A “plugged-in” reader goes to the head of the site for his/her must read comment and insight into building a home in San Francisco. The punch line: “This is possibly one of the hardest places to build on the planet, and another reason property is expensive here. If you are looking to build your dream home, it might be a better idea to build in California instead, using this Custom Home Builder in Oakville. As for San Francisco, if the stars align you might make some money. There’s also lots of chances to loose your shirt.”
Our reader’s back of the envelope calculations and commentary (with slight editing for format):
“Having just built a new house, ground up in San Francisco – as unlikely as this sounds. . . . it almost surprises me that house prices are not higher. The cost of construction is shocking. When we do have the big shake. . . . Rebuilding is going to be ridiculous.
Here is some back of envelope math (in part based on my experience).
1. Minimum present cost of a ‘regular’ (ish) lot on a street that you would want a ‘dream home’: $700,000
2. Closing costs: $6000
3. Raw construction cost: 2400 sqft @ 400/ sqft . Yes, construction will cost that, unless you are the contractor, for a ‘moderate’ custom home. Forget what the permit forms say!: $960,000
4. Permit fees/surveys/school fees/wastewater capacity charge/PG&E fees/geo-tech report: $45,000.
5. Architects/ engineers/ specialist fees. Assuming a basic service, no lighting design, minimal interior design, nothing too unusual (i.e. shoring): $96,000
6. Interest on lot during planning (assume 1 year, for a non controversial, ha!, permit): $30,000
7. Interest for construction loan (1 year period): $60,000.
Total cost = $1,897,000
Note: If you have a pretty high credit score, you can probably borrow 80% of construction cost, or 70% of future value (as determined by the bank). So, you will likely need about $375,000 skin into the game. . . . . .
This is before you factor in *risk* that you may never get a demolition permit, that the neighborhood might keep you in appeal purgatory, that construction prices wont go up ’cause of China’, or that you won’t be moving into your dream home for 2-3 years! You will also need 35% down for the lot, unless you buy a house to tear down (but then you may not be allowed to, see above). . . . You will likely have to pay the architect and permit fees out of pocket, though you may be able to roll some of that into the construction loan if the end valuation and loan ratios support the numbers (unlikely). You will also spend a lot of your life working on the project! Your friends may no longer recognize you 😉
This is possibly one of the hardest places to build on the planet, and another reason property is expensive here. If the stars align, you might make some money. There’s also lots of chances to loose your shirt.
Not impossible. Not a picnic! Definitely a unique experience.”