Controlling Building Cost in Hot RE Markets
My wife and I have 5.5 acres of mountain land in Colorado. We hope to build a vacation home on it this summer, but have run into problems keeping the costs under control.
The property is beautiful. It has stunning views of 14k-foot mountains and is within walking distance of a hot springs resort. It’s a great lot and an ideal place to build our dream home. But we have run into a roadblock.
In order to control costs (we have a budget that is based on the estimated market value of the home once it is completed) I planned on acting as my own GC — something I’ve done twice before in the past.
I’ve investigated all kinds of alternative approaches, to cost control. Any kind of modular home – even the new-generation buildings (that are nearly indistinguishable from good stick built homes) are strictly forbidden by the HOA. So I’ve been talking to pre-fab panelized post and beam outfits from all over the country to see if they can help me meet my goal of staying within the market value for the project.
So far, I’ve come up empty handed — with one builder even offering to buy our lot. No way will I do that — as we looked for that lot for years.
Comparable homes in the area with good (but not necessarily top-drawer) finishes are selling for about $240/sq foot. Our problem is that because of all the in-migration to our state lately and the housing demand that has created, prices for digging and pouring a foundation, framing and finish work have gone through the roof.
I’m told by others that are in the middle of the same process, that I can expect to pay at least $350/sq foot and wait up to 2 years for subs to become available. This is more than a little depressing as the RE market simply won’t support the cost of building the home. In other words, we’d be seriously upside down the day we moved in.
I’ve had others doing similar projects tell me they had to bring in subs from out of state — and pay for their expenses while they were working. The cost of doing that would be “unsustainable.” We’d end up with a building that was worth substantially less than it cost to build.
This is a totally new situation for us. The folks making and selling the pre-fab homes are charging what they’ve always charged. They are not the problem. It is subcontractor labor costs that are the basis, as far as I can tell.
Has anyone encountered this sort of situation? What did you do to keep the project viable? Thanks for your advice.
Replies
Do you have a trades background? If so, do a lot of the work yourself. It may take longer, but it can save a lot of $ and it is rewarding to say you built the home yourself. Or you could possibly hire subs just to get a weatherproof shell up and you take over from there. If you are of an age that you cannot physically build anymore consider having family and friends help. When I was 12 my dad and brothers built our grandparents home with direction and help from grandpa. We did all the heavy lifting. I can honestly say it was one of the best times of my life and bonded all the men in our family. I caught the building bug and it set my career path at an early age. With the view you are describing I’m sure family and friends would be more than willing to help.
I’m not following you on the hiring subs from out of state piece, but you may need to concern yourself with fly by night contractors. If your state is like mine your subs will have to be registered by the state or you and they can face penalty.
Build yourself a 30x40 box. You don't need 12 gables and bumpouts.
Do just enough to get your CO (certificate of occupancy).
Of course, if you are financing this they won't want to finance a 1200sq ft unfinished studio apt.
Pay cash.
Thanks. All good advice.
Unfortunately, framing doesn't require any kind of competency test or licensing at the state level. A few counties and cities require GC licensing, but most do not. Electrical and plumbing do require state licensing.
I do not have a background in the trades, but I've GC'd 2 homes in the past and for the most part, they've been successful projects.
The point about a simpler building is well taken. We started with a fancy post and beam design and have scaled back to what is considered a "hybrid" building, involving a combination of P&B as well as 2x6 framing. It would be (as you suggested) a "box" with a 10/12 pitch and glass prow front.
Just the same, I have to follow the HOA's rules and regs about the size and exterior finishes on the building. They want to keep the neighborhood upscale. The closest neighbor that is putting up a home has a build budget of $1.2 million...So I have to be careful in what I propose to the HOA/ACC.
We've taken other measures to reduce the cost of materials. We scaled back our requirement for Anderson/Pella/Marvin windows to Jeld-Wen - a middle-grade alternative. That saved more than $10k in our budget. We also downgraded roofing from standing seam metal to exposed fastener metal. That also saves about 10k.
The problem comes down to sub labor. When talking to folks that are also involved in planning or execution of new homes, we hear a common assessment: The best subs have largely gone to the big front-range cities (Denver, CO Springs, Ft. Collins), where the pay is the highest. The most elegant solution would be to essentially build the home in lower-cost labor markets and ship it here on a flatbed. That's fine - except modulars of any kind are strictly forbidden by the Covenants and ACC Rules. That seems to be universal among subdivisions here.
And yes, we will be paying cash. That is one reason cost-control is so critical. One of two things must happen, though -- either the value of a comparable home in this market will have to appreciate to the cost of putting the building up -- or the cost of labor will have to come down.
I'm still hoping that someone can offer a practial alternative. Thanks again for the input.
Have you considered simply putting up the shell of your dreams? It's a vacation property and perhaps you can work on finishing the interior over a number of years or wait until the inevitable economic downturn materializes. Put a coat of paint or varnish on the subfloor. Metal shelves for cupboards. One cheapo washroom. Some DIY drywall (if you want it) can easily be covered with another layer by a pro. (Heck, putting it up is easy. It's the taping, so why even tape?) Here in Ontario, it is not unusual to see remote or island vacation properties for sale with no electricity.--propane fridge and stove and oil lanterns. Before cellular, they didn't even have a phone. ...Generator and batteries in the garage to charge your electronics. Embrace the open concept design theory.--Only a couple of interior doors. Well, you get the idea. Now you just have to convince MrsGem. (and yes, I have a relative with a gorgeous timber frame place with 360 degree views, much like what I've described, about 1/2 hour from the nearest marina by fast power cruiser, out in Georgian Bay.)
BTW, whatever windows you choose, I'd recommend that you ensure the manufacturer uses Cardinal brand sealed thermopane glass units. All the good manufacturers buy the sealed glass from Cardinal. Google them.
Great minds think alike, Suburban guy. Your approach of building the shell first (and waiting for the labor market to improve) is a possibility --and one I'd pondered, recently.
MrsGEM would probably be OK with an incremental approach -- if we controlled the costs. We are retired folks and would not want to seriously cut into our savings/income stream.
Here's a quick and dirty budget for doing it that way:
P&B panelized home kit $131,000 w/windows and exterior doors
Drive/Site Access Improvements $1500
Temp Power - Pad Transformer to site $2000
Drill Well and install pump $23,000
Excavate for septic and foundation $20,000
Pour Foundation and Strip $8,000
Erect Dried-in Shell $30,000
Total: $215,500
All that said, the County and/or the HOA might have a problem with an unfinished building with no Cert of Occupancy sitting there for a couple of years. Normally, the County issues a permit with a one-year lifespan. The HOA has their own rules of course. It says you must complete the home within 18 months of having received a build permit. Both can be extended -- but I am not sure for how long and other limitations.
So that approach may work if I can get OK from the Building Department and the HOA.
Looks good. Here in Ontario, we know a couple who were forced to close by the developer/builder of the subdivision, on a new house without any kitchen AT ALL. (fell behind on construction trades) -- were they mad!!! The home had running water/sewer and a bathroom(s) and as far as the city was concerned, that was all that was necessary to grant an occupancy permit. Check out the requirements with the building dept. The HOA might never know how "incomplete" it is on the inside. Anyone who visits will be so taken with the view and the beauty of the wide open space, they won't care that they're walking on plywood, etc. Oh, I forgot...and the wonderful host and hostess. Best Wishes.
There's another way to look at your situation too. You love the lot and location and the neighborhood. Build the house you want and live happily. The value of your home doesn't matter unless you're selling. We bought our house a month before the crash in Florida. We've lived here for 15 years and only now is our home's value getting close to what we paid. We couldn't have lived anywhere else for any less so we haven't cared. We may care in another 10 years but I expect it will have appreciated by then.