Cost estimate sanity check

[Brian Allen]

Hi Everyone,

Im working on a tear down and new construction on my mothers house in Mar Vista California which is on the West side of Los Angeles. I have discussed the project with an Architect that I like (although I will be contacting a few more, recommendations are welcome) and he sent me a proposal for his fees and estimated cost of the entire projects which I will detail below. The estimate came in higher than I expected and I am trying to wrap my head around how accurate the estimate is considering the Architects fees are based on 10% of the total cost of construction. Looking at very comparable new construction projects nearby, there are plenty, the purchase price of the lot plus the hard and soft costs would leave almost no money in the project. As an example, there are several nearby new construction projects purchased for about $1.3m to $1.5m with similar finishes and sqft to my project that are selling for about $2.2m-2.4m. As a sanity check if I were to sell the lot now, worth probably $1.3m-$1.5m, and take that $1.1m I shouldn't be able to buy a comparable finished house but I can easily (ignoring property taxes). I understand there are inherent synergies that make these projects cheaper for bigger developers that are difficult to account for, however I fail to see where the profit is at the numbers I've been quoted. Any and all insight is greatly appreciated and Im looking forward to updating this going forward.

House

1) Main House (2,490sf @ $300/sf.) $747,000

2) Accessory Dwelling Unit (500sf @ $300/sf.) $150,000

3) Roof Deck (300sf @50sf) $15,000

Site Improvements

Hardscape $25,000

Landscape $35,000

Total Construction Costs $972,000

Pre-Construction Costs 

Architectural Fees (10% excl landscape) $93,700

Structural Engineering $12,500

Title 24 $500

Reimbursable Expenses $1,500

Local Permits and Fees $15,000

Total Soft Costs $125,700

Total Estimated Project $1.1m