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By Rachel in John's Island, SC on 4/30/2010


We just sold our house, and will have around $70,000 to put down on the dream home. We found our plan online and love every nook. architecturaldesigns.com/house-plan We haven't bought the plans yet, because we don't know what to do first.

We are now looking for land to build on and the sellers want a pre-approval letter from the bank. Banks in our area want 25% down on the perm loan and after buying the plans and putting 25% down, we will have no money in savings.

We have already been shopping around for finish materials but don't know where to start with this process... HELP!


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By David in Greenville, SC on 5/1/2010


Hi Rachel,

Congratulations on selling your home and on deciding to build your dream home. Unfortunately, from the content in your email, it seems like you need to take a step back for a minute and think this whole thing through a bit more.

First of all, your post leaves out a few key details. Such as, do you have additional money to buy a lot with, or is your $70,000 supposed to cover the cost of buying the land and building a home? Also, where are you looking to build your home? If you are looking for affordable AND desirable land on John's Island then it's going to be tough. For my response I'll assume you are buying land in your posted location of John's Island. Anyway, whatever the answers to those questions might be the place to start is buying a lot.

Without a lot you can't begin to put together an accurate budget. And, banks are very reluctant to make construction loans to people who don't have a lot already. However, before you rush out and buy the first thing that captures your heart, please understand that the home site can make or break a project before it ever gets started. In a coastal area, you very often have sandy soil and high water tables to deal with, not to mention tougher building codes to protect against hurricane damage. Any or all of these factors could turn what seems like a bargain into an expense that doesn't leave enough money to build the home with! So, whatever you do, have people who know the area and know their stuff inspect your potential home site and do your due diligence thoroughly. This applies to any lot anywhere, actually, but there are some features often unique to coastal property that may need extra attention. It's tedious and at times frustrating, but it will save you big in the future!

Now, with a lot picked out and good estimates of its development costs, you can begin to form a real construction budget. If your $70,000 is all you have down, and your bank requires 25% down then that dictates that your total budget is $280,000. So, once land and rough development costs have been established, you simply subtract them from the total sum and there you have your rough construction budget. Let's say, for argument's sake, that your land and it's associated costs total $70,000. That leaves you $210,000 to build your home with and that's if everything goes perfectly requiring no extra expenditure. Better to keep 5% in reserve - minimum - and 10% would be better. But we'll go with 5% of the construction (not the total budget) budget which is $10,500. This realistically leaves you about $199,500 to plan to build with.

Is that enough? Not if you want to build the plan you have chosen to the same level of finish as it is show on the website! Granted, on the coast you won't have a basement as shown in the plan, so that will save you a good bit. However, without modifying the plans you really only have two bedrooms in the original main floor and second-level depictions. This still makes the home 2,587 square feet. A size that is easily attained for $200,000 or less with a less complicated plan and/or a less well-finished home. But very difficult to achieve with the plans as they are. This is a beautiful home as I can attest from firsthand experience, as a slightly modified reversed-plan version of this home has been built here in Greenville County. I was able to tour it when it was first built, and it is a dramatic plan for its location, making the most of the mountain views behind it. And, in its modified form makes for a nice livable layout, but without the changes the developer made, I don't think I'd like it that much. It's in a neighborhood called the Sanctuary of Greenville and although it's been sold now, the pictures are still up on the website which is the thesanctuaryofgreenville.com.

I have no connection with the developer. I just wanted to pass along to you where you can see real photos of the home you are considering building. At any rate, this is a complex floor plan with a lot of turns, two staircases, a huge sweeping covered porch with outdoor fireplace, and a lavish suite-style master bath. If this were an infomercial I could say "but wait... there's more!" What that all means, simply, is that this is on the more expensive side of homes to build. The home that sold here went for almost $600,000! Take away the land at $103,000 and we'll generously give the contractor his 20%, or $120,000 and you're still paying nearly $380,000 for this 3,450 square-foot modified version. That's $110 a foot, construction only!

Kind of makes you say whoa! At 2,500 or so square feet, you would have to get construction-only cost down to around $81 a foot to meet your max theoretical budget of $210,000. Not impossible, but with this plan it's going to be very tough. None of this is meant to rain on your parade. If you are building somewhere else where land is less expensive to buy and develop then you will have a bigger budget. The home will be a pricier build anywhere by the nature of it's design, but perhaps you can simplify the design while keeping the elements you love the most. Well, I guess I've elaborated a little more than your original question required! However, your lot is the place to start and if you'd care to share more specifics or ask other questions, please feel free to do so.


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By Pat in Arnold, CA on 5/3/2010


The cost of building is very deceiving. Ask around for construction loans and find out what they require. See if they will roll the lot loan into the construction loan. The bank we are dealing with will roll the lot loan into the construction loan and only require 10% down. BBVA Compass Bank.


The plan you picked breaks down as follows where we live; $165/SF for living space is about as cheap as you can build where we are at:

2,587 SF x $165/SF = $426,855
2,648 SF x $55/SF = $145,640  (basement and garage)
  
Total $572,495 + the land + architectural drawings ($8,000+), plus site development, e.g. bringing in utility lines + 5% contingency fee + $15,000+ in interest payments on the loan while under construction.

As you can see, it adds up fast. Our lot was $159,000 and we have spent to date $55,000 just on architectural drawings, driveway development, septic system, soil testing, topography drawings, tree removal, geo study, surveying fees, grading of driveway for access into the property, etc., and we haven't started construction.

Most people I've run into say NOT to buy drawings. You will be paying for drawings twice that way. Just show the drawings to an architect and get a price on what he would charge to draw it up for your lot's specifications (once you have acquired a  lot).

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By Rachel in John's Island, SC on 5/3/2010


In our area, you can't have a basement (the "low country") and we were thinking of leaving the upstairs two bedrooms unfinished for later. There are just two of us and kids are in the distant future. Our plan for the lot is to leave as many trees as possible.


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By Rachel in John's Island, SC on 5/3/2010


The $70,000 is for the down payment. We were hoping to buy land with the construction loan. Our budget for land is $60,000. We found three acres for $70,000 and tried to offer $60,000 but the Realtor wanted a pre-approval letter for the land. We were preapproved for over $300,000 when we were looking to buy a resale home, but looked for two years and didn't see one house that was for us. Our goal is to finance as little as $220,000 so we can double up on the mortgage payments.

We modified the plan a bit. We are going to get rid of the third walk-in closet, and move the sink beside it to other opposite wall to have a double vanity on the one side. The stairs to the basement (which we can't have here) will be a study. The curved breakfast room will be a four-sided half octagon. We were hoping to find the finishing materials in outlets or from wholesalers either in the area or online. Our plan is to leave the upstairs unfinished and finish it out later.

We also have friends in the trade.  Our buddy Jason's house in WA flooded a few years ago, and they were left with nothing. We moved him and his family down here and helped him find a job. He offered to do our tile work for free. Our friend Clint owns an electrical company. Our friend Derreck does millwork. The only trade we don't know a guy for is plumbing! We can paint and do some things as well. That is where we hope to save the money. Plus owner-building.

Even though we want to live in it for a while, I would hope that when we sold, it would sell for a lot higher than what we built it for. Your example is being built for $110/sqft. Our goal is to build for $95/sqft. The number to me doesn't seem to be that unobtainable. My goal is to be a well-informed builder who shops smart.


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By Rachel in John's Island, SC on 6/17/2010


UPDATE!

So we found a bank that will do 20% down with the lot and construction. We also found three acres with well, electric and septic already in place :)

Moving along very well so far...


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