Easily Estimate Your Cost to Build

Summary

Michael from Open Book Build shares a practical method for estimating the cost of building a new home as an owner builder. He advises finding a single builder community with similar homes for sale, comparing listing and closing prices, and using these to estimate the cost per square foot. The method accounts for lot cost, builder markup, and material costs, offering a preliminary guide for potential home builders to plan their investment wisely.

Takeaways

• 🏠 The video discusses a method to estimate the cost of building a new home as an owner builder.
• 🔍 It suggests finding a local new home community with similar homes for sale to use as a benchmark.
• 🏡 The community should be owned by a single builder selling homes and lots as a package.
• 💻 The process involves using realtor.com to find comparable new construction homes and recently sold ones.
• 📝 It's important to note the sales price and square footage of homes that closely match what you want to build.
• 📈 Comparing listing and closing prices can reveal cost differences due to upgrades or market changes.
• 💰 The script uses a 20% rule of thumb for lot cost and a 30% markup for the builder's overall cost.
• ➗ By dividing the estimated labor and material cost by the square footage, a cost per square foot is calculated.
• 📈 This cost per square foot can then be multiplied by the square footage of your dream home to estimate your build cost.
• 💡 The video highlights ways owner builders can save money, such as by finding closeouts on products or using personal connections.
• ⏰ Being an owner builder can be time-consuming, but it allows for savings on overhead costs and the ability to use personal labor.
• 📊 The method is a rough estimate with many assumptions and should be used for initial planning before investing in land or house plans.

Q & A

What is the main purpose of the video by Michael from Open Book Build?

The main purpose of the video is to share a quick method to estimate the rough cost of building a new home as an owner builder, before investing too much money and effort into the project.

Why is it important to find a local new home community with similar homes for sale?

It is important because the method relies on a rule of thumb for builder markup and lot cost as a percentage of the sales price, which requires consistency in the community, specifically those owned by a single builder selling homes and lots as a package.

How does one select the homes for sale to use as data in this cost estimation method?

One should select homes that closely fit what they are looking to build, with similar foundation types, design features, and other specifications, and ensure they are in the same community discussed.

Why is it recommended to compare the listing price with the actual closing price of a similar new home?

Comparing these prices helps to understand the potential cost differences due to upgrades or changes made by buyers, which can affect the final price of the house.

What does the video suggest using for the cost estimate, the listing price or the closing price, and why?

The video suggests using the higher of the two numbers for the estimate, as it accounts for potential upgrades made by buyers, which can increase the final cost.

How does the video calculate the lot cost based on the sales price?

The video suggests that the lot cost for the type of builder in question is approximately 20% of the final sales price.

What is the estimated builder markup percentage used in the video for this type of builder?

The estimated builder markup percentage used in the video is roughly 30%.

How does the video calculate the labor and material cost to build the home?

The video subtracts the lot cost from the builder's overall cost to arrive at the labor and material cost to build the home.

What is the significance of calculating the cost per square foot for building a similar new home?

Calculating the cost per square foot provides a rough estimate that can be used to determine the cost of building a similar home based on its square footage.

What are some of the advantages owner builders have over traditional builders according to the video?

Owner builders can save on costs by looking for closeout products, using their own physical labor, utilizing connections in the business for discounts, and avoiding the overhead costs that traditional builders have, such as marketing, advertising, and sales commissions.

How does the video address the concern that owner builders may not achieve the same cost as traditional builders?

The video acknowledges the concern but points out that owner builders have unique opportunities to save on costs, such as through closeout products, personal labor, business connections, and the absence of certain overhead costs.