Cost of Building a Custom Home: Where Does the Money Go?

How much will it cost to build my custom home? Should be an easy question, right? Unfortunately, it isn’t. Estimating the cost of building a custom home can be tricky due to the large number of variables at play. The same things that make a custom home so wonderful – the endless possibilities – also make it difficult to accurately estimate the cost of building during the early stages of design. That being said, it doesn’t mean you shouldn’t try!

Understanding where the money goes and the biggest factors that impact the cost of your custom home is a great first step. If you haven’t read it yet, check out our blog discussing the 4 primary categories of cost: site, scope/size, structure complexity and specifications.

Today we’re going to look at cost from a different standpoint – where does the money actually go? To do this, we took an initial construction estimate from a real project and broke the numbers out into 8 categories. We’ll look at what goes into each category and what percentage of the budget it makes up. Remember – these estimates are meant to give you a general idea and better understanding of where the money goes. Each project is unique and actual numbers will vary.

Project Details: Our pie chart is based on an approximately 6,000 SF home (3,500 SF above grade + 2,400 SF basement) with a 1,500 SF garage. The construction budget is about $1.68M.

What isn’t included? This is a construction budget, so it doesn’t include fees for consultants such as the architect or interior designer. It also doesn’t include costs for things such as furniture or landscaping.

Pie chart illustrating where the money goes when building a custom home
Ever wonder where the money goes when building a custom home? This pie chart is based on an initial construction budget for a real project. It’s meant to give you a general understanding of where the money goes.

Site Work: 3%

Site work is what happens before construction can begin. It’s everything the builder needs to do to get the site ready to build on. This usually includes:

  • Water tap fee
  • Sewer or septic fee
  • Electrical temp pole
  • Engineering consultants (structural, soils, etc.)
  • Surveyor
  • Erosion control
  • Grading

Foundation: 5%

The topography of your site will influence how much your foundation costs. Building on a hill is much more expensive than on ground that is already flat. In addition to the foundation itself, this number generally includes excavation, backfill, damp proofing and drainage.

Framing: 17%

Once the foundation is in place, it’s time to go vertical! Framing is when you really start to see your new home take shape. Framing costs include items such as lumber, timber, steel, trusses, stairs and labor.

Exterior Finishes: 17%

Style, design and materials all impact the cost of your exterior finishes. Brick is more expensive than wood, stone detailing is pricey. Roofing costs vary widely depending on the type of roof you’ve selected. Items that fall into exterior finishes generally include:

  • Exterior wall finishes (masonry, stucco, etc.)
  • Flatwork
  • Windows and doors, including garage doors
  • Roofing
  • Gutters and flashing

Major Systems Rough-ins: 12%

Major systems are the behind-the-scenes rock stars of your home. They keep you cool in the summer, warm in the winter and directly influence your monthly utility bills. Major systems include:

  • HVAC (heating, ventilation and air conditioning)
  • Plumbing
  • Septic
  • Electrical
  • Natural gas
  • Security
  • Home technology and automation
  • Etc.

Interior Finishes: 29%

Interior finishes make up the largest piece of our pie chart, and for good reason. They’re the “touch, see and feel” elements of a custom home. The level of finishes you select can have a surprising influence on the over-all cost of your home. Cabinetry is a great example. Basic kitchen cabinetry might cost $20K, while a luxury, custom designed cabinetry package could be $100K or more. Items that fall under interior finishes include:

  • Flatwork
  • Fireplace
  • Masonry
  • Insulation
  • Drywall
  • Trim, doors and mirrors
  • Cabinetry
  • Countertops
  • Flooring
  • Lighting
  • Hardware
  • Plumbing fixtures
  • Appliances
  • Painting
  • Railings

General Conditions: 7%

General conditions cover necessary costs that we don’t normally think about. Safety rails, duct cleaning, a temporary toilet for workers…you get the idea. Things the builder needs to get the job done, but that won’t be a part of your home. General conditions is a broad term, and methods for estimating and categorizing general conditions vary. Costs that are usually considered general conditions include:

  • Building permit
  • Misc. fees and assessments
  • Temporary toilet
  • Utilities for construction
  • Site clean-up (through out the build and final clean-up)
  • Duct cleaning
  • Superintendent
  • Trash pick-up
  • Safety rails
  • General labor
  • Overhead allocation
  • Insurance

Contractor Fees: 10%

This one is self-explanatory, but we had to include it. This is how your contractor makes money. Contractor fees generally run approximately 10% of the total cost of the build.