Cost To Build Your Home

To give you high level guidance on costs, Blue Ridge Custom Homes, LLC will need to meet with you and ask some questions about your project. Costs can vary widely depending on factors like lot conditions, shape and style of home, level of finish, energy efficiency options, features, etc. So, there really is no generic pricing based on cost per foot that is accurate. However, we still employ this tool to do very high level, ballpark estimating. Using a cost per foot approach can at least identify some broad guidance on projects feasibility. The reason that cost per foot does not really work well is that that approach would only work if size was the only thing that drove cost. While size is a major factor, there are many, many facets to consider when calculating cost.

Here are some general guidelines that are helpful for considering the question of cost:

Cost per square foot

Factors to Keep in Mind

Single story homes can be $15-20 more than an efficient two story. A house with a finished basement will cost less per s.f. than the same sized house without a basement. And, smaller houses will tend to cost more per foot than larger homes since all the fixed costs don’t go down (well, drainfield, clearing, drive, etc…). More complex rooflines and footprints will cost more. And, what about features like a swimming pool or other outdoor spaces? There are also lot site specific costs like cash proffers, permit fees, clearing, driveways, etc.. that can make prices vary by many tens of thousands from one lot to the next with no change in actual footage or plan.

Rule of Thumb

Having said all of that, we can assume turnkey costs in today’s market around $175/s.f. for finished spaces and something like $60/s.f. for unfinished spaces. While obviously not precise, this will likely put you in the ballpark in average, custom home situations.

Above and Beyond

Obviously, with price, the sky’s the limit and you are bound only by your imagination and your budget. We see home exceed $200/ s.f. substantially when we are building products like you see illustrated in the nicest home building magazines and the “wow” factor is pretty intense. With features like boat docks, pools, very high end finishes, a pursuit of extremely efficient energy packages, etc… a house can be $300/ s.f. or even more.

In a cost-plus scenario, customers will tend to save around 10% under the cost of a traditionally priced home. Thes pricing guides mentioned here would consider site work like clearing, well, driveways, etc… but do not factor in the actual cost of the lot itself.

Are Custom Builds Right for You?

It is worth saying that there is an entry point for a custom built, scattered site home. While it can vary, it is unusual to see houses that are not well into the 400’s even before you consider the lot. By the time you consider the site costs, the unfinished spaces, and the features you see in an average home, it tends to be hard to produce anything of a custom level for much lower than that.

For customers whose price point is below that level, they may find they can be served better by a builder who has a production style business model and builds the same houses over and over again in controlled conditions and with designs, finishes, etc… that are very focused on value rather than aesthetics.

Shape/style of house

While the above price information is meant to be helpful, many factors can skew the price significantly. One of those is certainly the efficiency of shape of the plan.

Multi-Story Homes

A two-story house will save approximately 10-15% 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. This allows us to meet your budget now but allow you to have more space later without moving to a new house or performing expensive additions. While not exactly true, you can sort of figure half the cost of finished space when considering unfinished space that has a roof over i

Square vs. Irregular

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. Square shapes with simple roof lines that stack the footage (meaning the second floor footage is equal to or greater than the first floor footage) will be the cheapest to do per square foot.

Count the exterior corners of the home and you will get a sense for the efficiency of the design based on that number. With 4 being extremely efficient, 10 being average, and 20 representing a pretty inefficient design.

Overall Size

The overall size of the house will also affect the cost per foot. The larger a home, the lower the cost per square foot. This is because some “fixed” costs such as water source, sewer, driveway, garage, clearing, etc. will generally be the same or close to the same but if those costs are averaged into a larger house, the overall cost is lower.

For example, a $5,000 well will cost $1 per square foot on a 5,000 s.f. house and $2 a s.f. on a 2,500 s.f. house. This same math applies across many phases. Since houses with low square footage of finished space still tend to have garages, porches, and all the other site costs, the cost per square foot tends to be higher. So, you can expect small houses to cost a lot more per s.f. compared to larger houses with the same fit and finish.

Cost-Plus Construction

In cost-plus construction, we build a home for our actual builder cost plus a percentage as our management fee (intended to cover overhead and profit).

This is an “open book” process where the customer has access to every piece of information we have in terms of estimates, costs, invoices, etc. Our customers get a biweekly update on exact costs from that week’s payments, an updated projection based on changes, selections, actual costs to date, etc. and copies of every invoice we pay.

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Financial Benefits of Cost-Plus

The customer will see every invoice, every projection, and every cost that is used to build their house without any markup for the builder. Thus, the customer gets “contractor” pricing. Then, Blue Ridge Custom Homes charges a fee for overhead and profit based on a 15% margin.

With only 15% built into the process for our company’s overhead and profit, 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 gross margin. 2/3rds of the gross profit a builder makes will typically be consumed by overhead. So, this sort of margin yields a small, single digit number for net profit on an average project.

Given the size of our company, we are spending 40 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 cost plus situation, we pass our exact cost to our customers.

Why Fixed Price Is More Expensive

In a “fixed price” scenario, a builder will add on overhead and profit of somewhere in the low to mid 20% range, then another 5% or so for variances from the budget. So, in cost plus, the customer can save 10% or more 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 we have 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. Our overhead is mainly just the staff it takes to build homes.

Transparency Throughout the Project

Another feature customers like about cost-plus is being able to see where their money is going. Our detailed estimates help you to know exactly what you are spending your money on and thus ask questions, make cuts, etc. with the use of this extra level of information. See an example of what a budget looks like below.

Upgrades and Changes

The cost-plus format is very beneficial to customers when it comes to upgrades and changes as well. These represent major profit margins for many builders. Many builders will charge a change order fee for every change order. And, they will build in 100% margins or higher into changes. But, with our system you pay nothing for changes except exactly what our cost of that change is and the associated margin on it.

Needs May Vary

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 and to show you what a real house looks like and answer any questions you may have. In addition, we can refer you to past cost-plus customers so you can see how well it worked for them.

Contact Us Today!

Example of a Cost-Plus Estimate