So you've looked all over and can't find something that is just right for you and are now starting to think about building your own home from scratch. Buying off the shelf saves a lot of time, but if you just have to have the right sized living room for your Austin powers couch, then this is what it's going to take.
I have permitted and built over 50 homes in Austin, TX since 2011. Since then the process has changed some, and the costs have changed significantly, but many things are still very much the same. At a high level it's going to take you probably about a year from idea to move in if everything goes normally. Here are the main steps you need to tackle and some of the challenges at each step you will face.
Finding a lot Time: 30 days
Cost: $75,000 to $300,000
As of this writing, there are 427 lots in the city of Austin. If you want a home that is under the median home price (Currently ~$400,000) and around 2000 sqft, you are going to need to get the dirt for around $100k or less. There are only 46 lots that meet that criteria. If you exclude Lakeway, there are 15 left. So finding the land is going to be one of the most challenging parts of your journey. This excludes creative approaches like sub-dividing and building multiple units to reduce the cost per door.
Because of the limited supply as well as the equity requirements from a lender to secure a construction loan, most land purchase offers at this price point are made in cash. This means you could find and close on land within 30 days. Most of this time will actually be taken up with your due diligence to make sure you can build what you want on the property. This is a lengthy topic, so perhaps I will do another post on that later.
Designing your home
Time: 30 days
So you will need to submit a design and permit request to the city of Austin before you can build. A licensed architect will be able to create the plans required for the permit. You will start with a site plan which lays out where the building will sit. Assuming you are zoned SF-3, this space can consume no more than 45% of the total land area, including driveways and anything that is impervious cover. And no that really cool permeable concrete stuff still counts toward your coverage.
An architect will take several weeks to develop a set of plans, and as a custom home owner this may consume more than 30 days as you tweak the designs. When I was spec building, we fixed the designs and didn't mess with them much because we wanted to move quickly.
The other plan that will need to be completed is the utility plan. You will need a civil engineer to create a design for water and waste water connections. If there is an existing water tap in a usable spot, you may be able to get around this step, but be sure you know where the water, and waste water connections are and that they are both large enough and in sufficient shape to service the structure you want to build.
Getting your permit
Time: 30-60 days
Cost: Time, or consultant (varies)
Once your plans are ready, you can submit your permit request to the City of Austin. You will need to submit for both the building permit and the water/wastewater line if applicable. The city will review the permit and will always have revision requests. Each round can take up to a week or more. This time has stretched over the years from as little as a week to as long as a month per revision. It will usually take two to four sets of revisions between the city and the applicant to get a final approved permit.
Your builder should be the one to submit the permit and work through the revisions. Some builders will not do this and you may have to either hire a consultant, or you can do it yourself which is completely possible. There is a development assistance center on the first floor of the building at Barton Springs where you submit and they will help you navigate the process.
This is often where the builder and the architect can collide on what is in the plans vs what can actually be built. Builders will look out for where utility piping, electrical, and HVAC duct work go which are sometimes not a priority with architects. One is aesthetically minded, the other is functional.
Getting your financing
Time: 30-60 days
This can be one of the trickiest parts of the process. Most banks review their loan pipeline once a month. If you do not have an existing relationship with a construction lender, finding one can be very time consuming. Small local banks are the best type for these types of loans. They are more community focused and don't have a large corporate checklist to adhere to. Your loans mean more to them than large banks.
It will take about 30 days for an underwriter to review your loan application, the project, and viability of the loan. Assuming you have the creditworthiness to get the loan, you will want to aim to close the loan about the same time you get your permit. Here is the hard part. Banks have sales people just like any other business, and their job is to say yes. The loan committee that approves the loan has the job of saying no. The first person you talk to in a bank is likely to say they can do the loan or they will find a way. But the loan committee is the real decision maker. So you can be on the 'everything is great' train ready to close when you get your permit only to have the loan committee say no at the last minute.
When this happens, you have to start over again with another bank and now you are going to sit for at least 30 days while you go through that process again. It's perfectly ok to have multiple applications in with multiple banks that all close about the same time. So when you have your permit, you can be the one pulling the rug out on n-1 banks instead of them pulling the rug out from underneath you.
Getting the build done
Time: 6-12 months
Cost: $110/sqft and up + Utilities, financing, and services
Build costs can vary, but if you are hiring a builder that is going to charge a fee for building the home, $110/sqft is the lowest you will want to go with. A higher rate might not be a bad idea either, as quality is are not cheap. You get two of the three, Good, Fast, and Cheap. Sometimes you only get one. A quality issue on a house can be a huge cost where you end up having to pay a second vendor to remove and start over bad workmanship. Don't make that mistake and hire a cheap builder. It will end up costing you more.
In my experience, the best builders are doing multiple projects at a time and have some overhead. This means they know how to run a business, can manage expenses, and know how to create labor specialization for efficiency. Anytime a builder says, 'Oh I can get in there and swing a hammer if I need to' I take as a bad sign. If they ever have to do that, it means the don't know how to properly value time.
A very efficient builder with good tradesmen keeps them coming back and gives them a lot of work, which means they will show up to your job. Such a builder may be able to get a house done in as little as 4 months. I've seen it happen, but it is rare. Usually it takes about 6 months for a competent builder to get a house done. A slow one who has more work than they can handle will take 9 to 12 months or more.
In a perfect world the schedule will look something like this.
Month 1: Foundation, Framing, Roof
Month 2: Electrical and plumbing
Month 3: Insulation, Drywall and paint
Month 4: Cabinets, fixtures, and finish out
Month 1 is misleading in its speed because you see the framing go up quickly and think, wow this thing is almost done. Month 2 and 3 show good progress, and month 4 tends to be a grind as all of the tiny details are completed. The fit and finish is the most likely to take more time than anything else.
Is it worth it?
If you have very particular tastes and can afford to wait, a custom build can be a very fulfilling and exciting process to create the perfect home for you. It does become like a second job for a year though. So be ready for the undertaking should you chose to go this route.