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Site Improvement Costs
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You may find your perfect piece of land hidden under overgrown brush and get a great deal. However, land purchases can also spring any number of unpleasant, and often costly, surprises on the inexperienced. Before bidding on land, you need a rough budget for major development costs.
Developers buying large tracts of land to subdivide often budget more for development costs and fees than for purchasing the land itself. The ratio will be different for a buyer of a single lot at retail pricing, but it’s critical that you get a realistic estimate of development costs before purchasing a piece of land.
Site development or “site improvement” costs can vary dramatically depending on site and soil conditions, your development plans, and local fees and permitting costs. Fees and permits, alone, can cost well over $10,000 in high cost areas and often exceed $20,000 in high cost states such as Colorado and California.
If the house site is a long distance from existing utility lines, you may have to pay a fee of $25 to $100 or more per foot to extend the utilities to your house, in addition to the “tap fee” to actually hook up.
Since many site development costs are not readily apparent to the inexperienced, they have the potential to eat up dollars intended for house construction or to derail a project altogether. So it’s important to get a realistic estimate of site improvement costs as you evaluate a piece of vacant land.
Even when buying a “developed” lot, make sure you know what exactly in included in the package as it can vary a great deal from one development to another and you may still need to pay for additional site work, permitting, and fees including costly impact fees. In addition to purchase price of the land, make sure you budget for:
- A survey, if required
- Hookup to utilities: phone, electric, cable, gas, and sewer and water (municipal or community systems). Include both the cost to extend lines to your house and the “tap fee” to hook up.
- Septic system design and installation (conventional or alternative, if required)
- Well drilling, pump, and hookup to house
- Earthwork: excavation, cut-and-fill, and blasting, if required.
- Paving: road, driveway, patios
- Permits and fees: The number and size of fees vary widely. Ask for a list of all permits and fees required in your jurisdiction
- Legal costs: title search and other closing costs. Also may include variance requests, addressing challenges from abutters, resolving conflicts over rights-of-way issues, boundaries, etc.
- Impact fees – varies by state and municipality. Also called development fees, mitigation fees, service availability charges, facility fees, and other creative names
Impact fees are now assessed by many towns to help them pay for schools, infrastructure, and other public costs associated with adding new homes to their community. Depending on the state, they may be called development fees, mitigation fees, service availability charges, facility fees, and other creative names. According to a recent survey, about 60 percent of all towns and cities with over 25,000 residents have impact fees and the number is growing. The number is over 80% in Florida and 90% in California.
Impact fees are rarely under $1,000 and may exceed $20,000 in some areas. Some communities in California impose fees of over $100,000 as a way to discourage development. The average impact fee for single-family homes is just under $12,000, according to a 2010 impact-fee study of 275 jurisdictions in states with impact fees. Even if you a purchasing a design/build package with the lot, you a likely to be hit with this fee, separate from the price you pay to the developer.
ESTIMATING LAND DEVELOPMENT COSTS
Before making an offer, you’ll want at least a rough estimate of what it will cost you to develop the lot. These costs are often underestimated and can make or break project. Like going to the hospital, one procedure may generate bills from a number of vendors who all charge a la carte.
For example, getting electricity to the site might involve paying the utility company to install a transformer, an excavator to dig a trench and run underground conduit, an electrician to pull cable through the conduit from the transformer to the house and install the “socket” and service panel, and then the utility company again to install a meter and tie the cable to the transformer.
Key items to include are listed below. Also you can view and download sample budgets at these links:
View Sample Land Development Budget
Download Typical Site Development Costs (.xls)
SITE DEVELOPMENT COSTS
Cost of land: plus any brokerage fees
Permitting: Septic, well, driveway, building, other (varies with jurisdiction)
Other regulatory fees: Plan review, inspections, land clearing, monitoring wells, curb cuts, etc. (varies with jurisdiction)
Impact fee: Charged in over half of municipalities over 25,000 population – can be costly
Tap fees: Connection fees for municipal water, sewer, electric, and gas if available
Utility connections: Costs to bring all utilities to the house, including electrical power, natural gas, water, sewer, phone, cable TV, Internet. May include trenching costs for underground utilities; transformer (the big green box by the road), meter installation for electric and gas, and tank purchase for propane or oil. Some utilities charge $50 to $100 or more per foot to extend existing lines, so long runs to the nearest utility line can be very expensive.
Survey: If needed; required by many lenders and building departments
Engineering inspection: If needed, for steep sites, wet sites, problem soils, excess ledge, or other site problems
Water well: Well drilling, casing, pump and wiring, pressure tank, trenching, and plumbing to house. May also include water treatment if needed.
Soil testing: If required – deep hole test, perc test
Septic System: Design and installation; more expensive “alternative systems” may be needed for poorly drained soils, waterfront property, or other environmentally sensitive areas.
Clearing: Costs more to cut carefully and preserve trees; may include removal of stumps and cut timber
Rough and Finish Grading: May include purchase of soil, sand, gravel, or crushed stone
Blasting: If required for the foundation or when trenching for utilities; include cost of removal of blast rock
Excavation and Backfill: May require purchase of granular fill
Site Drainage: As needed: foundation perimeter drains, swales, culverts, subsurface drains, curtain drains, sand, gravel, and stone
Steep Sites: Cut and fill, retaining walls, terracing
Landscaping: Finish grading and plantings
Driveway: Rough driveway, top layer or gravel/stone, paving
Other Paving: Walkways, sidewalks, patios
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How Much of Overall Budget Should Pay For Land?
Hello. Love this site and trying to consume all of it, so Thank You! I am weighing options to buy and refurbish or buy some land (1-3acres) and build. My further decision is to be the owner builder. My main question is about the general rule of thumb for the percentage of land cost to the overall budget. If I have a total budget, I want to subtract a small percentage for my contingency allowance. From the remaining budget, what should be the percentage for the total land? Is 15%, 20% or 25% a fair amount?
There are various rules-of-thumb that state that the cost of the vacant (undeveloped) land should range from 20% to 33% of the total cost of a project — or about 25% according to a traditional guideline.
While a rule-of-thumb could provide a rough starting point for your research, they could prove to be way off on your project. There are simply too many variables, which can differ greatly across regions and individual projects. Land costs, development costs, construction costs, house sizes, and valuations can vary enormously and render rules of thumb pretty useless.
To do a more careful analysis, you need to start with the appraised value of the completed project and subtract out hard and soft costs. The remaining amount should cover the land and (if you are a developer) your profit.
For example, if you expect the finished project to have an market value of $500,000 and you are spending $300,000 on hard construction costs, $50,000 on site development (utilities, clearing, landscaping, paving, etc.) , and $50,000 on soft costs (design, engineering, permitting, survey, financing, insurance, etc.), you could spend $100,000 on the vacant land and kept your spending in line with the project’s valuation. In this case, your land cost is 20% of the total project cost.
If instead you spent $150,000 on the lot and had to sell the house when completed, you would lose $50,000. If you plan to live there for 10 years or more, the shortfall is less of a concern.
How Much To Budget For Electrical & Plumbing Hookups?
Hi – I am having a log home built in north Georgia- this is on an existing “pad” on a 1.79 acre lot in a gated community with existing electric (there are other homes on the same road close by).
The builder of course includes construction and labor, etc in their price of the home, however I am responsible for the 1) electricity hookup, 2) the electrical inspection, and 3) plumbing hookup.
Can you give me a ballpark idea of how much this might be? Thank you
These costs can vary widely, so it’s not that useful for me to throw out average numbers.
That said, the electrical hook-up, if you already have power on the building site – typically a pad-mounted transformer in a big, green box – you can expect to spend from $1,000 to $5,000 for the full electrical hookup to the house, including labor, materials, and inspection.
Water and sewer hook-ups vary more widely and tend to be a lot more expensive. “Tap fees” for municipal water can range anywhere from $1,000 to $30,000 or more in high-cost urban and suburban areas. In addition, you have the cost of trenching and laying pipe.
If you need a well and septic system, then you can expect to spend $5,000 to $20,000 for a conventional septic system and $30,000 or more if you need an alternative septic system. You can expect to spend several thousand more for a completed well system. The deeper the well, the greater the cost.
Since the costs can range so wildly, you really need to get actual cost estimates from local utilities and tradesmen, as well as information from the town on permits and fees.
I recently heard from a reader who was shocked to find that their $85,000 lot needed $65,000 of improvements before they could build. It sounds like you are in a rural area where development costs may be a lot lower. However, if you want real numbers, you’ll need to contact the town, utility companies, and trade contractors for to get estimated costs for permits, fees, materials and labor.
Read moore on Typical Site Development Costs
Thanks so much for the quick response, and the very helpful numbers. The builder did an estimate for me (based on previous customers) and it came to about $23,000 – I’m sharing it with you so you can continue to do the great job you are doing helping others make important decisions. Thanks again!
Install Well and pump or water tap fee $6,000
Connect water lines and sewer/waste lines from each box $5,200
Septic System install $4500
Temporary power $1500
Install meter base and wire to panel in home $2200
Connect Phone wire $250
Connect Coas Wire $250
Wire HVAC system $250
Wire pressure tank $750
Apply for building/septic/well/zoning/land disturbance $1700
New Lot vs. Lot With Burned House?
I have a question. Would it be less cost to but a lot that has electric, water & sewer but the home was burnt down. Planning on buying an Amish prefab cabin, placing it on a slab. It I have to demo the house & remove it, How much will that cost? Can I use the existing electric/water/sewer.
The cabin comes wired & plumbed. Is this plan cost-effective? How much will all this cost?
There are too many variables to give you a precise answer. You will save some money on utilities and spend some money on demolition. It might be a wash. Personally, I would opt for a new lot unless I loved the lot with the burned-out house.
The three key numbers are the cost of demolition, the savings on utilities (depends on what is salvageable), and the cost to bring utilities to the new lot. This can vary a great deal depending on whether the new lot is vacant land or partially developed. If you really want the lot with the house, I would first determine what can be reused and what is toast. In particular, the town may not let you reuse the septic system, even if it is fully functional.
The cost to demo a house will vary depending on the size of the house, local labor rates, and local dump fees. In general, you will pay a lot more in urban areas than in rural areas. That said, the national average to demo and dispose of a 1,500 sq. ft. house ranges from about $6,000 in low-cost areas to $18,000 or more in high-cost areas. Special problems such as difficult access or toxic materials will add to the cost.
Average numbers, however, can only give you a rough idea of costs. It’s best to contact a local demolition contractor to get a real estimate.
As to whether you can use the existing electric, water, and sewer, that depends. Assuming it is a well and septic, you will need to assess their condition. If the well is producing a suitable yield of good quality water, then you shouldn’t have to spend much to plumb it to your new house.
If the septic system was well- maintained and is not too old , then you may be able to reuse it. However, many septic systems are poorly maintained. Also, it may not be up to modern standards for your community and may need to be replaced. You’ll need to research this further. The local building or health department may have records of the system design and when it was installed. There’s a good chance that you will need to complete a new perc test.
You will save some money on electrical. You will probably need to replace everything from the pole or transformer box (for underground wiring), but won’t need to pay to bring power to the site – a substantial savings depending on the nearest power supply.
Is buying the burnt house a cost-effective approach? It could be if you can buy the lot at the right price and everything checks out. If you are replacing an existing full foundation with a slab, you will need to spend a few thousand dollars filling and compacting the foundation hole. You will save several thousand dollars if you can reuse the existing foundation.
You’ll need to weigh the pros and cons of each lot and run the numbers. Every project and every building site is unique.
Where To Start With Vacant Land?
How do I start with a new building lot: land clearing,road,utilities, etc? Do I need to start with a land developer or just contract everything out ?
If you buy a lot in a development, a lot of these issues will be taken care of by the developer – water, sewer, and utilities will typically be provided to the building site although you will still need to make the connections to the house. Many lots are sold with a land-and-home package where the developer is also the building contractor or works with one or more builders to provide the home construction.
If you are buying vacant land with minimal improvements, your building contractor could take care of most of the land-development issues, but will charge you overhead and markup for their efforts. For example, if the contractor hires an excavator to clear land and build a road, he will typically add 20% or more to his cost. The advantage to you is easy coordination and one-stop shopping. You don’t have to deal with a variety of subcontractors and get up to speed on a wide range of issues. But you pay for the convenience.
Some builders will offer turnkey pricing that includes some or all of the land development costs. For example, if you hire a well driller, you may also need to hire an excavator to dig a trench to the house, a plumber to run the underground piping, and an electrician to provide power to the pump. If the contractor agrees to provide water at the tap, he would be responsible for all these steps in the process.
Even with a turnkey building contract, however, you will still be responsible for some costs, so you still need to do your homework. The hidden costs of site development can be significant. Some towns have “impact fees” or similar fees that you need to pay for the privilege of building. Don’t make any assumptions about what is included (and excluded) from your contract with a builder or developer. Ask a lot of questions. Play dumb. Specifically ask what out-of-pocket expenses you should anticipate before your home is in move-in condition with appliances, window treatments, landscaping, and paving.
Jim Flynn says
Start with a architect. They will be able to help with all local info needed.
Depending on local costs, I would think the hook-ups will be 2-5 K, inspection about 1 K.
Does Lot Size Affect Development Cost?
Is the size of the site considered in the site-development cost estimates shown in the table? For example, is the Total Cost (low) of $18,870 for a site with Municipal Water/Sewer the average develop cost for all sites or based on size? Thanks
Note: View Site Development Cost Table
As the note states at the bottom of the Typical Costs Table: These are very rough numbers intended mainly to get the reader thinking realistically about development costs. As they say, “mileage may vary…”
The costs do not assume a specific sized lot. Size, in itself, is not a big factor in driving costs. For example, the costs would be same to develop a large, wooded lot vs. a small wooded lot, assuming that you cleared the same area and the house is roughly the same distance to the road. In some cases, a small lot can actually drive up septic system costs, if special systems are needed to reduce the leach field area.
On the other hand, if you build far from the road, clear and plant a large area, move a lot of earth around to change grades, and build retaining walls and a long paved driveway, you will obviously be spending more.
Always get cost estimates for your project from local contractors, utilities, and officials. The biggest cost drivers are usually the location of your project (low-cost vs. high-cost regions for labor, permitting, and utility fees) and proximity to utility connections. For example, in high-cost Colorado, water tap fees can vary from $13,000 to $26,000 per housing unit, plus the cost of trenching and piping. Similarly, electric utilities often charge a per-foot rate after you exceed a certain distance, such as 100 ft. to the nearest pole or transformer. Fees can range from as little as $10/ft. to over $50/ft. with underground runs costing more.
Bottom line: Get real numbers from local utilities and government agencies that hand out permits, and from local contractors who will do the work.
Not Like the Good Old Days
This is what happens when technology advances, unfortunately. It’s not like the good old days when you could simply outright buy the land and build your dream log cabin or stone cottage right away. Sometimes the reality of it all makes you want to move to Alaska with the whole family and live off-grid.
I like the way you think but 🙁 it still costs a lot to move too 🙁
The problem isn’t technology. The problem is REGULATION! It cost more to produce materials because of regs. It takes more time because of regs.
Government regulations are designed to slow progress.
Outrageous Connect Fees for Water & Power
I ran into two outrageous costs for water & power connections. (I think this is all a shame to create higher costs to keep private individual property owners from building in the area and making it so only people building High Dollar houses can afford to build. Does this sound like something you’ve run into or can see happening?)
I was working on buying a lot. I found out about the cost for permits, survey, etc. These costs were high but understandable.
On water: The city used to do the work to connect to water. Contractors cried saying they should have the work. The city did the water connect cheap. The contractors boosted the price way up to $7,000 just to dig & install 3/4 in. water line through 7′ of rural asphalt st. & 7′ into the shoulder. I work construction & do my own remodeling & $7k is an outrage. It should only cost $150 a ft to dig & connection I could do myself, but they wouldn’t let me. Is this an outrageous price to you?
Electric connection: The worst thing I ran into was two weeks to give me an estimate to connect to a power pole distribution transformer that had been in place since 1977 & was installed for a neighbor for free & had plenty room for another connection. There BS quote was for $20,000 just to allow me to connect. They had supervision, planning charges, real estate charges to check if a railroad owns the land (LOL), just a bunch of trumped up crap. I asked them to justify all the costs & they basically refused. Not even for the trenching etc. Just to connect. I was shocked and had to reduce my offer to cover the costs & lost the property because of this. They are a monopoly. Don’t Public Utilities have a duty to charge reasonable prices for connections?
I hope you can shead some light on this. Thank you
Spence McCallie says
Mike, I don’t know where your property is located. But, I can tell you that in Colorado, the water districts usually charge an outrageous “Tap Fee” that can be tens of thousands of dollars for even a 3/4″ tap. Supposedly this is for infrastructure improvements on the whole system in order to accommodate your little tap. In theory, this is the time value of money that they will require for the future maintenance of your service. I would ask your contractor if the tap fee was included in this.
Most independent REAs (Rural Electric Associations) will charge you a line extension fee in order to make the necessary improvements to their grid to provide service to your residence (Swapping out transformers, switchgear, etc.). In addition, this fee also will include your prorated portion of the line extension fee of your neighbors. While most REAs have a fixed time limit on these (I.E. 10 years), some do not. For example, I have a piece of property that will require a 700′ line extension to my house. Therefore, I am responsible for the extension of eight poles (in a very windy and steep area) at $1,500 a pole. That’s $12,000, right? Not really. Because there are two neighbors that use the existing line, I am also required to pay 1/3 of their line extension fee for the shared 1,500 feet of line. Therefore, I have to pay an additional $8,000 for a total of $20,000. The $8,000 will then be distributed back to the homeowners who share the line with you.
I know that this happens because I had a remote industrial site that I was developing, and I paid $3.8 million for the power service (it was 17 miles long). By the time the project was completed, I had actually received nearly $1.8 million back because two other customers connected to our power line at various intermediate points.
In either case, You are either financing the future upgrades to the system, or paying a share of past upgrades to the system.
Hope this helps.
The $7,000 fee to tie into city water is steep, but not uncommon in high-cost areas. I’ve seen tap fees for water and sewer reach over $20,000. You didn’t mention the fee to tie into the municipal sewer, but that can cost as much or more than the water.
The electrical hookup costs do sound pretty outrageous. I’ve seen costs like this when the nearest power pole is more than ¼ mile away. Otherwise I’ve seen costs ranging from a few thousand to as high as $7,000.
Fees vary widely from one town to another. High fees are a source of income for towns and a way to discourage development. The net result, as you suggest, is to drive up the cost of housing and lock young people and working people out of home ownership.
You can try to negotiate with the town, but I’m not sure you will have much luck. In general, larger towns and cities have much higher fees than rural areas, so that may be where you have to direct your search for more affordable land.
You can view typical developlment costs at this link.
Best of luck in finding an affordable place to build! I agree with you 100% that development costs are out of control, but can’t offer much in the way of solutions.
All the above comments are absolutely spot on.
I build infill single family homes in the Bay Area, CA. There are ways to decrease your total utilities costs. Take what I’m saying wth a 30 year grain of salt:
1. Owner builders do not have skill set to safely encroach on public right of ways, guide traffic, install metal plates and create testable utilities connections.
You work in construction and that’s a great start, but how many taps have you done? If you’ve done 50-100 then the answer is obvious. If not, borrow other people’s experience and good will.
2. Find a general or better yet engineering contractor friend that will show you the ropes and let you be the labor.
3. Skilled labor – subcontractors are often as skilled or moreso than the contractor because they are in the ditches all day.
4. Negotiate with the utilities company. Ask for a connection cost meeting. Bring a lawyer friend. Again borrow friendly experience to leverage your positron. Claim indigent hardship if its your family home. I typically pay 50% what they charge others because they know I use highly skilled govt subcontractors moonlighting to put our utilities in and I do it right the first time without their supervision. You must make it easy for them to say yes.
Look around on C-list for underground utilities subs. Then get the supervision of a licensed contractor to submit and negotiate for you.
Olga Levin-Diaz says
That is great advice, Dan !
I just got a call from EBMUD (East Bay Municipal Utility District) as I was trying to figure out the cost of connecting municipal water to a new lot in California. There was already water on the street. They told me $40K on the low end to connect, but more like $80K typical cost.The sewer connection permit is another 8k and doesn’t include actual work to connect.
That is just insane and doesn’t take into account any other fees you’d pay.
The lot is located in a unincorporated part of Walnut Creek, CA, and it falls under the Contra Costa County jurisdiction
Should Utilities Pay to Bring Lines to Property
We have purchased a piece of property zoned residential. We understand that we have to pay for trenching and service installation on our property, but the municipality is trying to charge us for the lines leading up to our property line as well. Should they not be responsible for that portion considering that it’s zoned serviced residential?
Zoning typically determines what types of buildings and uses are allowable, but not the availability of utilities. A public utility district, on the other hand, would define where city services are available now or in the future, but is no guarantee that services would be brought to the lot line for free.
Each city, power company, and other public utility has its own rules and fees for hooking up to services. Some absorb most of the cost if the connections are nearby, while others push most of these costs to the builder or homeowner. The trend has been that more of these infrastructure costs are passed on to owners or developers (who typically pass them on the owner).
The two main costs are:
• Connection (tap) fees that you pay for the privileges to hook up to town water and sewer and other utilities such as gas or electric.
• Extending the lines to your parcel and then to your house site, including trenching and running pipes and wires
Tap fees are often modest, but may still run several hundred dollars. The cost to bring utility lines to the house can be much higher, especially if there is a long run to the nearest water main, sewer line, or power connection.
In some cases the town or utility will pay for a certain distance – say, the first 100 feet – and then you pick up the cost from there. Rates for extending water and sewer lines can run $50 to $100 or more per foot. With a long run of, say 200 feet, fees can reach to $20,000 or more! Power companies tend to charge less, but cost could still reach several thousand dollars for similar run, including the cost of a transformer.
Since every town and utility has its own rules and rates, you need to contact them for pricing and details. Find out exactly what you will get for their fee, how far they will bring the lines (to the lot line or house), and what additional out-of-pocket costs you should anticipate.
Best of luck with your building project.
Maureen Allen says
Well this is certainly a Reality Check! Your summary is so helpful–I had no idea. This great info is the single most important factor in the decision to build rather than buy. Thank you so much!
April Raymond says
I think that the fee we were charged for hooking up to water, which was $700, was unfair because impact fees were waived for our county and because we are forced to get our water through this company. Isn’t this price gouging?
christopher Wand says
It’s not really price gouging in the strictest form. The main factors that I’ve found that contribute to this number are the contracts the utility company needs to sign in advance usually for the year which control these pricing scales. Because the contracts are made several months before even the first person would want to hook up water they need to keep the staff and contractors around which usually means having a higher fee than if you were to shop the price around yourself.
On the flip side because they do this the price can’t get exorbitantly higher and you can get timely service.