comment. Is that not how the market works? In an ideal world home values increase over the years and therefore the current market prices should always be higher than the past.. and one should expect it will be higher in the future.

Are you suggesting the cost to build is outpacing the market in general? Im genuinely curious as we are considering building as well.

True - it was an obvious reality with inflation. But building costs oscillate and it is currently significantly more expensive to build then typical market forces justify. Supply and demand differ for building and established residences. But all markets are local and in certain areas, this doesn't apply.

Nothing about RE market is normal right now. One could easily get caught in a pretty negative way by going under contract now. And the world is not ideal and betting that RE prices would increase from this point is no sure thing. When you build, you lock in a low end of pricing when the result is in the future. The high end is not locked in. Mortgage rates are not locked in.

And OP was comparing to a house already built - in a time of hyperinflation in housing and building, this is a mistake.

Current costs to build are putting the hammer on my clients due to the appraisals not meeting the the bid price. Commodity materials have doubled and even tripled in several categories of construction compared with pre-covid pricing. For example, I have one client trying to build a house that I bid for approx. $500k. This house would have been quite a bit less last year (30k different? or so...) but it will mostly appraise for the same amount. My client will need to come up with the cash to cover the gap of appraisal to build cost in addition to the down-payment requirement. Those who have been working to build up a cash base to build are finding they will have to wait for: 1. Prices to come down, 2. The market to come up, 3. Enough time has passed that they have achieved their cash goal.

Luxury homes are less affected from this due to a higher proportion of their budget being dedicated to finishes, windows, and labor. Many of the finish related items have not gone up yet. Cabinets, windows, countertops, appliances, and fixtures have all seen small or no price increases. Especially when compared to the commodity items.

This means that a home trying to be built with a modest budget is spending a higher proportion of that budget on lumber & sheathing and therefore they are hit harder than the high-end counterpart.

Another issue with building right now are delays in materials. For example, all of my window companies right now are delivering anywhere from 2 to 5 weeks later than normal. Decking is really hard to come by. LP SmartSide & Vinyl Siding are also difficult depending on the color choice. (I avoid Hardi, so I don't have info on them). Add all these things together and there are inevitably going to be some pretty upset clients. Delaying your project several weeks or more due to material delays can end up being expensive for the client. (Rent, interest, double mortgage, ect.).

It really is a difficult time to build a house.

Emily, your best bet is to contact a regional real estate office and see what's available as land goes or a house, let them know your budget and see what will work for you best and see what is available.

Most of the information here will find it confusing or simply useless.

Thank you all for your replies!

@David Cary That is exactly the type of cost comparison that I was looking for. It is very helpful to have a sense of these things.

I did hear about the prices of construction materials. I'm sorry for those caught up in it. But it does seem a fairly temporary problem, and if we were to build, we wouldn't be likely to start for another year or two. And we wouldn't start until we had read up a lot more. Someone on an old thread suggested literally making a list of every component of the house and pricing them all out and buying them when they are on sale, if you have the luxury of time. I wonder if there is ever waste and spoilage in going that route, if you mistake what you need or store it improperly.

Does anyone know of any photos or plans of places where the builders/owners were doing a great job deliberately keeping costs down but still had a lovely (though perhaps not magazine worthy) result? I don't need expensive appliances, for sure. But I also don't want to live in a house with rough carpet and no windows. I guess these are the trade offs that spreadsheets are made for.

Emily, I worked tirelessly to design a cost effective essentially 5 bedroom house (it’s 4 plus a rec room). We have one bump out, the rest is rectangular. We were not able to keep all plumbing stacked and we do have one LVL beam in our living/dining area, so I think there are certainly more savings to be had than our floor plan. But what I found, with our local builders anyway, is that you aren’t reslly given much credit for building a simple house. Meaning, they just wanted to know square footage. I got the impression they didn’t care how many peaks, dormers, etc you had-they based their bottom line off the sq footage. I realize of course a simple house has to save on both labor and material costs...but that doesn’t seem to be the reality that builders live in. It’s a very strange thing. So maybe focus more on limiting your square footage?

Some floor plans I have seen (including the new home we are building) can have the first floor flex space (2nd living /office) turn into a bedroom. The powder room would then turn into a full bath for a full on guest suite.

If the 2nd floor has 4 bedrooms that makes for an EZ fifth!

M R : I agree some builders are frankly lazy or just not very good at math so they depend on sf pricing too much. These practices give them a "win some lose some" mentality.

A design-build firm often will have a better feel for the consequences of added details. For example, when I do a quote, I first draw the house in my system, then the program I use creates an accurate material takeoff based on the design. These takeoff numbers are a really complicated metric that took me months to setup initially, and I have been perfecting for years (within the program). This amount of detail allows the client to see material changes pretty quickly. So my material take-offs tend to be extremely accurate. However, if I take the plans to a roofer, he will ask 3 questions: Size, Pitch, Elevation from the ground. After that he doesn't do anything to adjust pricing. Valleys, wall intersections, & penetrations all slow him down but he doesn't get compensated, or give discounts for either spectrum.

I feel simplified design has other benefits: Less corners usually mean better enclosures. A corner has a lot of wood in it and performs worse thermally than a flat section of wall. Also, every corner or added detail offers another place for something to go wrong. HVAC gets bent and turned a million directions and the client is left with poor performance in complicated designs. Is the dormer properly flashed? Did those 4 extra gutter corners get installed properly? Can you effectively seal 3 windows as well as one big 3-wide unit? All of these things should be done properly, every time. But even the best builders make mistakes. These mistakes aren't usually on the simple portion of the project, but on penetrations, connections between materials of different types, or other details.

So in short, cutting 4" off a wall to cut SF might actually save money from the bid standpoint. Materials used will likely be mostly the same. A cost plus relationship would avoid these issues if the builder can be trusted to keep a tidy jobsite and be productive with their time & materials.

There is no upside down work where you build a 500K house for 300K.

Cost control that YOU have control of comes from two things. The first is having time, and good liquidity, and be accepting that a good deal of your selections are up in the air, to be bought only when you find a deal, and then stored where they are not damaged, and can easily be located. The down side to that is you must have a heck of a lot of organized warehouse type storage, with a lot of racking, and you must have the discipline and great design vision to not create a eyesore hodgepodge. Most people have zero real design vision.

Just because something is on sale for ten cents on the dollar doesn’t mean it’s something you buy and use. You’ll end up with a whole lot of ugly, or a bunch of unsafe and unusable stuff, if you aren’t careful. There’s a reason stuff goes on clearance. And it isn’t a good one. And if you don’t own a giant barn to store all the stuff in in an organized manner, the point is moot, and you just end up on Hoarders or Pickers getting rid of all of that wasted liquidity.

The second real savings on a build occurs by throwing your wants and “while you’re at it’s” out the window. You “want” 3000 feet. But if your family only really needs 2000, that extra 1000sf represents a 100K savings. And “only” 100K, because you can’t be cutting the expensive to build space like kitchens and bathrooms. Unless you can. That 3rd bathroom? 5th Bedroom? Concrete Patio? Get rid of them. Be ruthless. Gorgeous custom white shaker cabinet’s to the ceiling with quartz counters? Partial overlay oak cabinets with laminate counters cooks the same meals, and saves you 20-40K to not do a high level kitchen. Plastic tub and shower, not tile. Carpet and sheet vinyl, not wood and tile. Get real about what is a want and what is a need. A 39 year old mobile home can provide a need. Anything above that is a want.

There comes a point though, that if you can’t get some of the not even fancy things that you want, why are you building instead of buying existing? The expensive new car smell isn’t worth it over buying used. Because buying existing is a much better use of a limited budget. Building on a budget is still a bigger budget than buying the 39 year old split level. If your budget is as limited as you imply, you simply should not build. Or buy a new car. Or add to the family. Or any number of things that cost more than the return.

@roccouple Yes, thank you, that is very useful and a very good explanation. I guess a lot depends on the builder in question.

@D B I have heard "cost plus" contracts mentioned before and have lined up some reading to do on that; there appear to be many variations and pros/cons. If you have any resources, articles, or threads that you think explain these different contractual models well, I'd love if you could point me in that direction. But what I really want to know is, how would you know in advance what type of contracts a builder typically does? Is there some jargon on their websites that people who know what to look for would recognize? Or do you just have to ask?

@User "If your budget is as limited as you imply, you simply should not build. Or buy a new car."

In terms of what we can afford, the analogy of a car is perfect. When the car salesman asks "What can you afford to pay per month?" that is ludicrous and shouldn't be answered directly. I can technically afford to pay $700 per month but I think that's a waste of money for a car. I am willing to pay $600 for a 30K car with 0 down for 60 months, but not willing to pay any amount for 72 months, and not willing to pay more than $400 for the same car leased with 0 down. With our current car (a large van, of course) I researched every available vehicle in the country for what I wanted, and got it for $5K below average, for various reasons I was fine with, and I have no doubt the dealer still had a good profit and moved a new car that was sitting around from last year. I wanted to pay only $200 per month, so that's what I pay, and was willing to pay cash for the rest to get the numbers right. So I guess what I'm saying is, I want to pay $80 per sq ft, and if that's not possible, then $100, and after that? Sure, we could technically afford a lot more, but we don't want to spend our money on that, so what are the creative options? Be our own GCs? Build it with our own two hands? Use a GC for the shell only but do the inside in stages over time? If we had an understanding of what was available and what the trade-offs would be, we could still find money -- if it would truly be worth it.

Does that make sense? I am currently much too ignorant of the homebuilding process and need to really dig into this, to understand where the cost cutting is realistic, and whether there are builders who work this way, and how builders work, and how to find them.

@Emily L im in the same boat as you as far as looking into creative options. I started a thread a few weeks back (“diy home build”) to gain feedback on the potential of being our own GC (my husbands family owns a GC business but does not have history of full home builds). I’ll be curious what feedback you get here. I was hearing financing is nearly impossible when going that route but something I plan to look into more with local lenders.

Pg. 206-207 of The Elements of Building by Mark Q. Kerson. (Excellent read BTW)

I thought JLC had an article about this a few years back but I was unable to locate it.

Cost plus requires two things: Excellent communication, and excellent communication. It is an open contract with no upper or lower limit. Scary? Yes of course, but really all contracts are. Both the builder and client MUST have excellent communication skills. We all think we do, but most of us don't.

Lots of different takes on it but essentially this is my take: after choosing the builder:

1. Define Budget Goal
2. Work with designer or architect to create plans to fit within this goal
3. Make sure builder is part of the design process to avoid big surprises
4. Estimate everything out as close to final choices as possible.
5. Builder is completely transparent on how much markup they have on each sub and material they hire or purchase. Also any other expense they plan to charge for.
6. Client understands these are estimates and they will fluctuate during that actual build.
7. These fluctuations must be continually communicated from builder to client. For example, he needs 2 more loads of rock than originally anticipated. Don't wait to tell the homeowner about it, tell them immediately so they can plan ahead for overage. Constant tracking of the budget (over/under) allows the client to make final allowance choices

Pros:

• Builder never loses money unless client doesn't pay. I have lost money on more houses than I'd like to admit.
• Client only pays for what they get, not the gap between the bid amount and actual.
• Client and Builder forced to know exactly how the project is progressing vs. the estimate
• Client has a better understanding of the process and build of their home. Become mini-experts. Super-clients!
• Creates a we're in this together feeling! Some builders will have a clause that gives them a bonus for coming in under budget.
• Transparency means trust. No wondering how rich the guy is getting off you.
• Client has freedom to discuss numbers with subcontractors in front of builder. No hidden conversations to hide prices.

Cons:

• No protection from estimating errors
• If client or builder is a poor communicator it can be awful
• If client or builder is not organized it can be awful
• Character is key to success
• No motivation to come in under estimate unless there is a specified bonus clause. When the builder is not financially motivated to be efficient with material usage they may not be as inclined to be thrifty.
• Cleanliness no longer equals profit for builder
• Requires much more involvement from the client.
• Punch list can have much less incentive for the builder to finish

If there is the right combination of builder and client then this can be really successful. Otherwise look for more traditional contracts.

A low budget simply does not coexist well with a custom home. End of story. Buy used. It’s a known pricing quantity. The best bang for your buck for new is a tract build in a subdivision. It’s a fixed price. Very few surprises.

A custom cost plus build is the most risky to the homeowner and the most expensive. It’s irresponsible to even think about a contract like that for such a neophyte. It requires knowledge of building, a heathy budget, and the self control to not pick all the tasty and bright red jellybeans in the jar when you objectively really need a few black ones, and very few red ones. The bills come due, and you’ll be over by the end of the first month.

$80-$100 per square foot is an exceptionally low cost for a new build. I live in a lower cost of living area and ours was $170 ish. That is bargain basement compared to most.

to get to $100 you need to be very very very savvy. And also lucky Think about the time it will take. And the risk. A lot can go wrong in a custom build.

if you try to reach those numbers you have a lot on the line and this will be your #1 priority in life for a year or more. If worst comes to worst can you absorb tens of thousands in overages?

Emily, please think carefully about these replies. Building a home is expensive and frequently goes way over budget. I’d like to add from experience we learned a new build has a boatload of added/unexpected expenses, like excavation, utility hookups, appliances, lawn and landscape, window coverings, towel and tp holders, and quite often the allowances are rock bottom, so you will exceed them just choosing basic finishes. True confession - I naively thought if I chose carefully, I could stay on budget. We could have bought so much more if we had purchased an existing home. You live and learn.

I agree with the other commenters that purchasing an existing house is usually a better financial decision. In my market in particular, a house is worth less than the cost to build regardless of the location. It's why we stopped building spec homes.

But, sometimes this isn't an option, or you don't want to buy something. I get it.

Cost-plus: As I stated in both of my earlier comments the success of this system is highly dependent on the character of those involved. I feel it is safer than a homeowner trying to GC the project themselves if they find the right candidate. I have witnessed many homeowner GC fails... It is the scariest method unless the homeowner is supremely experienced and dedicated.

Allowances are the devil of contracts. I have lost many bids over the years due to my allowances being too high. If I put cardboard cabinets in every bid, I'd look like a great deal. Then change order city... Most of the projects I work on are bid based with allowances that the client has chosen BEFORE the bid. Makes the process much more predictable. Things that are left to chance are still: dirt work, rock fill, and commodity fluctuations. Most of the time the bid and build are close together in time enough to mitigate the commodity pricing issue (except this year). Rock fill can be a really frustrating overage. I try to guess high on this, but still often come up short. Incredible the variance from one project to the next! In fact, rock fill is one area I have tried to get better at estimating and haven't made any progress. Dirt work is referring to the surprises you find when you dig. I once had a basement that we ran into an old foundation. Nothing was supposed to be there! Had to haul it all away and bring in clean dirt for backfill & grade. Soil sampling can eliminate some of these surprises, but not all.

In short, whether you go with cost-plus, bid contract, GC yourself, or something else entirely it is important to dig in and be involved as much as possible with every step along the way.

Thanks for all the replies! It is all helpful. But rest assured I do not need warnings about diving in! Lol. In my former life I was a lawyer and a researcher. I could never build as a "neophyte." If we did build, it would be after reading all the books, compiling all the options, checking all the boxes, etc. If I couldn't do the math on how the load bearing works and how the roof is supported etc I wouldn't be ready. Right now, I'm just trying to get the very earliest help on understanding the major categories of what I don't know (which is "everything") and what the moving parts are.

@curlycook Thank you, I find this sort of anecdotal experience very helpful!! I can't see any possible situation where we go with the "cheap allowance and then change order to upgrade" contractual model.

@D B "Most of the projects I work on are bid based with allowances that the client has chosen BEFORE the bid. Makes the process much more predictable." What do you call this? This sounds more like what I pictured. All of your comments are incredibly informative!

The process is a simple bid project format. It's pretty much the same format that most projects are completed with. The key is to know what you are getting for the allowances.

Most clients do not understand the importance of allowances. One of the first conversations I have with them is to educate them on how easy it would be for me to take advantage of them through allowances. I'm a pretty smooth talker, if I had no conscience I'd be very good at under bidding through allowances and adding the profit back in later.

I had a client once who went through the whole design and bid process with me. When the final numbers came in they about went through the roof. They were expecting a much lower number. They ended up with another builder. I learned afterwards they were within 5% of my bid when the job was complete due to allowance deviations. I learned a lot from that event, which is why I try to educate my clients to the fullest of my ability early in the process. Also, I don't shy away from budget talks. Many clients feel if they reveal their budget I will find a way to spend it. The reality is that almost everyone thinks they can do more with their budget than what is actually possible. I crush dreams in our first visit....

Yes, that makes sense! It sounds like your clients are lucky to have found you.

Well.. My key takeaways from this going forward are:

1. You can't know much hypothetically. Once you find a specific piece of land, you will know what the condition of the site is and what it needs done and what all those costs leave for building, as well as which builders are in the area, and the specific builder matters a lot.

2. The way you plan to fund the project may heavily impact how creative you think you can be.

Thanks y'all!

Just a FYI, your projected cost to build was what we were quoted turnkey for our larger shop build. Not a house with plumbing and kitchens and baths and floors and finishes. A plain concrete floored vinyl sided shop, but with 10’ ceilings, and 2x6 walls, super insulated, and with climate control, and some electrical and other shop specific functional extras.

We ended up taking 3 years of out of our time, and built it with our own 4 hands, after our full time jobs and on weekends. With cash. No loans. With the occasional help of others. Which is why it took 3 years. It ended up being right at today’s $50 a square foot. With less than 10% paid labor. Meaning that was virtually the material costs only. By the time you add the labor, which is the bigger part of it by far, it would be close to your cost target.

The best construction cost controls are created from good designs that don’t build in too much complexity, and then the power of sweat equity. All sweat equity is not created equal. If you’re not an experienced DIYer, the learning curve can cost you more in mistakes and delays than hiring it done. My other half is an engineer, and I’m a kitchen designer/project manager, and we are both take charge people. That dynamic there created its own added time to the build. And took it’s toll on us. Don’t underestimate that either. It is a reality that large build or renovation projects contribute to the divorce rate. Good luck with your project!