What does it cost to design and build a remodel, addition, or custom home?

Many people interested in designing and building a custom project start with the question: “How much will it cost to build?” When people hear the answer, their next question is, “Why? I thought it would be less expensive.”

Then come the following thoughts:

1. “My friend told me that projects can be built for $200 per square foot”
For years people have heard a general rule of thumb that houses can be built for $200 per square foot. They think that if a 3000 square feet house costs $600,000 to build, then a 500 square feet remodel or guest house should cost  500 square feet X $200 per foot = $100,000. But this just isn’t true.

The $200/sqft number can be accurate, but the size of the house has to be large enough to take advantage of economies of scale. Generally, the bigger the house is, the less expensive the per square foot cost can be. The smaller a house is, the more expensive it is to build per square foot. You’re going to have to build a 2500+ square foot house to be able to hit that $200/sqft number.

Also, when a builder says they can build a house for $100 per square foot, they are talking about the costs to build in a subdivision in some place like Atlanta. They not factoring in design, engineering or permitting costs. These costs alone are often over 20% of the project. They are not factoring in quality construction you’d expect in almost any coastal or metropolitan area.  In many place costs of $500-$1,000 per square foot are not only common but spending that much makes sense as that is the cost of a quality and finish level that owners expect.

And finally, the cost per square foot can change dramatically based on the location of the project. For example, costs to build in a coastal city can be as low as $200/sqft but modern projects in Dwell Magazine are easily in the $500 per square foot or even $1,000 per square foot cost.  As home prices continue to increase around the country, the cost of building increases as well.

2. “I just want a simple house.”
That’s great. But even a simple house is a complex feat of permitting, engineering and back breaking labor.  These things take time and money.

As an owner, it is helpful to know that all projects are built using the same process:
a) Figure out what you can build, including permit requirements in your city or county, if you do that kind of thing 😉
b) Work with an architect or designer to draw up the size, look, and shape in a “schematic” design.
c) Submit the design to the planning department to get planning permits.
d) Once you have the planning permit, have the architect draw up construction documents for a building permit. This often requires two or three engineers such as structural, soils and civil.
e) Determine all the “finishes” which include appliances, faucets and fixtures, materials, tile, paint colors, landscaping, utilities etc..
f) Work with builders to get bids, select one, sign a construction agreement, prepare the land, pour a foundation, frame the house, enclose the house, hook up water/electric/sewer, and install finishes.

Whether you build something that is 500 square feet or 5000 square feet, all of these steps are taken.

3. “I’m thinking a prefab house because it’s easier.”
This is possible but it really depends on your site,  existing home and personal goals. Blu Homes and Living Homes are the top of the line if you go this route.  Buying a home that is built somewhere else can reduce design fees, but it still needs to meet your city and county codes and then be permitted. Then it needs to be shipped to your location, and if that location is in an urban setting, you’re looking at significant costs to shut down streets and hire a crane to lift the unit into place. Once it arrives you will have paid for the same foundation and water/electric/sewer hookups that you would need with a stick-built home. By the time all of this adds up, you are looking at a similar price to building a custom house. And while you don’t have to spend time designing prefab, you still have to spend all the time getting permits.  Most importantly, a custom home allows you to design something specific to your needs and the lot in which it will reside.

4. “My uncle is a handyman or contractor and can build for me for cheap.”
The best way to save money is to do the work yourself. It will take you a long time and you will make mistakes, but it can be an amazing and fun experience. One of our favorite projects is this Normandy Style stone house in Upstate NY. The walls on this thing are 2′ thick stone!

Moriarty Farm House 1         Moriarty Farm House

The owner spent seven years getting to this point.  It is a $1,000,000 home that will cost less than half that and it is a work of art.  We’re not counting this husband/wife team’s 10,000 hours of labor in our costs though.

If you want to try a DIY project, just be really careful because construction is the definition of back-breaking labor.

The second best way to save money is to manage all the subs (electrician, foundation, framer, plumber, drywaller etc…) yourself.  The most skilled subs prefer not to work for inexperienced clients.  They are concerned that your inexperience will require too much of their time as you make decisions, that you will call them back repeatedly and they will end up making very little money due to the extra time.  So owner builders often get stuck with the second tier subs and that can be painful!

If you have a relative who is skilled and experienced and willing to work for free, jump on that and do it… but again, we’ve seen siblings stop talking to each other when the builder in the family is too slow or too expensive.

5. “A builder I know says he can build for $X.”
Be very careful with this scenario. When you get a bid from a builder, make sure they give you a price for every line item that will go into the house, from permitting, to design, to construction, to cleanup. Permits alone can cost $15,000-$100,000+. Architect and engineers are often 15% of the project’s total cost too. At New Avenue, our process requires that our partner builders review a 200+ line spec sheet with every single piece of building a house so no one can say the dreaded phrase, “We didn’t talk about having a (insert whatever you like here, such as “sewer line”) for the house. That will be an extra $5,000.”

6. “Where does New Avenue get information about building?”
After working with many architects and builders on over 500 projects, we have a very unique data set that shows exactly what every component of building a house costs. For example, we can easily pull up a project that we managed and show that the foundation for a home in a landslide zone with 12 piers going down 10′ each cost $40,000. Or we can pull up a sheet that shows a house with $7,000 allocated to Hardieboard siding and the fair change order (and totally a good idea) to change that to cedar shingles.

7. “Can you give me a sample breakdown of costs to build my project?”
This is our specialty. Let’s say you wanted to design and build a 1000 square foot project in the San Francisco Bay Area.  We would start by showing you what a similar, recent, project we completed cost. This would include every detail.  Then we adapt that budget to meet your needs.

Here is a shortened example of a small project:

– Initial Assessment and Permit Research: $400
– Design Fees: $5,880
– Construction Documents: $5,400
– Engineering: $4,500
– City Fees: $5,620
– Survey: $2,300
– Construction Administration: $3,400
Total Design and Permit Costs: $27,500

– Demolition: $2,100
– Site Prep: $7,100
– Foundation: $11,975
– Framing & Carpentry: $23,700
– Insulation & Moisture Protection: $3,500
– Windows & Doors: $6,489
– Finishes: $14,825
– Plumbing: $13,900
– Heating and Ventilation: $3,400
– Electrical: $5,300
– Contractor Overhead and Profit: $15,100
Total Construction: $107,389
Total Project Cost: $134,889

We can show you this for $100,000 projects and $2,000,000 homes and everything in between.

 8. “Can spending a ton of money  still give me a good return on investment?”
Absolutely. The financial return is often there and more so, the real return is usually so much more valuable than any cash you might collect in a future sale. A creative space, family room, home office, guest room or anything that increases the value you and your family get out of your home can make the investment well worth it.

Financially, many of our clients create something that is worth more than the cost of construction.  So their return is crystal clear.

Other clients spend $200,000 building a guest house that increases their mortgage payment by $1,200 per month. Often times they can offer that home to a child or parent who would be living somewhere else for many times the cost of the guest house.  Other people use this as a home office and create a new business from home.  Many people choose to downsize and move into their accessory dwelling while renting out their main house, bringing in even more rental income. Or by creating a second unit for your child or your parents you can avoid paying for many of the expenses of living separately such as rent to live elsewhere, maintenance and taxes of owning two homes, or the high costs of assisted living.

No matter what you are considering, the New Avenue platform is the easiest way to get organized, get bids, hire a team and manage your project.

You can sign up and use the New Avenue system for free here: Get Started

Have any questions? We are available to discuss your goals & ideas. There’s no fee or commitment. To request a time for a call, just click here and tell us when to call you.

 

Architects and Contractors… Who’s the Project Manager?

At New Avenue we are often asked what we charge for the Project Manager.
The short answer, is our network of proven architects and contractors manage the design and construction so well that a project manager would be a waste of time and money.
Architects manage the design and permitting. Contractors manage all of the sub-contractors and on-site construction.  With this done right, there is no need for an extra project manager.
 An hourly project manager fee would be redundant to the services the architect and contractor should provide.  That fee would be $100/hour or more and that adds up to $30,000 or more during the course of a project.  It is a waste of your money.  Even worse, you can get a project manager who ends up playing the telephone game and relaying messages back and forth between the owner, architects and builder. Our platform does that for free, and it has a better memory than any person can ever have! 🙂
Part of the role of the contractor is to be your on-site project manager.   If your project is big enough (near or over $1,000,000) then your contractor will most likely have a site foreman who acts as a project manager. This person is part of the contractor’s crew.  Part of the role of your architect is to provide an addition pair of eyes and the professional opinion as a design professional.  All of these services are quoted and billed hourly.
At New Avenue we built the management platform and recruited a network of over 1500+ people who can deliver an exceptional experience and quality anywhere in the country.
Sign up to see example budgets, example floor plans, or to use the New Avenue system for free here: Get Started
Have any questions? We are available to discuss your goals & ideas. There’s no fee or commitment. To request a time for a call from our founder, Kevin Casey, just click here and tell us when to call you.

How to pay your architect or contractor without the usual risk or headaches

At New Avenue we try to make it as risk free and as easy as possible to pay for architecture and construction services.  We provide bid management, invoicing and payment service to owners for free.  You can hire a New Avenue architect or contractor, or you can hire your own architect or contractor, or both!

First you have to get a Design Proposal or a Construction Bid that you want to accept.  Of course, we are always eager to provide either. This article assumes you’ve already met with an architect or contractor and you want to accept their proposal or bid.

Architects give proposals while contractors give bids.  We always bill hourly for architecture but do fixed price bids for contractors.  It’s just best to do it this way because design and permits are so open ended.  While construction is much more concrete.

Once you accept a proposal or bid, we send out a form for you to set up an EFT, or electronic funds transfer.  This is the same way almost all employers pay their employees and how online services like PayPal work.  This is easier and safer than checks so almost all of our clients set that up.

When you get an invoice from either your architect or later your contractor, you can review the invoice and if it looks good you can click approve.  By clicking approve that authorizes your bank to send the funds through our system and pay the person who invoiced you.

The limit for any payment is the amount you approve when you click that approve button on the site.  Payments range from a few hundred for small design tasks up to $100,000+ during construction.
Ideally your architect or contractor will bill you every single month.  It’s actually in your best interest as an owner to ask for an invoice if you haven’t received one.  The invoicing is the best way to measure progress.

How to Work With New Avenue

You can hire us for as much or as little as you’d like.  We start with a $250 flat fee for a Design Session with an architect in your home. They will:

  1. Review your Goals and Ideas questionnaire before they meet with you. Then they’ll discuss it with you
  2. Discuss their design ideas for your project. These are preliminary. You won’t get a finished design, but you will get some great ideas.
  3. Discuss the permits you will need.
  4. After the meeting they will go back to their desk and write up a detailed Design Proposal.

If you accept the design proposal we bill hourly for architecture and do fixed price construction bids based on the materials and labor rates at the time of bidding.  Costs can range from $200 per square foot to over $1,000 per square foot. We can tailor our service to either end.  Design, soils engineering (if needed), structural engineering, a survey, permits, site work, tree removal, drainage and utility upgrades are the typical hidden costs that surprise you during your process.  When you diligently plan on these expenses the cost will easily be over $300 per square foot.  I’d recommend you budget at least that.  Just keep in mind that every $100,000 in project costs is about $500 per month in mortgage payments.

We always offer to design and then you can get bids from other contractors to compare our prices to theirs too. If you do hire someone else to build it, we can still manage the budget and payments to make sure the project stays on budget.
We’ve done modular, panels and other forms of pre-fab construction. It ends up being more expensive than onsite custom construction. Well managed custom construction is better quality and a better price than pre-fab.  So we focus on the best management we can provide.

How to start a new architecture or construction project

At New Avenue we have three simple steps to start every project:

1 – Get started online for free: There is a Goals & Ideas questionnaire that is as much for you to define your goals as it is for our architect to start preparing for a meeting with you. A Roadmap on your project page. The design agreement on your project page spells out every step start to finish.

2 – The hiring process starts with the meeting at your home, which is what we charge the $250 for. We introduce the one and best designer we have in your area.  That’s part of our service is that we’ve interviewed hundreds to narrow it down to the one we believe is the best fit.  Design requires meeting on site and that takes at least half a day’s work.

3 – The platform is for you to work with the architect and later the contractor.  Project management is provided by the designer/architect during the design and permitting process.  Then during construction the contractor provides the project management.  An additional project manager would cost $160/hour and just a few hours a week adds up to $30,000 over the course of a project.  We don’t offer that “extra cook in the kitchen” as it is not a good use of your money.
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Who owns architecture plans? You paid for the service, not the plan

If you are a typical owner, you expect to “own” your plans after you hire an architect and pay them to create a design for you.  That is not exactly how it works because any set of plans has tricky liability and copyright issues. We will explain these issues and how the industry standard of the owner having the right to build the project while the architect owns the copyright is very reasonable.
First we’ll share an infuriating scenario that really is the architect’s fault: Fairly often, an owner hires an architect, they progress through a certain amount of design and the relationship or project is just not working out. The owner decides to fire the architect and the architect says “This is my design, you can’t use it in any way unless we negotiate a price and you buy it from me”. This happens.
The owner’s mind is blown! Imagine you just paid thousands or tens of thousands of dollars for someone to work for you and then they tell you that he or she “owns” what he was just paid to do? That’s simply not how any typical employer/employee relationship works.
While a nightmare, this is a communication error that can be easily mitigated and it is the architect’s responsibility to explain why the plans are copyrighted.
Most importantly, what you want as an owner is typically the right to build your project. This is what you get with New Avenue.  Many (but not all, and not even most) architects follow this practice too.
There is a nuance with architectural plans that is similar to buying a book. When you buy a book you can read it and keep it on your bookshelf.  You can’t edit it or start making copies to sell.  You have the right to use the documents created by the architect for your project in the same way.  This is similar to having the right to buy and own any copyrighted material.
Frankly, you can stop working with your architect, or you can hire another architect or you can hire your own contractor and in each scenario you can use the plans.
There are two big limitations though:
1.  You don’t have the right to replicate the designs or use them build another home on another site. There are several reasons for this:
– There are always specific site conditions that need to be considered by the architect for plans to be safe to use.
– An additional project increases the legal liability of the architect so it is not allowed.
– You did not pay for the vast majority of the “details” in the plans.  Details are often times dozens of intricate drawings for how to assemble a part of the project.  These are crafted over decades and are used over and over again on projects.  Since you, as the owner, did not pay for the years of development to make them, you don’t own the right to use them or copy them.

2. You don’t have the right to use incomplete plans to build the home because this creates liability for the architect who created the plans. For example, you can pay to just sketch up a floorplan in the Schematic Design (Phase II in our process) and then stop. You can then use these completed Phase II documents (i.e., the floor plan and design) to work with another designer or architect.   But you can’t get half way through the construction documents (Phase IV in New Avenue’s process) and then fire the architect and try to build the home with an incomplete set of drawings.  This also creates liability as mistakes inevitably occur and it leads to liability, and lower quality construction that leads to lawsuits.

In conclusion, you can stop working on your plans and keep the portion of the work that is completed and this is for the one project that the plans are for.  If you want to finish an incomplete set of plans you typically start all over with a new architect however you may be able to sign a release from the original architect who then allows the new architect to finish the plans. This involves a release agreement that releases the first architect from the liability that the new architect will assume.  Then you can continue the plans from that point forward.

Why you need insurance when remodeling or building a new home

Insurance is a good thing when remodeling or building.
At New Avenue we require that you have homeowners insurance for your current improvements on your property.  Improvements are basically your home and anything else built on your property.  A typical homeowners policy covers these buildings.  Our lawyers tell us of scenarios where something bad happens when a consultant, architect or contractor is on site.  For example, a dog knocks over your grill and burns your garage down.  This happens while the surveyor is also there so you blame him or her. Your insurance covers this and protects the surveyor.
There’s no need to fear this though.  Check your current homeowners insurance and you should be covered so you don’t have to buy anything new:)

$1,000 for a custom home plan? This is a ripoff that will cost you.

One of our architects recently emailed this to me:

“I lost a commission on a NEW BUILD to a guy who charged a grand!!! Now I made most of my fee back, fixing it, but you wouldn’t believe how often that is the case.”

The key here is that the owner in this story still paid “most” of the original architect’s proposed fee. For the same cost the owner had to endure a painful experience of starting with a defective plan, then figuring out how to fix it during construction.

Every architect has this story.  Very few owners understand it.

The lesson is that a great designer or architect will create a better design, your project will be a much more enjoyable experience, and the time that the architect spends working on your project creates efficiencies that save you money.  Basically, you can’t avoid the work so you might as well hire a professional who knows what he or she is doing!

Eight years ago, I founded New Avenue and at the time I was guilty of misunderstanding the design process.  I had no idea what an architect really did. I fell for the prefab myth that scale and efficiency would save you money. It turns out shipping costs and cranes eliminate any cost benefits of prefab building. Worse than the lack of savings is that you get stuck with the existing design. That is never as good as a truly custom design for the specific site where you are building.

The key is finding a good architect who follows a good process and stays involved start to finish.

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3 Reasons Why We Recommend You Hire an Architect

At New Avenue we are all about great value.  In design and construction the hard way is usually the right way and that means the best value is often the more difficult and more expensive way.

This applies to architecture as much as any other part of the process.

Many people cut out an architect and trust the design to their own capabilities or to a contractor.  The hope that you will save time and money is a shortsighted decision that can sound like a good idea at first, but it will typically make your project more costly and painful in the long run.  This is a big mistake.

When hiring and architect for the first time, we recommend you consider these three reasons for hiring a professional designer or architect:

Reason #1:  You want your home to be amazing.  An architect with 10, 20 or even 30 years of experience and a creative ability is critical to creating a truly great design.  An architect can make a good design great.

Reason #2: You studied anything other than architecture.  Exposure to hundreds of photos on Houzz.com and Pinterest makes you a more informed and better client, it does not make you an architect.  The skill required to manage the design, permitting and construction process starts with formal training, involves rigorous licensing and requires years or experience.   An architect will typically require at least 100 hours of work to get a design and permits together.  It may be 300+ hours of work if your project is larger and more complex.  If you were to try this on your own it can easily take five or ten times as long. An experienced person can pull from decades of experience to create a better design and they can do it all in a fraction of the time it will take you.

Reason #3: You will probably make at least one big design mistake that you will see every time you look at your new space or new home.   Even if you design something amazing on your own, one design mistake is something that will be built into the home and it may never go away.  It is worth a few thousand dollars to avoid how a mistake like this will reduce the enjoyment of your home.

The super pragmatic perspective is to acknowledge that having an architect should save you from at least one major mistake and that alone will justify their entire fee.

At New Avenue our standard practice to incorporate an architect in all of our projects because of these three reasons.  We mapped 300+ key steps in any residential addition, remodel, accessory dwelling or new home.  Not all steps are essential but each step is a potential pitfall and an ally who can navigate and resolve the design challenges effectively creates a ton of value.   You can review the New Avenue Design Agreement and specific role of an architect Here

Sign up to see example budgets, example floor plans, or to use the New Avenue system for free here: Get Started