When looking at home building costs per square foot we definitely see that some people are paying much more than others. One has to first ask why, and second try to figure out how we can spend less while getting the best house possible. This article will tell you how to save $100,000 on interest, plus a dollar per square foot, for every year you live in your home. It will also tell you how to get a check from the electric company every month, save half your water bill, and save the planet’s water supply one bathroom at a time.
Saving on Home Building Costs Per Square Foot: Cost Per Square Foot
The average home building cost per square foot in this country is around $100 for the actual living space of a home. In states like California which have high inflation and labor costs, the average price is $130, while in the repressed economy of the rural south, average costs are around $80 per square foot. Overall the cost of building a home is low in the South East and Mid West, and much more expensive in the North East and West Coast.
The first thing to look at is actual cost. Actual cost of your home can be either much more or much less than is reflected in the estimates for averages. First of all luxury homes and custom homes cost more because of architect fees and a higher quality of interior furnishings. Some luxury homes can cost from $200 to $800 per square foot.
One popular way to divide the cost per square foot of your home is:
• Labor 33%
• Materials 33%
• Contractor Overhead and Profit 33%
Looking at this breakdown, it’s easy to wonder why the contractor gets so much. It is important to note that the contractor’s overhead is greater than his actual profit, and also to remember that your contractor and his staff will be working on your home, for up to one year. During that time they will have to maintain a lot of equipment, and put in a lot of hours on your home building project. While other sub-contractors will be in and out of your jobsite after a few weeks work, your building contractor will be choreographing all these subcontractors for at least six months, and perhaps a full year.
• Grading $1 – $2 per square foot
• Foundation $4 – $6 per square foot
• Shell – $25 – $30 per square foot
• Electrical $10 – $20 per square foot
• Plumbing $10 – $20 per square foot
• Finishing the Interior $30 – $50 per square foot
Having the contractor finish the home down to the carpet and paint adds significantly to the cost of a home, and that is why many do-it-yourselfers choose to finish the interior themselves. Before making this decision though, it is important to price the items you will need to finish the home, and consider how handy you are. Many people save a lot of money finishing their homes, but others end up spending too much on materials, fixtures and appliances, or are unable to get the same quality on their work as a professional.
Most people totally forget that they will end up paying a lot more than the cost of construction, because of interest on a 30 year mortgage, even at today’s low interest rates. In fact if you are building a $250,000 home, and paying a $75,000, 30 percent down payment, that means you need to borrow $175,000. You will in fact pay $155,081 in interest at a rate of 4.2 percent. Your payments will be $855.78 per month. This means, you will repay $308,081 in both interest and principle. Add to this your original down payment of $75,000 and you will pay $383, 081, for your $250,000 house. If this is a 2500 square foot home and you thought you were paying $100 per square foot, it is a bit alarming to realize that you are actually paying $153.23 per square foot, over a 30 year period. Let’s work on reducing that cost!
Let’s say you choose a 15 year loan, and the same $75,000 down payment. The interest rate will be lower, probably around 3.5 percent, on $175,000, for only 15 years. With a 15 year loan you will pay $1,251 per month, but your total of only 180 payments is only $225,188, and only $50,188 of that is interest. The actual cost of your home including interest is $300,188. The cost per square foot is. $120 per square foot and you save $82,893, or $33.23 per square foot, just by getting a shorter term loan. Interest rate savings are greater than any other single item you could save on in the construction process.
If you cannot afford $1,251 a month, then consider less square footage. Not only will you save on the initial cost, and the interest you will also save on utilities. Dropping 500 square feet will leave you with 2000 square feet and make the price to about $200,000. You’d need to borrow only $125,000 with the same down payment. You are back down to $893.60 per month, and you’ll only pay $35,848 in interest. Your total payments would be $160,848. Add that to the $75,000 down payment and your home has cost $235,848. That is a real price of $118 per square foot.
This is actually close to the most likely appreciated value of your home, 15 years from now. It completely beats the loss usually represented by interest. Just imagine, a moment ago we were talking about spending $155,081 in interest and now by changing to a 15 year loan, and dropping 500 square foot, we are making the same down payment and virtually the same monthly payments and saving $119,233. Learning to use a mortgage calculator creatively can save over 100K.
• Building an energy efficient home will cost a little more, possibly as much as $6 per square foot, although usually it will only cost one or two dollars more per square foot. The savings for the entire life of the home will be at least $1 per square foot per year. With the rising cost of utilities the savings will increase as the years go by.
• Building a smaller home will make your home cost less and make it more energy efficient. It will save a bundle on your utility bills.
• Going green? Incinerator toilets can save between 25 and 50 percent of your water bill each month, for an initial price of only $1850. Plus incinerator toilets do not use water at all, or create polluted waste water. The cost of water varies considerably throughout the United States. Most families currently pay between $80 and $200 per month for water, but with water shortages worsening the price will go up. The best way to prevent water contamination and shortages in the future is to use incinerator toilets. Plus you could save up to $100 a month even at current rates. That is a substantial savings on a small investment.
• Solar Panels installed at the time of construction and coupled with energy efficient appliances and energy efficient structure can yield an electric bill that actually pays you! Imagine getting a check from the electric company instead of a bill.
Improvements leading to energy efficiency pay you back, and are well worth the added expense in cost per square foot. Other types of upgrades are not nearly as important, and should be considered on a case by case basis. Overall some of the things people do for upgrades make it seem more logical to just get a shell and complete it yourself. Paying for cheap carpets just to rip them out and install new ones before moving in, rather than buy an over priced upgrade, is just nuts. Why have the carpet installed at all? There are similar problems with cabinet and countertop upgrades. People end up paying a lot more for these cosmetic type upgrades than they are worth in some cases, and it is wasteful of money labor and materials to have something installed you don’t want. Yet dissatisfaction with upgrades and upgrade prices seem to be the norm. Why not deal with a builder who isn’t so inflexible about upgrades, and will put in the carpets and cabinets you want, for a fair price?
Most of the expenses you encounter in homebuilding are necessary, but there are ways to save or recoup up to half of your costs, over time. For more money saving advice, see our other articles on this site and download our free 98 page book. Saving money on home building cost per square foot can be easy when you consider all the angles and think outside the box.