How To Find The Perfect Piece Of Land For A Prefab Home

Earlier this week I was with a client showing them lots as part of them searching for their perfect lot to fulfill their dream of building a pre-fabricated home. It's easy to find cheap lots but it's a lot harder to find one that is cost=effective to build on. It's important to understand how much it costs to get water, electricity, sewer, plans, build a driveway, soils tests and the construction itself . We looked at a range of lots which varied in price but the one common theme that came up was finding a lot that had the right feel but which also had the least amount of risk associated with it.

When it comes to finding a lot that has the right feel, that is a very personal choice. Some people want a view, some a city lot, others want privacy. Another common consideration people will often focus on is the intended use of the house once built. For example, if it is a second home, clients will often want to purchase a lot that has the potential , or flexibility for the final house to be operated as a high end vacation rental.

Clients who choose to go down the pre-fab route will often do so for a combination of the house aesthetic as well as cost certainty, or rather, to minimize financial risk. Contrary to what many people think, buying a pre-fab home will not necessarily be cheaper than using traditional building techniques but it will reduce the risk of budgets getting out of control. Typically, at the point monies are committed on the build, all the costs are finalized to a very accurate level. This is not the case with a traditional build.

For clients who are more budget conscious, or where a budget overrun of $100k would put a project in jeopardy, I always recommend
people find a lot that eliminates many of the complexities associated with developing a lot to the point where it is build-ready. So what should someone looking for a build-ready lot look for? In a perfect world, it would have all services at the lot, all the engineering plans completed, full costs to develop the infrastructure and costed up plans to build the home. Are these lots available?

What To Look For In The Perfect Lot?

A good example of lot that has all the attributes for someone looking to build a pre-fab home is a lot in Forestville on Van Keppel
Road, that I have just listed (see here for details). The full package includes everything a buyer needs to start building immediately with the potential to be in the newly built home by the end of the calendar year. Outlined below are all the components you should think about when buying a lot because they can all dramatically impact the overall cost of the build. 

Is It On Septic or Sewer?

One of the biggest headaches for people buying a lot, especially a lot that has a more rural feel, is trying to navigate the rules and regulations around septic systems. For someone looking to build sooner than later, it is essential to buy a lot that is either on city sewer or if not on city sewer,  it has an existing septic system installed or at the very least a successful perc test and an approved septic design. While purchasing a fire lot may not be everyone’s first choice, doing so will often give a buyer a fast track to building a rural property because there will already be a septic system in place which will often have been cleared by the county as ready to build. 

2 Van Keppel Road (above): It has the feeling of being a little rural and backing up to a creek but is on city sewer, eliminating any of the challenges of a septic system. The only work that needs to be done is to tie into the street sewer at an estimated cost of $15,000.

Is The Lot On City Water or Well?

If a client is looking for a fast path to building then having water at the site is a must. When you see a lot for sale that seems very cheap, there is always a catch. More often than not it means it either isn’t buildable because of the challenges of putting in a septic system or else it doesn’t have water to the site. In some areas purchasing a rural lot without a well already drilled could be a risk worth taking. For most people, who do not have experience of rural properties, you will want to find a property that has a good well (ideally over 5 gallons per minute (GPM)) or is on city water.

2 Van Keppel Road: The lot is on city water right at the lot. The only costs will be to tie into the water in the street at an estimated cost
of $12,000 

How Much Will The Access Cost?

A couple of months ago I interviewed, Carrie Hunt of Sonoma Hill Builders, who used to be head of business development for Blu Homes, and she said, “one of the biggest reasons build projects fall apart is because of the cost of building access to the property. It’s great finding a lot of $650,000 but if the cost of building a road to the lot that conforms to code is the same cost again it can very quickly derail a build project. 

One of the lots I viewed this week, 4532 Bennett Valley Road (see below), was a beautiful lot, complete with well but the cost of the driveway to the building site would be in excess of $500k. While that is a lot of money to anyone, the nature of the access was such that the cost would be incredibly hard to predict with any certainty without doing a full engineering study. Because of the unknown costs of building a road to the building site, I would always advise sellers to invest in the cost of the road, or at the very least get a design and quote. as part of the overall sales package to help eliminate that as an obstacle to the purchase. Alternatively, the price needs to be significantly reduced to account for building a road that is more expensive than average for the type of lot.

On the other hand, there are plenty of lots which have a road direct to the lot, where the cost of a driveway that meets code is minimal. For example, there are  lot that will be coming on the market in Dry Creek Valley as well as Wright Ranch Lane which have roads right to the building pad. 

2 Van Keppel Road:  The lot is just off the road with driveway costs estimated at approximately $24,000 for 1200 sq ft of flat driveway. Driveway costs don't get much cheaper than this.

Who Much Will It Cost To Get Electrical To The Home Site? 

The same rules apply for proximity to electricity as they do for access. The further the distance the bigger the cost. You want to minimize the distance that PG&E has to run power to the build site. The good thing with electrical, unlike driveway access, is that you can albeit eliminate the cost for running power if you are prepared to invest in a full solar and off grid capability.

2 Van Keppel Road: With power right at the road, the cost of establishing temporary power and then running power to the home from the road is minimal, estimated at $10,000

How Much Will It Cost In Soft Costs Including Plans, Fees and Permits?

One of the benefits of building a pre-fab home is that you can eliminate the costs of employing architects and structural engineers if you choose a home from one of the plans provided by the Pre-fab manufacturer. I used to think that going down the pre-fab route meant you have no flexibility on the rom layout and design but that is not necessarily case. With some pre-fab systems, It is possible to have an architect design a home and then get Pre-fab companies to bid for the business (see this blog post about Dispelling The Myths Of Pre-fab Homes. 

My listing on 2 Van Keppel Road comes with full plans (see floor plan above) from Connect Homes which offers a number of different plans for pre-designed plans. (See here for an interview with Connect Homes and here for an outline of the different models). The plans that have been developed and costed are for a 2,560 sq ft 4 bed, 2.5 bath home including a 320 sq ft covered deck, garage and a car port.

One aspect that people often forget about are the soft costs, outside of architectural fees, that need to be incurred as part of developing a full set of plans required by the county to issue a building permit. Even for a  project that is on city water and sewer, the owner will need to conduct a full survey, extensive soils testing, structural engineers to design foundations and develop a grading plan. These costs alone can run to over $50k.

2 Van Keppel Road: All the plans are fully developed for a 2,560 sq ft home with a full plan set ready for a building permit to be issued. If a buyer wanted to build either a smaller or larger home, Connect Homes has a number of different models from which to choose. (see here for the full range of plans available and here for the price list)

How Much Should I Pay to Purchase The Lot and Build The Home? 

Whenever someone is considering building a home it is important to look at the overall combined cost of the lot plus the finished home including pool, hardscaping and landscaping. It’s a continual balance between paying too much for a lot which will make it difficult to support the valuation of a property and buying a cheap lot and over developing it in a specific area. There is no right and wrong place to purchase a lot because there are so many factors to take into account.

2 Van Keppel: At $350k, there are not many rural lots in wine country for less than $500k which are build-ready from the day the transaction closes. With an overall build cost of $1.4m, equating to approximately $550 per sq ft, the all in cost for this home in wine country with a pool would be $1.75m, for a home that would be worth over $2m. What makes this home especially interesting is that it is zoned for the new owner to be able to get a permit to vacation rent it. According to AirDNA, a home of this type performing in the top half of properties listed, would earn over $150k per year based on an occupancy level of 50%. This suddenly makes it a very attractive proposition for someone wanting a wine country home that not only doesn't cost them money but makes a profit while the owner can enjoy it for half the time!