Wednesday, November 18, 2009

Part 3 - Estimating costs

With a house plan in place the next step was to figure out how much it was actually going to cost to build. Sorry, but I won't be including any actual cost figures in my posts. My father had recently built a house with a similar floorplan, so he had a pretty good idea of what the labor\materials would be. To nail down the numbers, we collected bids from the various subcontractors and the lumber yard.

Here's a breakdown of the major items:

  • Land survey to subdivide the property
  • Foundation\Dirt work
  • Well\Sewer
  • Heating\Cooling
  • Electrical
  • Plumbing
  • Windows\Doors
  • Construction materials (concrete, lumber, siding, trim, roofing, etc)
  • Cabinets\Counter tops
  • Flooring
  • Drywall taping

My father and his crew will be doing the framing, drywall, finish carpentry, siding and roofing. My brother and I plan to put sweat equity into the home by doing the following without using a sub-contractor.

  • Low voltage
  • Painting\Staining
  • Hardwood\Tile installation
  • Landscaping

Once we knew the cost of building the home we needed to figure out how much we could expect to sell it for. We don't know if we'll be using a realtor to sell the house, so we opted not to bring one in to help us with an estimate. I started by looking at the MLS for comparable homes in the area. Unfortunately, there weren't a lot of comparables. The good news is that there isn't much new construction right now, so our property should compare favorably to many of the older homes on the market. Besides the MLS, Better Homes and Gardens and have some nice tools for estimating the value of homes in the neighborhood. The sites aren't perfect, but I found them to be useful in providing a variety of different information. After a lot of research we settled on a target sales price. After taking into account commissions, interest payments, closing costs and a potentially long selling cycle (9-12 months) we felt confident that the profit margin was large enough to pursue the project.

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