How to Budget For A Custom Home

One of the most common questions that I get from prospective clients is, How much does it cost to build a custom home? No matter what location you are looking at, The answer to this question is, of course, complicated and can be affected by dozens of factors, and it’s definitely not as easy as budgeting for amazing local food. 

To break it down simply, there are three areas that you should budget for:

1. Land cost

2. Design and construction costs

3. Decor, furniture, and landscaping costs

Think of your “Total Project Cost” as a simple math equation:

Total Project Cost = Land Cost + Design/Build Cost + Decor/Furniture/Landscaping Cost

Here are a couple of rules of thumb to follow that will help you plan your budget:

1. The cost of your land should typically not exceed 25% of your total budget for land plus construction costs. (This would not apply if, for example, you purchased large acreage or unique parcel of land where land values are higher due to their rarity or uniqueness)

2. Budget 5%–10% of your land plus construction costs for post-construction items such as decor, furniture, and landscaping— these items are optional, but if you are planning to buy new furniture, landscape your yard or buy window coverings, it’s good to have the money set aside ahead of time.

Here is an example of what this might look like:

Land Cost (25%) $500,000 + Design/Build Cost (75%) $2,000,000 = $2,500,000 for Land and Construction.

Optional budget for decor, furniture, and landscaping (5%–10% of Land + Construction Costs) = $125,000–$250,000.

Total Project Cost for this example equates to $2,625,000–$2,750,000.

Following the equation example above, you should be able to determine an initial high-level budget, and you can begin looking for land and planning your home!