Round 2! We’re going to dig even more deeply into potential site development costs and budgeting techniques. It’s essential for developers to get price estimates for site improvements, which are dependent upon careful evaluation of the site prior to development.
Unfortunately, many real estate developers, be it families designing a custom home or commercial magnates, miss-budget the full costs of their project in the early onset. Often, the land itself is the most common cause of insufficient budgeting, which can turn a construction project into a financial headache.
Even developed lots still require careful evaluation. Again, that’s true whether you’re looking to build a custom home in a subdivision, or intend to use already cleared land to build a shopping mall. No matter the size of the project, the land lot must be carefully evaluated.
Estimating the Costs of Site Development
Before making an offer, you want to have a rough estimate of how much it will cost to develop the land. After all, your offer must reflect your budget, and your budget must reflect the cost of developing the lot. If not, you could put your entire real estate development project at risk.
Site Development Factors to Consider
Home building and real estate development often involve numerous vendors providing services for the same overarching project. The same is true of lot development. For example, installing electricity incorporates multifaceted operations, and service is not singular to an electrician. First, a utility company must install a transformer. You must then organize means to run the electricity onto your lot of land; by hiring contractors to install above ground electricity poles and wires, or an excavating company to dig a trench. Then you could have a conduit line run underground. Before installing poles or digging trenches, however, you might need to hire someone to clear the land or to drain a body of water.
From here, you have to pay an electrician to connect the transformer to the conduit, socket, and service panel. Of course, you’re still not done. Next, the utility company will have to install a meter and tie the cable to the transformer.
Meanwhile, as you’re connecting the electricity, you’re also going to need to run water and sewer lines or well laterals and septic tanks if it is a rural lot. The process for installing utilities is expensive, complicated, and requires the timely collaboration of multiple vendors, including public utility departments, power companies, builders, and excavators.
The costs associated with multiple parties can add up quickly, as they will charge separate service fees. Further, the above example represents a sort of best-case scenario. You might run into unexpected problems. The soil might be to wet or loose, or the ground may have frost in it instead of installing utility lines the “normal” way. This could result in additional costs. Endangered animals under mandated protection might prevent prospective homeowners from excavating surfaces or destroying surrounding habitats.
Calculating the Final Site Development Cost
So how do you figure out the ultimate cost of side development? First, evaluate the cost of the land. How much will you need to spend just to acquire a lot? From there, you need to figure out the cost of permits and fees specific to your land development and home building project. The fees to install septic systems, wells, driveways, buildings, and other components will vary with jurisdiction.
To effectively budget in the onset of your project, evaluate potential regulatory fees and impact fees as well. From plan reviews, land inspections/clearing, and curb cuts, regulatory fees also vary with jurisdiction. Impact fees are imposed by the government at the time of construction to offset the impact of additional development and new residential costs associated with providing public services. While the cost of impact fees are dependent on location, they are a highly unanticipated cost that can strain the budgets of new homebuilders tremendously.
The site preparation fees associated with land development and construction projects could entail clearing trees, blasting, excavating, site drainage, or terracing. Along with tap and utility fees, the underestimated costs can make or break a construction project. Therefore, before making an offer, it is vital for prospective homeowners to estimate the multifaceted costs of site development and budget accordingly.
Wrapping Up: Be Prepared For Challenges Expected and Unexpected
Despite thorough preparation, avoiding all of the unexpected costs and challenges associated with land development is a difficult task. Perhaps a large rock or an old structure is buried underneath the site you want to build, or the soil is too lose to support intensive development. Regardless of the situation, site development challenges are normalcy, as are the headaches and heartaches caused by underbudgeting.
However, with careful planning, predictive budgeting, and continual consideration of the total costs required to prep a lot for site development, you can mitigate financial risks and streamline your homebuilding process. When it comes to real estate development, the planning phase is often the most important, leading many forward-thinking, prospective homeowners to seek the guidance of professional home building consultants and contractors, such as Belman Homes.
With over 40 years of experience developing land and enhancing communities, Belman Homes offers a range of invaluable building and real estate services that have helped thousands of homeowners streamline and save on their dream home projects.