In order to get an accurate estimate for your project Blue Ridge Custom Homes LLC will need to meet with you and ask some questions about the many conditions that effect building costs. Having said that, here are some general guidelines:
Cost per square foot
Generally, when we speak of cost per square foot, we are talking about finished square footage. However, it is important to consider that unfinished square footage is not free. Average price per square foot described here will allow for a deck, reasonable front porch, a garage, etc…. If we use more custom finishes like natural stone flooring and siding, synthetic decking, pavers, larger garages, lots of outdoor living space, screened in porches, etc… additional costs will occur.
Generally, turnkey costs will start at around $60 a square foot for a starter home. An average level of finish will be more like $90. At $110 we are building a custom finish. At $150 a square foot, we have used many of “the best” finishes available (items like theaters, specialty flooring, custom appliances, etc..). In a cost-plus scenario, customers will tend to save 10-15% under the cost of a traditionally priced home. These costs are for the home only and do not include lot costs.
Shape/style of house
A two-story house will save approximately 10% compared with a ranch that has the exact same square footage. This is because large structural elements such as the footing, foundation, framing, roof, insulation, etc… can be used to cover twice the square footage without increasing their costs. Similar economies can be found with the use of basements and finished attic spaces. These areas are often constructed unfinished and then finished later in order to allow us to meet your budget now but allow you to have more space later without moving to a new house or performing expensive additions.
The more square a house is as opposed to long irregular shapes, the smaller the foundation and roof will be and the more cost-effective the design is. The more “bump-outs” or projections the house has, the more the price per square foot will increase.
Cost-plus construction is generally the least expensive way to build a new home. In cost-plus construction, we build a home for actual builder cost plus a percentage as our management fee. This is basically an “open book” process where the customer has access to every piece of information we have in terms of estimates, costs, invoices, etc…
The customer will see every invoice, every projection, and every cost that is used to build their house without any mark up for the builder. The customer gets “contractor” pricing. Then, Blue Ridge Custom Homes charges an 15% fee for overhead and profit. With only 15% built into the process for our company, there will not be better pricing available on any apples to apples bid from another home builder. There is simply not a viable business model that allows for a smaller margin. Particularly given the size of our company, we are spending 8 million dollars or so a year (of course this varies), and thus we buy at better prices than our smaller competitors. And, this buying power generates savings that go straight back to our customers.
In a “fixed price” scenario, a builder will add on overhead and profit of around 25%, then another 5% or so for variances from the budget. So, in cost plus, the customer can save 15% on average.
There are two reasons that we can cut our profits on cost-plus project. One is that the overhead and profit number is guaranteed. In a “fixed price” situation, the builder will absorb any variances, price increases from vendors, etc…Since the actual gross profit will only be determined after everything is complete, the builder must plan for some worst-case situations in his budget. In cost-plus this uncertainty does not exist. Since the builder has less risk, less profit is also appropriate. Secondly, Blue Ridge Custom Homes is designed to operate very efficiently with a “lean” business model that allows us to have a viable business with lower profit margins than our competitors. We do not hold large amounts of land, build model homes, have sales staffs, standing inventory, advertising programs, etc…which allows us to charge our customers less and still maintain a measure of profitability.
Cost-plus is not for every project and it is not for every customer. We would like to speak with you in further detail concerning this approach. In addition, we can refer you to past cost-plus customers so you can see how well it worked for them.