Before you even think about starting to build a new home, you need to set a budget you can afford, and then plan according to this budget. The challenge then is to stick to this budget.
To some extent it’s a chicken and egg situation, because you will need plans and specifications to draw up cost estimates. But until you know what these are, you won’t be completely sure whether you will be able to afford the build.
One vital thing to remember is that if you find that your plan needs more money than you have got available, you’re going to have to make some changes. For instance, you might need to have your plans amended to ensure you CAN afford the build. Alternatively, you can see if it is possible to cut costs by changing the specifications, and using materials that cost less.
Effective Cost Control is Essential
Bad cost control is one of the most common causes of failed building projects, particularly those that rely on borrowed money. As William H. Roetzheim says in his book Software Project Cost & Schedule Estimating:, “More projects are doomed by poor cost and schedule estimates than anything else.”
It is absolutely vital to know exactly what materials you need to build, how much you need of each, and what they are going to cost. You also need to establish well in advance what professional services and basic labor are going to cost. Then, once you start building, you need to constantly monitor the actual costs of construction and compare these to the figures in your budget.
Ways to Cost Estimate a New House
There are a variety of ways to do cost estimates. The simplest is to manually make lists… although this is also the least accurate method. Generally, a good software program is a much better bet. But beware of those that simply depend on common construction projects and surface areas. This approach (done manually or with the help of a computer) is essentially an educated thumb suck of what it will cost per square foot to build. Normally all you do is enter the required information in terms of dimensions and the calculator will tell you what your build will cost.
Even though this calculation method might take shape into account, it really isn’t accurate enough when you are spending hundreds of thousands of dollars building a new dream home. It’s not a bad approach to take prior to the plan stage, but it certainly is not adequate for reliable cost estimating.
The best costing software, on the other hand, will enable you to plug in costs of every possible element, from bricks and mortar, timber and connectors, to sanitary ware, taps, roofing, and even your labor costs.
The comment Carl Heldmann — who is a licensed home builder and author of several books on building – makes on his Build Your Own House website (www.byoh.com) is classic:
“Pricing a house by the square foot is like pricing a car by the pound,” he writes. “A Ford and a Mercedes probably weigh about same, but they sure don’t cost same to build.
“Using the cost per square foot as a rule of thumb to estimate the cost of a new home is dangerous for professional general contractors, home builders, owner builders, and people planning a new custom home as well as for new home buyers.”
Also, as he points out, the cost per square foot of a large house is likely to be considerably less than that of a small house, although the overall costs will be much higher for the big house. This is largely because expensive items like kitchen and bathrooms fixtures and fittings are applicable to all houses. But large houses have more open spaces where there are no fixtures or fittings, except perhaps lighting and of course floor coverings.
Apart from basic costs that apply to all houses, design elements play a major role in terms of what the build will cost. This ranges from roof style to the number and style of windows and doors that are incorporated.
The site itself can also affect the cost estimating process, in terms of access, slope, soil conditions, the water table, presence of rocks and even existing vegetation that might need to be removed before building can begin. As Heldmann says:
“A building site may incur extra foundation costs due to soil quality, degree of slope, accessibility, drainage problems, and/or other expensive unknowns.”
Get your cost estimating process right, and you’ll have yourself a great new home. Get it wrong, and you might just as well dig a hole and throw your dollars into it!