I am considering a land development acquisition in the Napa Valley area of California and need to do a land residual calculation. It has been a long time since I was involved with vertical construction (semi-custom production homes) and need to get a handle on what construction costs are for a ~4,000 sf home that would sell retail for $1.25 to $1.50M (assume a finished lot cost of $225K with a flat building pad). The level of construction would be similar to west coast Toll Bros. or John Laing Homes (when they were in business). When I sold lots to either of these builders I was estimating their direct costs in 2007 at approximately $125/sf. I am only looking for direct costs – labor and materials. Your help would be greatly appreciated.
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Replies
$1M / 1.35 = $740,000
$740K / 4K sqft = $185 sqft
SWAG, ya know?
Awful cheap for a square foot.
Me? I'd rather spend ~$225 sqft. At $740K, that's about 3200 sqft. Decent, good bones, no frills.
Here's a short sample:
$799,000
Eastside Country Home
+ New Master Suite
Bathrooms:
Total SqFt:
Lot Size:
2.5
1,991*
1 ac.*
$849,000
For Eastside Napa Custom Home
Bathrooms:
Total SqFt:
Lot Size:
2
1,891*
.63 a*
$1,575,000
French-Inspired Country Home
Bathrooms:
Total SqFt:
Lot Size:
4.5
4,000*
.53 a*
Sam
Sorry it took this long to respond. I understand your math at Sales Price/1.35 equals cost, but that quotient includes the land + labor and materials, but not overhead, financing and margin.
Example:
Sales Price $1,250,000
Direct Costs $1,250,000/1.35 = $925,000
Labor and Material $925,000 less land cost $225,000 equals $700,000
Cost per square foot $700,000 / 4,000 SF equals $175/SF
Remember, this is direct costs only. No permits, financing, insurance, other and profit. That is where the 1.35 factor comes into the solution.
I am not building these for fun, or myself. If it were for myself, I would budget around the $220/SF you are contemplating + landscaping of around $100K.
Given today's market, I can probably shave $25/SF off that price and given my lack of purchasing power compared to Toll, $150/SF is probably in the range.
BTW, a 1.2 acre, no view, slight slope lot adjacent to the property I am investigating is on the market at $495,000 and will probably sell for $425,000.
Thank you for your insights.
If you're paying $425,000 for the lot and plan on selling for 1.2 million I don't see how you can make money doing this in Napa Valley. I build down in the bay area, (silicon valley), and haven't heard numbers like $150/sq ft in fifteen years. Napa's a little cheaper but not much, even considering the recession. Also, the market at your target price range has pretty much dried up. I'd really give the idea some rethinking.
Coincidentally, I'm building myself a home in lower Lake County, (just outside of Middletown), and I'm a builder who's treating that project as a hobby and doing all the work myself. I'll be lucky to do it for $150/sq ft. Of course, it's going to be a tad more custom than a spec home.
The company that I worked for in Marin County (I lerft 3 years ago) built for about $300/ft.