There are four basic factors involved in the cost to build a custom home: size, design, features, and operational efficiency.
Home Size includes the heated and cooled areas, the garage, and any porches or patios. Design includes the shape, number of stories, and how much wasted space exists in the home. Features are things like flooring, countertops, cabinets, fixtures, fireplaces, an outdoor kitchen, etc.
Operational efficiency is all about how the builder runs their business—if they do it well, they'll make a good profit while costing you less money.
1. Size of Home and Per-Square-Foot Costs
It goes without saying that, all things being equal, a bigger house will cost more than a smaller one. There are some items in a house where the overall cost is tied directly to total square feet: slab, framing, roofing, most electrical, drywall, interior trim labor, and paint.
For a house in the 2,400 square foot range with a three-car garage, front porch, and reasonably sized patio, the costs can range from $150-$250 per square foot, and that number can vary widely depending on features, amenities, size, design, location, and site costs.”
2. Home Design and Wasted Space
The design of the house is the next cost factor associated with the structure. By design, I mean the shape and layout. For example, a house with many corners, offsets, and complicated roof lines will cost more than a simpler design.
The main reason is simply waste: Every time the house turns a corner, especially on an outside wall, every piece of building material (lumber, drywall, roofing, etc.) has to be cut. When there's a cut, there's material that gets thrown away.
The other big design element that affects cost is wasted space. That includes long hallways, areas in rooms that are dedicated to traffic flow, and single-loaded areas, such as bathrooms where there's an area to stand in front of the sink and another area to enter the shower instead of the same floor area being used for both.
Wasted space means more square footage which means more money.
3. Finishes and Features
The next area that affects cost is finishes and features. Some costs (like flooring) vary with square footage, while others (like a fireplace or appliances) are single-item costs. Some costs could depend on the design of the house, such as a brick exterior where more exterior wall area means higher cost.
As an example, some of the trendy wood-look tile we're seeing currently might cost $3 to $5 per square foot for materials plus anywhere from $3 to $7 per square foot to install. It costs more to install the wood-look tile that comes in random lengths to mimic the way wood floor planks come versus the kind that comes in a standard length and ends up looking like tile because of the consistent pattern.
The cost of finishes such as countertops and floor coverings, which vary with how much you use, are greatly affected by efficiency of design. For example, I've seen well-designed smaller kitchens that feel bigger and work better than bigger ones that are far more expensive. Same goes for wasted space where you're installing that $10 per square foot hardwood floor.
4. Operational Efficiency
This last item, operational efficiency, is a multiplier. When efficiency is high, it will save more money on a larger home because it's applied to more materials and labor, but it can even be a make-or-break item on a smaller home with a tight budget. In fact, it's much tougher to build a small home because there's less room for error.
A builder who takes the time up front to solve design problems on paper rather than relying on field personnel when the meter is running will save more money than you can imagine.
The same applies to the builder who orders materials carefully and inventories all deliveries to make sure they're accurate. You'd be surprised by how much money is wasted with inaccurate material deliveries. The builder who runs his/her business efficiently can build you more house for your money while making better than average profit for the company. That's a win/win, and all too rare in the building industry.
If you're thinking about building a custom home, be sure to consider all four of these factors and how they'll impact your budget.