Owner-builder Ian Schwandt describes the cost planning that went into his single-family home build in 2021. He breaks down the actual costs for each item in each phase of the build along with the amount of sweat equity included in each phase, and describes how to plan financially for a project — including financing, design, and sourcing materials and subcontractors — before building begins.

Where It All Began

I grew up on a small farm in Wisconsin in a family that openly discussed the farming business, so much so that as a primary school student my younger brother was able to explain the concept of gross profit to his class. It took me a few more decades to realize the importance of money and how cost planning can make or break your home-building plans. Though it was an overbudget remodeling project that initiated my career pivot toward estimating, I credit my owner-builder experience for showing me that estimating is the part of the cost iceberg that you can see, but cost planning is what lurks beneath the water and sinks ships.

Estimating focuses on determining the cost of a specific part of the project, while cost planning’s goal is to create a framework for making decisions about the execution of a project from the design concept phase on through the build stage. It is this framework that allows the owner-builder to make informed decisions, and avoid reactionary planning.

I speak from experience as an owner-builder. My wife, Sara, and I built a 2750-sq.-ft. house in 2021 with a budget of $100 per sq. ft. This budget, which I will detail here, was for the house build only and does not include the cost of land—and as you can see, this is way below the national average for a custom home. This reduced cost would only be achievable in a frugal owner-builder project.

I kept a detailed spreadsheet throughout my design process that had estimated costs for each phase of the build, and I tracked the actual costs against that estimate. For the work that I needed to hire out, I got subcontractors involved early in the process, reaching out to some key subcontractors like my excavation company, JF Trucking & Trenching, while I still lived in New York. These subcontractors were able to provide me with cost ranges that I plugged into my spreadsheet along with the material takeoffs for my self-performed work.

In this article I will give an overview of what I spent on each part of the build and the decision-making process that I used to plan the spending. If you are searching for more information about singular parts of the build, I wrote extensively about the experience of building my home as the 2021 FHB House, and builder Jon Beer has produced similar articles for his 2023 FHB House project. You can find both at FineHomebuilding.com/fhb-house.

Plans, Permits, and Loans

Thanks to numerous websites dedicated to tracking the buying and selling of real estate, we live in a golden age of cost data. You can track the prices paid for new and existing homes that will help you develop your own home design with an understanding of what features of a home your local market values above others. Parade of Homes tours and home-building trade shows offer the owner-builder opportunities to network with future contractors, subcontractors, and vendors and to get ideas for building features that can help solidify a design.

Speaking of design, you need a set of construction drawings that express your design to build a house. This is a necessary part of executing an owner build successfully. This does not mean that you need an architect or a set of purchased plans, but you need a set of drawings that gives the parameters for the main cost driver of the project—the home’s foundation and structure. The drawings can be high level and light on finish details, but without a drawing set that you can use to communicate with vendors, you will not be able to secure cost information that forms the basis for your cost planning. For example, lumber salespeople are generally skilled at producing a material estimate that can include everything from sill seal and framing lumber to a trim package and a fastener allowance. But they need a set of plans to do it. When vendors and contractors have a clear understanding of your build, they can be trusted advisors and make up a critical part of your toolkit as you move to plan the execution phase of your project.

Building officials and bank officers are a variable part of the planning process, but can be important advisors to the owner-builder too. While zoning regulations vary across the country, most municipalities require that a building meet the locally accepted building codes, and often the local building official, who is responsible for issuing the building permit and performing inspections of the building work, can be an asset in helping the owner-builder make sure the planned build complies with all regulations.

If a construction loan is in your future, it is crucial to find a bank with construction-lending experience that is willing to lend to owner-builders. Not all banks have a business model that allows them to take on the risk that comes with an owner-built project. Meeting with multiple banks to discuss your project in detail is a necessary part of financing an owner-built project. Bankers who are well versed in construction lending will be looking to you, the owner-builder, to confidently provide them with answers to their cost-planning questions to prove that your project is worthy of their investment and risk.

With our design finalized and my budget spreadsheet complete in August of 2020, we secured financing via a construction loan for $250,000 for our house. This $250,000 figure was based on 80% of our bank’s expected appraised value of our design at $312,500. The 80/20 loan-to-value matrix is very common in residential mortgage lending. I budgeted an additional $25,000 out of pocket, resulting in my self-design-build budget of $100 per sq. ft. As material costs steadily rose throughout the second half of 2020 and the first half of 2021, we faced a realization that to meet our budget we would either need to drastically value-engineer our interior finishes or possibly not build a portion of the project. The other option was to increase our budget. After looking at the new construction appraisal our bank provided and comparing it to what new homes and newly remodeled homes were selling for in our area, we felt that increasing our budget was worth the risk.

I started planning my build in 2019 and approached it with a carpenter’s and estimator’s mindset. Working through the process of designing, sourcing materials and subs, financing, and then finally building the house shifted this mindset toward cost planning. Not only did this shift my thinking about my trade, but it shifted my career path to focus as much on the financial planning for a project as I previously had on the physical execution. As much as I take pride in having built my own home, I take great personal satisfaction in having done it in a financially responsible way.

The Significance of Sweat Equity

In addition to the monetary cost, a large self-built project like this comes with a cost measured in time. During the build, I worked 20 hours a week at my job as an estimator and project developer for TDS Custom Construction, and my wife, Sara, worked full time. Between the two of us, our fathers, and a few friends, we worked about 3000 hours on the project. It would be easy for an observer to say that these hours need to be converted into dollars to give a true cost for the project, but I feel that this line of thinking misses the point and the spirit of self-building. We, like most of the self-builders you can find on social media, have chosen this path because it is the only way we know to achieve the desired result.

That said, below is a rough breakdown of the hours we put into each of the phases discussed in this article. Though on paper this looks like a daunting outlay for two people in one year, the decision to self-build as opposed to buy was an easy one. Having previously remodeled one house to the best of our abilities, and having been exposed to many interesting architectural styles through my interior carpentry work, we had a clear vision for what we wanted our home to be. Add in my desire for an energy-efficient high-performance home and our access to buildable land, and the choice to build new was clear. In the end, the added cost in dollars and time of building our house as a double-wall construction, high-performance home was negligible.

The extra air-sealing, framing, insulating, and mechanicals added about a month’s worth of work, 160 hours, and $10,000 in extra material—the bulk of dollars was spent on framing for the double wall and extra insulation. I am often asked, “Would you do it again?” There were certainly times when stress levels were through the roof, money was tight, and our patience was shot. At those times, I would have answered, “No way, not a chance.” Having come out on the other side with a house of my own design, built with my own hands and the hands of my family, at a cost that I was able to shoulder, I can now answer that question with an emphatic, “Yes.”

— Ian Schwandt is production manager for TDS Custom Construction in Madison, Wis., and a Fine Homebuilding contributing editor. Photos by FHB Staff.

From Fine Homebuilding #325

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