One of the self-build books quotes the following calculation, to come up with a price for a building plot…
Plot sale price = Finished sale price – Building costs – A reasonable profit
As a rule of thumb, this explains why building plots are eye-wateringly expensive in areas of high demand and much more reasonable in less-popular areas. It is also commonly said that it is cheaper to knock down an old structure and build from new than to convert the old structure to modern standards. Whoever sold us East Byreleask Steading must have done calculations like these. It was at the lower end of the price range for Aberdeenshire. In some ways this is easily explained: It is closer to Peterhead than Aberdeen. The structure is sound, but it is large and needs a lot doing on it. The wider site is a mess. It may gain or lose from the state of the housing market and ‘desirability’ factors like accessibility, local schools and local services.
Finished sale price
By their nature, converted steadings are relatively few and far between. They vary wildly in size and degree of alteration (towards what a ‘normative’ or ‘ideal’ home is deemed to be). However, similarly sized converted steadings in the general area appear for sale at the £390k-mark. How quickly it might sell, should we need to, is probably more important to us than price. Our architect has suggested that the larger the floor area, the harder it will be to sell. We are choosing to make it larger.
A reasonable profit
As we see this as a retirement home, the profit element is less important than it would be to a commercial builder. It is a ‘desirable’.
Building costs – using Build Cost Calculators
New-build costs are often estimated using the tables of cost-per-square-metre that are published in self-build magazines and books. There are online calculators that use this information to come up with the numbers. The Homebuilding & Renovating Build Cost Calculator is popular. The variables are a) 1 or 2 floors, b) project location (Scotland is one location), c) build quality – standard, good, excellent and d) ‘contracted to’ – self managed subcontractors, subcontractors, builders & subcontractors, single main contractor. This does not really cover our circumstances. Our property is a mix of single and 1.5 floor and we will probably do more of the work ourselves than the ‘contracted to’ allows for. If I am retired or working in my spare time, I will not cost-in my time. Plus it is a conversion, not a new-build or renovation.
For interest, the magic number for 2/Scotland/Good/Self managed subcontractors is £818 per square metre, £204,500. Going for Excellent quality bumps the numbers up to £1,027 and £256,750. We will probably go for some ‘Excellent’ and some ‘Good’.
If this were representative for us, our cost including buying the site would be around £300,000 – £350,000. This would work for us if we can afford it, we would make our reasonable profit and we would still be able to sell the finished property.
Building costs – using a Work/Cost Breakdown Structure
The limited nature of building cost calculators lead me to use the other popular approach -a work/cost breakdown structure. Given the site and the complete list of things that need buying and doing, how much will it cost? It is time-consuming. It requires a solid knowledge of building techniques, time, materials and labour costs, which I do not claim. However, I have spent a LOT of time (not costed!) finding out how houses are built (praise-be to search engines, builder blogs, online suppliers and building brothers). Today we have some 570 distinct tasks to undertake or items to buy. This will increase as we work through the list. If I do not have a clue about a particular element of cost, I guess and assume that it could be ‘as-much-again’ i.e. the uncertainty is 100%. As I get more detail and a better handle on costs the uncertainty decreases until, with a quote, it is 0%. Even if I am wildly out on one line, I would expect to be out the other way on other lines.
This all becomes more accurate with time. A tiny example: We need an electricity supply. In the very early days we knew that power came towards our plot on poles and went underground at the boundary of the adjacent plot. In the worst case, we would need a trench dug and cable run to the steading. I guessed (based on some Googling) £1500 +/- £1000 as a single line in the breakdown. Later we discovered two utility meters on the wall of the steading and the remains of a wiring system, but they are on the wall that must be demolished and re-built. My estimate broke down to five lines totalling £1500 +/- £350 to relocate the meter box. Now my plan has 25 lines. I have a quote from the power company for £498.35 to re-locate the meter, with estimates of £725 +/- £224 for trenching, materials and an electrician to install my temporary power supply. I will shortly be getting a quote from the electrician and will buy the materials. It is unlikely to go outside the current limits.
My first estimates were that total building costs, including purchase, would be around £270,000 +/- £170,000. It is now around £330,000 +/- £110,000. I have some confidence that the first number will not change radically and that the uncertainty will fall. In the worst case, that the cost rises unacceptably, at least we will have some sort of warning and can scale our ambitions back. Of course, you will see that the cost calculator came up with just about the same number as my much more complex work/cost breakdown. I expect this is happy co-incidence.