Budgeting for Construction

Below is the budget that I have developed for the construction of the Little Rental House.  The lot was already paid for a long time ago (to help the community get the funds it needed for legal and infrastructure work) so that aspect is already known with accuracy.

When formulating the budget for the Little Rental House (#3, 992sqft, 2br 1ba), I used a combination of numbers from three homes previously built here at White Hawk: my own home (#6, 1536sqft, 3br 1.5ba), the home next door (#5, 1408sqft, 3br 1.5ba), and my parents’ home (#2, 1800sqft, 4br 2ba).  Because #2 was built in 2014-2015, while #5 and #6 were built in 2007-2008, the former gives prices much closer to “current day” while the latter need to be significantly adjusted for inflation.  However, #2 is a 4-bedroom home built with double-stud walls, so many of the architectural elements are very different.  #6 is the only reference with a basement, but was built with a lot of extras such as oak trim and flooring, so those costs aren’t representative of what I’m building.  And #5 is a good reflection of the trim level, but is larger and built a decade ago.

In all cases, I have the budgets (actual cost for #5 and #6, builder-estimated for #2) broken down into great detail, rather than just a lump sum total cost.  Thus, I was able to pick and choose, taking for example basement costs from #6, flooring costs from #5, and roofing costs from #2, with appropriate adjustments for number of rooms, square footage, etc.  Contractors often estimate construction costs on the basis of cost per square foot, and on that basis we find a range of $105/sqft for #5 to $124/sqft for #2 to $142/sqft for #6.

My basic budget (without the “extras”) has the Little Rental House just below the high end of the range at $136/sqft, even with almost no labor costs.  With the extras, it pops up to $147/sqft, higher than all of the reference houses.  There are several reasons for this.  First, the actual living square footage of the house is the smallest, so even though it is the lowest total construction cost, this increases the cost per area.1 Second, the basement is adding a substantial cost (about 6%) to the total.  Third, the additional cost of more heavily insulated walls adds another 6%.  However, it’s also unclear whether it’s fair to compare 2008 prices to 2019 prices; perhaps the homes built back then would be substantially higher today. 2

The budget below 3 represents the baseline that I’m working toward, will provide the structure for reporting the actual costs as we go along, and also provides the initial basis for estimated return on capital.

Budget ItemEst CostBasis for Estimate
Lot lease fee$40,000Contractual
Site preparation and excavation$8,000Assume same as home constructed on adjacent lot
Utilities-Oversight - was not budgeted
Foundation$10,330Assume: $4,000 for slab, $4,000 for ICF, 24.3cu yd concrete at $100/yd
I-beams$2,084Estimated based on weight of steel at $1/lb
Structural Insulated Panels (SIPs)$14,118$7.25/sq ft budgetary estimate, 1830 sq ft, $850 delivery
Framing material$3,000Detailed estimate from spreadsheet, rounded up
Framing labor$0Building it myself
Roof material$2,178Rafter framed, plus sheathing and steel roofing
Roof labor$1,600Assume same as home constructed on adjacent lot
Siding$1,800$1.5/sq ft
Siding labor$0Install myself
Windows and exterior doors$5,077Detailed estimate from spreadsheet
Electrical$2,250$25x40 outlets, $50x25 light fixtures
Plumbing$2,000Assuming I hire someone for septic but not for DW/DHW
Plumbing fixtures$1,700Use numbers from adjacent home but refactor for single bathroom
Heating$1,400Daikin RXS12LVJU
Wall finishes$7,000Use 60% of number from adjacent house based on smaller area
Interior doors$1,3004 interior doors
2 closet doors
Floors$5,952$6/sq ft
Kitchen$1,850Detailed estimate from spreadsheet for cabinetry, plus kitchen sink cost
Appliances$5,300Unique UGP-24CT1
Unique UGP-470L1
Combo washer-dryer
Microwave
Insulation$2,5004" R-6.5 foam over 7.25" R-3.6 cellulose in cathedral ceiling
Deck/porch$0Not including in initial build budget
Contingency$15,88820% of sum of above (except lease fee)
Extras - solar$6,718Battery backup
LED lighting
Extras - water$4,000In-basement rainwater collection and treatment
Total$146,045(including extras)

 

  1.  Some items, including the lot, have a fixed cost, so the smaller the home, the higher their impact.  Others, including site prep, plumbing, electrical, and roofing, have a significant base cost even if they do scale with home size.  Another important consideration is the fact that the home is mostly on a single story.  While this helps with accessibility, it means that there is, for example, more roof per square foot of house than there would be for a two-story home.
  2. One source suggests that this could have increased by as much as 50%, so that even the cheapest $105/sqft would really be $157/sqft, but I think that exceeds the construction cost people are seeing for other homes here, ones for which I don’t have detailed budgets.
  3. I apologize for the somewhat awkward formatting – I was torn between using TablePress (which gives you content in a searchable text form but doesn’t let me control the layout at all); or alternately inserting an image (which would let me make the format more legible, but wouldn’t contain text that you could access).

Foundational Beliefs

As I so often seem to do, I’m leading off with a pun.  I want to write about the principles that are guiding the Little Rental House project, and the principles that I’m hoping to apply in writing about it.  At the same time, I’m in the process of getting quotations for the foundation, so I intend to update you on that as well.

Principles

Transparency

My wife Raederle has observed that as we have become more open about sexuality, money has remained one of our greatest taboos.  In writing about this house construction project, I’d like to work on breaking down that barrier and start talking about some of the relevant financial issues, including:

To this end, I intend to post my a priori budget, along with an explanation of what it is based on, so that we can look at a before-and-after comparison and talk about where the estimates were out of line, and why.

I will also be posting about the economics of rental homes and how this is part of a transitional strategy toward retirement.

Passive-Level Energy Use

The community that I live in refers to itself as an “eco-village,” and accordingly all of the homes here have been built to extremely high standards in terms of both lifetime energy efficiency and the use of local materials and non-toxic materials to the greatest extent practical.

I want to go a step beyond this and build a house that as closely approaches a passive level of energy use as possible – a “passive house“.  This means among other things that sufficient heat is captured and retained from normal daily activities (body heat, plus cooking, electronics, etc.) that active heating is never required, even during the coldest part of the year.  I will talk in detail about the choices that support this and why I think it matters.

Grid Flexibility

Related to, but separate from the passive house considerations is the idea of a house that can operate flexibly either on or off the grid.  Every existing home in our community has at least some “grid” requirement, either in the form of electric (grid-tied solar) or natural gas, or both.  Furthermore, the existing homes all rely on a community water supply that comes from a local aquifer before treatment.

With this house, I will be building in grid flexibility.  Essentially all day-to-day activities will be possible using only the solar panels provided on the house.  While some activities (such as drawing a 50 gallon bath of pure hot water) may be limited when off grid, in most cases normal practical activities (such as a 10 minute shower) will be possible.  I’ll talk about what activities are supported and curtailed, and how the passive house choices play into this.

Progress

This week, I’m scheduled to have the surveyors out.  Although they charge quite a bit to “mobilize” (mainly for travelling here and getting all their equipment set up, I think), I’m coordinating this effort with several other interested parties so that we can get more measurements (a total of about 20 survey stakes) for an estimated $850.  This doesn’t actually have a line item, so I have to decide whether to count it as “site prep” or just take it out of the contingency budget.  It seems logical that putting the stakes in at the corners of the site and the house is a form of site prep, so we’ll go with that.

Separately, I’ve received price quotes on excavation and foundation.  The first excavation quote came in at $21,000 which puts it 162% over budget!  Part of this is the lack of a budget for utilities (my fault) but they attributed part of it to a junior employee making the estimate and not recognizing potential places to economize (such as, putting both water lines and basement drains into a shared trench).  I’m working with them to get a more definitive estimate, but I’m also looking to get a second quote – if I want to keep things on budget, I need to not just go with the first price I get, even if the contractor in question has been very affordable in the past.

My first foundation quote was based on the use of insulated concrete forms (ICFs).  However, as I was considering things, I realized that given that the basement is going to be purely mechanicals, there isn’t any good reason to insulate it.  So I also requested a quote based on formed and poured walls – slightly thicker (8″) walls to compensate for the lack of other structural elements.  (It turns out this saves money in another area, because the ICFs are required by code to be covered with a fire-resistant surface – drywall – even though it’s not living space.)  The quotes broke out the slab from the footers and walls, so the total is $14,200 for footers+ICFs or $10,300 for footers+formed and poured walls, another $3,000 for the slab, and then on the order of $700 for waterproofing.  Add in another $1,000 if a pump truck is needed for any of the three operations.  (I should be able to avoid this by making sure that a regular truck can back directly up to the site.)

I am strongly leaning toward the formed and poured solution for pure cost reasons; this would give a total of about $14,000 which is still 35% over my budget.  Part of this can be explained by the addition of a “bump out” to install basement stairs.  Although I could use pre-fabricated concrete stairs (quoted at $1,800 delivered and installed) I could not use the prefab solution and still have the stairs be the width I wanted (48″, to handle large water storage tanks) or come out the distance that I need (72″) to keep the house within the appropriate envelope of the lot.  So some of that cost overage is compensated by the fact that I’ll be putting in wooden stairs instead.  (None of the comparable designs I used for budgeting had exterior basement-access stairs, so this was an oversight.)

A New Start

This blog has languished for some time while a number of shifts have happened in my life.  While I’ve learned many things in this time, I haven’t been producing much intellectual output aside from my work.  I wanted to change that, and as this timing coincides with receiving a building permit for a new home that I’m about to build, it seemed a great chance to combine the two threads.

So, while this post is a new start for the blog, it also represents a new start in the sense that economists would call “building starts” – a permit has been issued for #3 White Hawk Ln. (affectionately known as the Little Rental House), and I’m hoping to begin construction soon.  I expect to be blogging about the design, the process, and various other aspects.

The new house will be essentially one story, with two bedrooms and one full bath.  There is some additional loft space above that can be used for storage, office, etc., but other than the house is intended to be ADA accessible by design.  Beyond that, it will also have the highest insulation levels of any home yet built at White Hawk, in an attempt to reach “passive house” levels of efficiency.  (I won’t write that out in German because I think it’s a trademark if I do.)  I have a wide range of other “neat features” planned but I won’t spoil all the fun by writing about them in this first post.  I plan to be doing a lot of the construction myself to keep costs in check.

Obviously, I don’t have any interesting pictures to share, but I’m including a rendering of the house as seen from the west (looking in the windows into the kitchen, at the left, and the living room, at the right).  I have also uploaded the full plan set (large, 2.3M PDF) for people who might be interested in those details.

The current status is thus: I have the building permit in hand.  I am waiting for the surveyors to come out and mark for both the lot position and the house position.  I’ve started seeking quotes from contractors for excavation and foundation work, which I don’t feel qualified to do myself.  I’ve been learning about the differences between pre-fabricated Bilco basement entry steps and building the staircase myself; and I’m looking into how this impacts the choice of equipment that I can potentially put into service in the basement.

And I’ve already (based on the first quote) gone something like $13,000 over budget.  So… I’ve got to work on getting that down.  My estimate was based on the fact that the total cost for site prep and excavation for my current home was $5,300 (in 2007).  I expected this to go up, and resources like this suggest that maybe 50% increase was reasonable, so my budget was $8,000.   You can imagine my surprise when I got a quote for $21,000.  Of course, the quote isn’t quite comparable, because it includes work that on my current home was recorded under “utilities,” and which I hadn’t properly estimated in my initial budget.

I’ll keep you posted on how things look as I move along.