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Building Your Home In a Subdivision

Building Your Home In a Subdivision

Subdivision Colorado SpringsChoosing a place to build your home is one of the most important decisions you will make during the entire home building process. The location can end up driving a lot of other factors like the style of home as well as the price you end up paying.

While some people prefer to live in a remote location on acreage, many people find the idea of living in a neighborhood or subdivision is very appealing. A subdivision offers community and in many cases convenience. 

It is important to understand that from a building standpoint, not all subdivisions are the same. 

Different Types of Subdivisions 

If you are thinking about building your dream home in a subdivision, it’s important to understand that there are different types of subdivisions. The way these subdivisions are set up will determine what type of house you can build, how much you will spend and in many cases who can actually build your house.

Production Subdivisions

The most common type of subdivision today is the “Production Home” subdivision. In this scenario, a developer creates a subdivision and then proceeds to sell individual lots to a predetermined group of homebuilders. These builders commit to purchase a set number of lots and build a model home from which to sell their homes in that community. The developer, in turn, restricts the number of competing builders in that community and will only sell lots to those builders.

If you want to build a new home in this type of community, you are limited to a handful of builders and their plans. If there is a particular lot you are interested in, you would need to work with the particular builder that owns that lot. 

In most cases, this works out just fine but in some cases, the builder may not have a plan that works for a particular buyer. In these cases, the buyer can talk with another builder in that community about purchasing or trading the lot for one in the preferred builder’s inventory but if it’s a great lot, the chances of the initial builder agreeing to this are slim.

Builders subdivision

The primary benefit of the production subdivision is economy of scale. Since the builders are essentially staying on the same street, they can move trades or workers from one house to the next. This saves time and money which contributes to the affordability of these homes.

If you find a home you love in this type of neighborhood, consider yourself lucky. The production neighborhood provides an economical, convenient way to get into a brand new home. In most cases, the builder will carry the financing until the home is ready and your expected closing day is fairly predictable.

If you can’t find your dream home in a production neighborhood, you may need to look into a custom or semi-custom community. 

Custom and Semi-Custom Subdivisions

new build house colorado springsThe second type of subdivision is the custom or semi-custom subdivision. In this scenario, the developer will sell the lots to individual homeowners as well as to builder clients. If the lot is sold to an individual, they will usually end up choosing a builder, designer, and other professionals to work with on the project. 

Another scenario and one we don’t recommend is one where the lot owner ends up acting as their own general contractor for the building project.

Another possibility in a custom lot subdivision is one where the builder buys the lot. The builder will most likely choose a plan for the lot and price the whole package out before putting a sign on the lot in order to attract an interested buyer. 

If you have a distinct style and layout in mind, purchasing the lot outright from the developer is a good idea. This puts you in control of the final product. 

The custom or semi-custom community affords a lot more flexibility in terms of design, style, and amenities but this flexibility comes at a price. For starters, the home buyer will most likely need to take care of the lot purchase. It is more difficult to qualify for the lot and construction loans than it is is the production home scenario. 

Another difficult aspect of building in a custom home subdivision is cost. In many cases, the design guidelines and requirements for a subdivision can drive up the cost of building your home.

Design Standards

Most Custom and Semi-Custom Home communities have design guidelines, requirements, and standards. These will be found within the covenants for the community. These design standards will specify everything from minimum square footage requirements to color and exterior cladding materials.

In many cases, these requirements can drive the cost of a building project through the roof. Expensive exterior stone accents and high-end roofing materials are two good examples of design requirements that can add tens of thousands of dollars to the cost of a home without really impacting the livability of the home.

building new home in colorado springs

The square footage requirements will also drive the final price of the home as well. In many cases these requirements will specify the required square footage for either the entire structure or for specific parts of the property. For example, if you build a ranch style home, the requirements might state that you must have a minimum of 2,800 square feet on the main level. Depending on the type of foundation required, this house could end up being close to 6,000 square feet. This is fine if you want a home this big but if you were looking to build something smaller, the time to find out about these requirements is before you purchase the lot.

It is important to read and understand the design guidelines before you purchase land in any subdivision but especially a custom home development. It’s important to maintain an appropriate relationship between lot acquisition cost and final project cost.


Most modern subdivisions are going to have some sort of Home Owners Association or HOA. These subdivisions will most likely have a set of restrictive covenants as well. Covenants are set up to maintain some sort of consistency in a neighborhood in terms of how the neighborhood looks and what you can and cannot do in the neighborhood. 

While some people appreciate the structure of a covenant protected neighborhood, others get upset at the idea that there is some type of restriction on their property and how they can use it. If this is you, you should avoid a covenant protected community at all costs. 

covenant community colorado springsPart of the process of closing on a piece of property is your agreement to obey and adhere to any and all covenants present in that community. The HOA or governing entity in the neighborhood has the right to enforce the covenants. This enforcement can start with a simple note but extend as far as levying fines for non-compliance and filing liens against your property for non-payment of these fines.

We’ve all seen the news stories of the disgruntled homeowner fighting the HOA for their right to do something the covenants prohibit. This is certainly not something you want to be involved with, it’s much easier to find a lot in a community that doesn’t have covenants or better yet, covenants that are in line with your lifestyle.

The best way to avoid problems with an HOA and covenant violations is to read the covenants before you buy.

Fees, Dues, and Assessments

Many subdivisions are going to have homeowners association dues. These dues pay for things like common area maintenance and common amenities. It’s important when buying in a subdivision the understand how much your homeowner’s dues are going to be and what they pay for.

HOA colorado springs

You’re going to want to do some investigation into the HOAs reserve fund as well. The reserve fund is set up to cover any unexpected maintenance or repair expenses. In a community that has shared amenities like a Community Center, Fitness facility, or a pool, these expenses can be pretty significant. If the reserve fund isn’t sufficient to cover any potential repairs, the HOA can levy a special assessment on the owners within the community to cover any gap between repairs and the reserve fund. This can be a nasty surprise for homeowners, especially when they have no idea it’s coming.

It’s wise to look at the financials for the association of any subdivision before you buy. It’s also a good idea to talk to neighbors about how the HOA operates. This information shouldn’t necessarily stop you from buying buy will give you an idea of what to investigate before purchasing.

In Conclusion

Building your home in a subdivision can be a great experience and living in this type of community can bring years of happiness. You just need to do a little homework before purchasing and building in this type of community.

Home Building Tips

The Relationship Between Lot Cost and Total Building Cost

The Relationship Between Lot Cost and Total Building Cost

With Colorado real estate being in high demand, local housing markets are experiencing a shortage in inventory for resale.

This lack of availability in existing homes is motivating some buyers to buy vacant land and build, rather than wait for their ideal home to come on the market or to settle for a home they don’t love.

Buyers have a few options when it comes to buying land and building a new home:

  • They can choose a production builder (also known as a tract builder) or
  • They can build a custom home

Production Builders

Production builders are a popular option for buyers looking to simplify the building process. Production builders already have the systems in place to build multiple new homes, usually in a development, with connections to city services and infrastructures, like electricity and streets. They own the lots and package them with pre-designed houses to provide a complete property to the buyer.

This simplifies the building process for the buyers and is often the far more cost-effective route to building a new home.

Production builders and developers usually purchase entire tracts of land and divide the land into lots of various sizes. So the buyer typically doesn’t know how much the production builder paid for each lot. And because of the pre-planned nature of production builders, buyers have few choices with regard to lot size. They simply choose one of the available lots provided by the production builder.

The builder may only allow certain home plans to be built on certain lots to retain a pleasing neighborhood aesthetic and uniform land-to-building ratio in the community. The land-to-building ratio is simply how much house sits on how much land. Builders don’t want to build a large house on a small lot or a small house on a large lot. So if you’re considering a production builder, you should be careful to confirm that the specific home design you want is available with the specific lot you’re interested in.

Additionally, production builders typically offer upgrade packages to the homes. Upgrades could include higher-quality materials, like granite countertops instead of Formica, or additional features like fireplaces or spa tubs. These upgrades are pre-selected by the builder to ensure that the total cost of the build will fall within an appraisal-safe range.

All of this pre-planning means the buyers don’t have to spend any time thinking about the cost of the land and how it relates to the total cost of the build. The production builders have already taken care of that.

Custom Homes

Some buyers will prefer to build a custom home rather than buy a production builder’s package. The most common reasons for choosing the custom home route are:

  • You don’t find exactly what you’re looking for in production homes
  • You want something unique
  • You want a larger lot for added privacy
  • You want to design your dream home

Choosing to build a custom home raises the question of how to evaluate the cost of the lot compared to the total project cost.

Unlike purchasing a lot-and-home package from a production builder, building a custom home generally requires finding your own lot. The lot is an entirely separate expense from the building budget.

When looking at lots, it’s important to understand any community building restrictions. Communities may have architectural building requirements that strongly influence the look and feel of the completed home. The building requirements and restrictions will also directly impact your total project costs.

The Traditional Percentage of Costs to Allocate to Land

The cost of the lot has traditionally been 25% of the total project cost.

For example, if you have a total project budget of $200,000, you should expect to pay $50,000 of that amount for the vacant land since 25% of $200,000 is $50,000.

This ratio has changed in recent years due to factors like increasing lot prices, escalating construction costs, and the increased demand for smaller homes.

As long as the final project appraises, lenders are flexible with the lot-cost-to-total-cost ratio. Homeowners Associations (HOAs), however, may be less flexible.

How HOAs Affect the Lot-Cost-to-Total-Cost Ratio

HOAs have the authority to dictate what can and cannot be built in the community

The goal of the HOA regarding design restrictions is to create a visually-appealing community of cohesive, stylized homes and landscapes.

Some homeowners find HOA design guidelines overly restrictive. Other homeowners appreciate the pleasant environment provided by the curated look and feel of the neighborhood. Many of these restrictions exist to keep the community free from some of the eye-sores that plague other communities, like distracting paint colors or out-of-place architecture.

To that end, HOAs have specific design guidelines addressing multiple aspects of the build that may include:

  • Square Footage
  • Style
  • Exterior Cladding
  • Roof Style and Roofing Material
  • Landscaping
  • And More

These restrictions can actually be helpful in the building process because they eliminate many choices. With so many decisions to be made in building a custom home, buyers spend excessive amounts of time shopping different options for styles and materials. HOA requirements to use certain styles and materials saves a lot of time and indecision for many buyers.

Square Footage

Of course each of these design guidelines directly affects the total cost of your home building project. So it’s important to budget around the HOA’s design requirements. And because they will directly impact your total cost, they should be considered even before you purchase a lot. You want to make sure you will have enough money remaining in your budget, after purchasing your lot, to build a home in accordance with the HOA’s design guidelines.

Just as production builders are concerned about the land-to-building ratio, so are HOAs. No one wants a large house built on a too-small lot or vice versa. So HOAs will typically dictate the size of the structure that can be built on a given lot.

Let’s look at an example:

A couple buys a lot for $75,000 in an HOA community with a strict set of design guidelines. Their total budget is $300,000. They don’t need a lot of square footage, but they do want a good quality home with some nice upgrades.

In Colorado Springs a basic tract, or even semi-custom, home could be built for as little as $110 per square foot (for anyone wondering, luxury custom homes tend to start at about $150 per square foot).

At $110 per square foot, our buyers could build a 2,000 square foot home and still be within their budget (110 per square foot x 2,000 sq feet = 220,000 + 75,000 for the lot = 295,000).

However, when the architect begins designing the home, they notice that the HOA design guidelines dictate that the ranch-style home the buyers want to build must have a minimum of 1,500 square feet on the main level.

This requirement means the project cost is already at $240,000 (1,500 square feet times $110 = $165,000 + 75,000 for the lot) before adding in the cost of the lower level or foundation. A 1,500 square foot main level will require a 1,500 square foot foundation and crawlspace or basement, which could add another $165,000 putting the total project cost at $405,000. So project ends up being $105,000 over the $300,000 budget, even before upgrades can be added.

This is why the HOA square footage requirements should be considered prior to purchasing a lot.


In most HOA areas, you’ll immediately notice that the architectural style is consistent throughout the development. This is due to the HOA style guidelines.

The guidelines may restrict builders from including design elements like balconies, columns, or bay windows, which would keep the building costs lower. Alternatively, the guidelines may require certain architectural design elements, which would increase the total project cost.

Exterior Cladding

Exterior cladding is likely included in the design guidelines to present a uniform exterior appearance.

Stone costs significantly more than stucco, which costs more than masonite. Many HOA’s require both stucco and a significant amount of decorative stone. Make sure your budget takes the exterior cladding requirement into consideration.

Roof Style and Roofing Material

A simple gable roof (the classic roofing style in which the roof peaks in the center and slopes down on two sides of a rectangular house) is inexpensive to install and maintain. But because it lacks visual interest, many HOA guidelines call for more expensive styles. The more modern hip-and-valley style, which creates multiple angles and multiple peaks is naturally more expensive because it is more complex.

Roofing materials are also a consideration. For example, fire-prone areas may require tightly-interlocking clay tile over a fire resistant cap sheet. Both the cap sheet and the tile are far more expensive than a traditional shingle roof. The cost of the roof could potentially double if higher-end materials are required by the HOA.


Landscaping is often an underestimated (or even forgotten) budget item for new builds. But landscaping can be costly, especially when the HOA is involved in landscape design.

HOAs routinely issue guidelines for things like:

  • The size and material of costly hardscape. The HOA may dictate how wide your driveway must be, and they may require a fence or wall around your lot of a certain height and thickness. They can even require gates of a certain style.
  • The amount of sod. If the neighborhood is looking for a green lawn aesthetic, they can require that a specific percentage of your lot be covered in sod.
  • Number of trees. HOAs want enough trees to make the community feel green, but not so many as to make it look overgrown. So they can dictate the number of trees per lot.
  • Sprinkler system requirements. To ensure that the landscaping is maintained throughout the neighborhood, the HOA may have requirements for sprinkler systems to keep the lawn well-watered.

Naturally, all of these items add to your total building budget, so they may cut into the amount specifically budgeted for the lot.

Other Factors that Impact Cost

In addition to the ways the HOA requirements affect the total project cost, other factors like soil quality, utilities, and construction quality will also make an impact on the total cost.

Soil Quality

Vacant land might not be quite ready to be built on. The lot might need to be leveled before building can begin. Additional excavation and backfill may be required due to expansive soils, which can drive the project cost up.


The soil can also affect water and septic systems. Additional excavation or backfill could be required to accommodate the septic system design. And the depth of the aquifer can significantly affect well costs based on how easy or how difficult it is to access the aquifer

Also, there will be fees to connect the utilities for the home with the public utility systems. Public Utilities Tap fees should be researched for your specific building location and included in your project budget.

Construction Quality

Lastly, construction quality can substantially impact the cost of the project. Homes are typically built on a per-square-foot cost-basis. The better the construction quality, the higher the cost per square foot.

For example, a $110 per square foot build might include lower-end construction materials like:

  • Vinyl windows
  • Hollow-core doors
  • Formica countertops

A $150 per square foot build, on the other hand, would include higher-end construction materials like:

  • Aluminum-clad wood windows
  • Solid wood doors
  • Granite countertops

And again, these costs are per square foot. So on a 2,000 square foot home, the construction quality could potentially make an $80,000 difference ($40 difference per square foot x 2,000 square feet).


The lot price does not stand alone. It is deeply connected to the total project cost by way of its relationship to the cost of the structure that can be built on that lot.

The building requirements and restrictions go with the lot. And they directly impact the total cost of the project. Before you buy a lot it’s important to understand the many factors that contribute to the final price of the completed home.

You should consult with your builder prior to purchasing a lot. They can usually shed some light on most of the issues mentioned in this article

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