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Tesra Huff
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Land Cost:
How much should your lot or home site cost? It depends on your budget. How much do you want your total mortgage to be when the construction is complete? The cost of land generally represents 17-25% of the total value of your home.
Suppose your total budget is $300,000.
Let’s look at a typical breakdown:
• Land - $60,000
• Carrying Costs on Construction Loan - $10,000
• Total Cost of Home - $300,000
In this example, the land cost is 20% of the
full cost of the home. Remember, construction costs must include permits and fees, clearing and preparing the land, and all steps of construction from laying the foundation to installing carpet and painting. Most experts recommend that land costs represent 17-20% of the total value of the home, but that can be stretched to 25% occasionally, if land costs in the general area are high.
Where to Buy?
In terms of cost, land further out generally costs less – which goes hand in hand with more spacious acreage for each home. Popular, well developed cities with restrictions on growth drive up land cost.
 Well or City/County Water
Your new home will need a water source, so you’ll want to make sure any construction bid includes an appropriate cost for either a well or access to city or county water.
If you’re within town limits, you’ll probably need to connect your home to the city water lines. This will involve “tap fees” or “connection fees”, which is what the city charges to give you access to their water.
Fees vary greatly by city and year – just make sure your bid includes all the current information.
On top of any city fees, there may be subcontractor plumbing charges to pipe the water from the home itself to the city connection at the edge of your property line. A basic subcontractor plumbing bid may include only the plumbing within the home itself.
If city water is not accessible at your property line, you’ll need to install a well on the property. Most likely the county will already have a specific well, septic, and home location for your particular lot. You’ll need these planned locations when you apply for a well or septic permit.
When drilling a well, make sure your bid includes a sufficient allowance for drilling a well to a depth that will provide a good water supply. Well drilling itself can cost anywhere from $2,000 to, in severe cases where more than one well is drilled, $15,000 or more. Until the drilling begins, no one will be able to tell you how far down you’ll have to drill. In some cases, water is hit at 200 ft on one lot, while the lot right next to it has to drill 950 ft to get the same water pressure. But most wells fall somewhere in the middle range. And remember – this is just the cost of drilling.
In addition to drilling the well, make sure the bid includes costs of installing the pump and running water lines to the home (this alone will be $1,000 - $2,000), installing required casing, installing a cement slab for the well pump to sit on, and if desired, a well cover. Well covers can look like decorative rocks and add to the landscaping features.
Ask your builder what the past few wells have cost in your county and area, or call a few local contractors yourself to get at least a general idea of what the final cost will be.
Not everything about the home in the country is less expensive, though. There may be extra delivery, material or labor fees during the construction process, depending on exactly how far away your lot is. These charges can be minimal, but check with your builder or a knowledgeable agent who has a good understanding of custom home building on a lot of your choice.
setback
What’s a “setback?” A setback is the amount of space you are required to leave between the edge of your home and the edge of your property.
This is required in subdivisions or fully developed neighborhoods, where space is at a premium. This is important to keep in mind, as it can impact the kind of house you want to build.
Here’s how that works: If your lot is 60 feet wide, and the required setback is 10 feet, that means you must count 10 feet from the left, and 10 feet from the right, before you can start to build.
The “building envelope”, or the land needed to place your home on, will now be a maximum of 40 feet across. Thus, the home plan you choose cannot be any wider than 40 feet from left to right.
Setbacks can also apply to the front and rear of your lot – you may be required to build no closer than 30 feet from the front of your lot. Check with local inspection office or the restrictive covenants.
Restrictive Covenants
Restrictive Covenants are deed restrictions that apply to a group of homes or lots in a specific development drafted and put in place by the original developer.
Size and Shape
What if the lot has an odd shape? Will that affect the building process? If your lot is half acre or more, the general shape of the lot may not matter quite as much. But if you’re looking at a small lot, a triangular or other irregular shape it can limit your building envelope as well. Consider carefully, and make sure your desired home will fit on the lot, without being tucked in somewhere different than you had in mind.
Slope
Is a lot on a gently rolling hill a good investment? There are a lot of variables to this. A house on a hill can provide fabulous views. The neighborhood can have more character and appeal if the roads have some slope.
A home built on a sloped lot requires more foundation work and more site preparation. Depending on the size of the foundation and the slope of the lot, this can add to construction costs. Drainage considerations can also be a factor.
Wooded Lots
Are there any lots with lots of trees? Wooded lots are extremely desirable, and harder to find. Just be aware that even environmentally aware builders who carefully develop lots to retain every possible tree can’t keep them all. Site preparation also costs more for a wooded lot.
Tree removal, stump removal, disposal of trees, and grading after tree removal takes a lot more effort than preparing a grassy, treeless lot. A lot with rocks and boulders can also require some extra preparation.
wow – What a bargain!!
How can I tell if a bargain price is a good idea?
Be wary of a lot listed at a price that’s considerably less than land has been selling for in that area. Of special concern are these words on a property listing: “no perk”. This does not mean that there are no “extras”.
When used in conjunction with land, the term “perk” means the ability for the ground to support a septic system.
If your lot is not connected to a city sewer system, a septic system is required. If the ground does not perk, you’ll be required to use some VERY costly alternatives. Make sure to get an expert opinion before buying a lot with this label!
Phoenix Housing Group employs full time Construction Coordinators to help our customers through their home building process. Once you have contracted for one of our homes, our friendly Construction Coordinators will assist you through all the above processes or completely facilitate each step ensuring your total satisfaction!
value
What makes a lot more valuable?
There can be many reasons why the price tag on one lot is higher than another. Trees. View. Shape. Slope. Streams that run through the property. Lake front. Location. More important than what the lot has or what it costs is the value it has for your own lifestyle, interests and affordability. If you’re excited about the property and it passes muster with all the criteria you’ve chosen, your instincts are likely on target.
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