How Much Does It Really Cost to Build Your Dream Home?

Dear Rich Lifer,

Not in 20 years has there ever been a better time to sell your home.

Home prices are at an all-time high while inventory levels are at all-time lows. Even houses buyers would have quickly dismissed five years ago are getting multiple offers and selling fast.

But there’s one big problem… 

Once you sell your house and make a sizable profit, you’re now on the other end of the deal. Where are you going to live?  

In a fiercely competitive market where buyers are making all-cash offers and willing to take properties as-is, you need to consider how quickly you can find a new home.

But there’s a way to avoid paying insane prices above asking: build your own home.

On paper, it may seem like buying an existing home is a more affordable option, but with houses selling well above their asking price and newer homes offering more square footage per dollar, building your own home can often be a good deal.

Today we’ll break down the pros and cons of making your dream house… you might be surprised at just how affordable it can be.

What Does it Really Cost?

When you’re considering building a home, there are a few main costs you need to consider first. breaks down these costs as follows:

  • The shell of the house, which includes walls, windows, doors, and roofing, can account for a third of the home’s total cost, or $95,474.
  • Interior finishes such as cabinets, flooring, and countertops can eat up another third of the budget, averaging $85,642. Use this calculator to plug in your ZIP code, exact square footage, and level of finish to come up with a general budget for various projects.
  • Mechanical — think plumbing and heating — runs around 13%, or $37,843.
  • Kitchens and bathrooms are the most expensive rooms to build, especially when the average cost for finishes like cabinets and countertops alone is $16,056. So if you’re looking to save money, ask yourself whether you really need that third full bathroom, or will two plus a half-bath do?
  • Architect and engineer drawings will run about $4,583.

Additional Costs You Should Budget For

Beyond the basic costs we’ve just covered, there are a few more expenses you may or may not need to budget for. These costs are typically not factored into the basic costs covered above:

  • The cost of a plot of land to build on averages $3,020 per acre. That said, the average home is built on only 0.2 acres, so unless you want a lot of space in a highly desired neighborhood, that alone won’t break the bank.
  • Excavation and foundation work is by far the most variable cost when building a home. In other words, you never know what you’re going to find until you start digging — be it bad soil or massive boulders. If excavation and foundation work go relatively smoothly, the average cost for both is $33,447.
  • You’ll need a building permit, of course — it averages $908 nationally.
  • Other costs you’ll incur before you hammer even one nail include land inspections ($4,191) and an impact fee, levied by the government to cover the costs a new home will incur on public services like electricity and waste removal ($1,742).

So What’s Cheaper — Building or Buying an Existing Home?

We said at the start the median price of an existing single-family home runs $223,000, which is $66,415 less than building a home from scratch. However, what this number doesn’t account for are things like repairs and maintenance in the near future.

When you build new, everything from the pipes to the heating and cooling systems to your roof will all be brand new. When you take these into consideration, a newly built home could end up saving you money in the long run by avoiding costly repairs.

Plus, you get to design your home the way you want it. Having the freedom to design your space exactly how you like is often worth the additional cost for some buyers.

But even when you break down the upfront cost of building a new home, it can still be cheaper than buying an existing home.

According to, the average 1,500-square-foot home built before the 1960s costs about $148 per square foot. For new construction, because homes are typically more spacious, with a median size of 2,467 square feet — the cost to build per square foot is only $103, which is actually lower than that of existing homes.

The last advantage to building new is you can have a builder build only what you want. This means you’re not paying for interior or exterior features you don’t like or will end up removing and renovating in the future.

The Pros and Cons of Building vs. Buying an Existing Home

Here are some final pros and cons you should consider:


If you build new: You’ll have a lot less maintenance since all your major appliances, think HVAC, toilets, flooring, etc. will all be new and still under warranty. Some builders even offer a construction warranty that protects your entire home for up to 10 years.

If you buy an existing home, depending on how old the home is, you may have to replace certain things. For example, the average lifespan of a furnace is 20 years and will cost $4,000 to replace. Most HVAC systems last 15 years and cost $5,000 or more to replace. Make sure you find out how old all these major appliances are. Also consider how old the roof is, plumbing, and electrical.


If you build new, you’ll probably have very little or no landscaping. It’ll cost you a few thousand dollars — and several years — to get the yard you want. If you want a house with a large maple tree or 10-foot-tall hedges, building new might not be the right move.

If you buy an existing home: Mature landscaping is one of the major benefits of buying an existing property. Surprisingly, mature trees strategically placed can add tens of thousands of dollars to a property’s value and save up to 56% on annual air-conditioning costs, according to the U.S. Forest Service.

Energy Efficiency

Homes built after 2000 consume on average 21% less energy for heating than older homes, mainly because of their increased efficiency of heating equipment and building materials. This translates into reduced energy expense every month, even with the higher square footage in many newer homes.

If you buy an existing home, the latest U.S. Census found the median age of American houses to be 36 years. Older homes usually mean outdated windows and appliances, which translates to wasted money on high energy bills.


Building new can be a risk because it means you’re likely building in an up-and-coming neighborhood. Because there’s no proven track record, it’s hard to say whether the area you build in will increase the value of your home substantially. Also, be careful when asking your builder to install trendy items. Saunas and self-cleaning toilets may be in vogue now but in 20 years they could decrease the value of your home.

One of the main advantages of buying an older home is its proven track record. Assuming you’re looking in a decent neighborhood, it’s highly likely that the value of your home will steadily rise over the years. This can somewhat guarantee you’ll make back what you spent and some.

Your Dream Home Might Be More Affordable Than You Thought

If you’re caught up in the fast-paced housing market and deciding where your next move will be, don’t dismiss the idea of building your dream home instead of fighting for the limited supply that’s on the market today. 

The cost to build new can in some instances be less than buying an existing home. Weigh your options and talk to a contractor to get an idea of how much it will really cost you.

To a richer life,

The Rich Life Roadmap Team 


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