The Cheapest Way to Build a House: From Tiny Homes to Pre-Fabs

You’ve heard the stories about people who’ve bucked the system when it comes to homebuying, striking out and building their home themselves at a huge savings. Considering the high costs of existing homes and the lack of affordable housing in many areas, building new can seem very appealing. But you also have to wonder how sustainable the idea really is. Is it possible to build a home inexpensively, and what is the cheapest way to build a house?

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Las Vegas real estate agent Daryl Hanna, a 20-year veteran of the industry, says that the savings can be big for an owner-builder.

“In Las Vegas, most builds are going to be on the higher end cost-wise, but you can still save a lot of money if you build it yourself,” he says. “The biggest savings is not having to hire a contractor to sub all the work out for you; you can sub it out yourself.”

Hanna says most of the builds he’s seen are by people who already have extensive experience in the construction industry — contractors who want to build their own place, or carpenters who know they can do a lot of the work themselves. “You can save 40% to 50% on building costs as an owner-builder,” he says, “but it’s also important that you know what you’re doing, as mistakes can end up costing you more than if you’d hired someone to do the build.”

With an average build cost in 2023 of $281,000 (not including land), that can represent significant savings.

We took a look at some of the different options out there for the cheapest ways to build, consulting with top real estate agents and providing case studies of four different home builders who built four different types of homes — all of which show some interesting and innovative ways to build without breaking the bank.

So is building an affordable dream home really doable? Let’s find out!

Is it cheaper to build or buy?

According to Arizona agent Gretchen Slaughter, who works with 69% more single-family homes than other agents in her region, the answer is subject to a lot of different factors.

“That’s kind of a tricky question,” she says. “It depends on your area and what’s included in the builder’s package. New construction might seem less expensive — but if, for example, it doesn’t include landscaping, and that’s something you have to do yourself after closing, that can be expensive. A preowned home already has all that.”

In addition to extra expenses like landscaping, the overall timeline for buying an existing house is usually quicker. Depending on inspections and contingencies, a standard home closing takes around 45 days — as opposed to a new build, which can take upward of six months or more, if you end up on a builder’s waiting list. If you need to get into a place right away, it might make more sense to buy a preowned home.

Buying an existing house could be less expensive than building new if you can find a deal on a fixer-upper and put in some sweat equity. Keep in mind, however, that renovating a pre-owned home can also mean the headache of ending up with a house that needs more work (and will cost more in repairs) than originally anticipated.

New builds offer buyers what can be some heady incentives, such as being able to select your floor plan and pick out features like countertops and lighting, which provides a feeling of control over the final product.

Cheapest types of houses to build

When building a house inexpensively, thinking outside that traditional box of a 2,000-square-foot, three-bedroom, two-bath home with a standard builder’s package can be a potential way to reduce costs.

There are a lot of different housing options available these days, and being open to different types of builds might mean big savings.

Tiny homes

Estimated cost range: $30,000 to $90,000

Tiny homes have become incredibly popular in recent years, partly thanks to HGTV, but also because people are looking to find ways to own a home without being house-poor. The global market for tiny homes is expected to reach $3.57 billion by 2026, and according to a survey by HomeAdvisor, nearly nine out of 10 people in the U.S. said they would consider tiny home living, and 68% said they would buy a tiny house as their first home.

While a tiny house is likely to be less expensive than a larger house, rising materials and labor costs mean they aren’t necessarily the cheapest option. Prices will vary greatly based on the size and design of the tiny house you want to build, but you can estimate an average of $150 per square foot.

If you want to go really tiny, like a 200-square-foot house, you might pay as little as $30,000, while a 600-square-foot tiny home could cost $90,000 or more. This also doesn’t include land, which you’ll need if you are building a house on a foundation as opposed to the popular wheeled tiny homes.

Shipping container homes

Estimated cost $25,000 to $40,000 per container

Shipping container homes have become a popular option for people looking to build a unique house at an affordable cost.

The containers themselves are cheap, ranging between $3,000 and $5,000, depending on the condition. Container homes can also be constructed fairly quickly, and you can combine them to make a full-size house.

Despite the low initial price tag, costs can add up quickly. You’ll need to pay to have the container(s) delivered, as well as for the land you’re building on, lumber and materials for the interior, and utilities such as electrical and plumbing.

Containers are also built to be airtight, so a ventilation system of some kind is a must.

Modular homes

Estimated cost $180,000 to $360,000

Modular homes are constructed in sections or modules; once complete, they are transported to their permanent site and assembled atop a poured foundation.

No longer the flimsy prefab houses of 30 years ago, today’s modular homes are usually well-built and high quality, with a wide range of floor plans and styles. A modular house is often less expensive than a site-built house because construction is streamlined, and their manufacturers can buy supplies in bulk, not to mention being more energy-efficient.

HomeAdvisor lists the cost to build a modular home as ranging from $100 to $200 per square foot, which doesn’t include any of the other things required to complete the house. You’ll also need a foundation, land to put that foundation on, utilities set up, and a contractor if you aren’t skilled in building yourself.

Barndominiums

Estimated cost $175,000 to $400,000

According to HomeLight’s Top Agent Insights report from Summer 2022, homeowners in rural areas have begun to build “barndominiums,” typically single-family structures made of metal with vaulted ceilings.

“Barndos” create living space out of the basic structure of a barn, which offers customizability. Buyers of barndominiums also tend to value the rural lifestyle, lower cost, and reduced maintenance these structures require.

In part thanks to the newness of the barndominium trend, these structures can be harder to finance and typically are found in more rural areas, including around Knoxville, West Georgia, Idaho, and Montana.

Prefab kits

Estimated cost $8,500 to $150,000

Prefab house or cabin kits, in which all the needed materials are delivered to your door, have become a popular way for DIY-ers to build without having to purchase supplies piece by piece. You might’ve even seen some of these kits on Amazon.

The kits include pre-cut lumber, are usually at least partially assembled, and come with instructions on how to build them. They can be customized to suit individual needs, with sizes that range from truly tiny to well over 1,000 square feet.

Prices range anywhere from $30 per square foot to $150 or more, and like a modular home, those square footage costs don’t include your land, foundation, or utilities — and although some companies, like prefab kit company Shelter-Kit, say they design for amateur assembly with assistance, unless you’ve got some building experience, kit houses aren’t necessarily easy to put together.

Hire a contractor or DIY?

Being your own contractor can be a great way to save when it comes to building on the cheap. But if you don’t know what you’re doing, it can also end up being more expensive.

Mistakes in the world of construction can be costly, not to mention the extra time it takes to go back and fix errors.

If you’ve never built a house before, hiring a contractor might be the way to go. Or, you can still partially be your own builder, completing some of the more basic work yourself, and hire subcontractors for specialized work, such as electrical and plumbing.

Going through a builder who has new construction homes for sale is also an option, and while it’s not always the least expensive, it can be more streamlined than building on your own — and you’ll know upfront exactly what you’re getting, and won’t have to worry about things like buying land to build on and bringing utilities to your property.

How to save money when building

While there are a variety of ways to cut costs when building a house, limiting square footage remains the biggest factor. The National Association of Homebuilders lists it as the number one way to drastically reduce construction costs.

If you’re working as your own contractor, make sure your plans keep water-using rooms in the same area, such as putting the laundry room off the bathroom. And if you go with a builder, they sometimes offer a few different levels of upgrades, so you’ll potentially be able to save some money if you stick with the standard builder’s grade rather than getting that high-end marble countertop.

Slaughter notes that buyers interested in new construction should understand that a lot of builders offer packages and that control over upgrades or floor plans might be more limited than you think.

“In our area, some of our builders have design centers where you can pick things out and do upgrades,” she says, “but others have set packages that say: this is what you get, with minimal or no upgrades allowed. There aren’t really ways with homes like that to get a reduction in cost.”

Rising costs for materials have impacted new builds as well, although over the last year, some of those costs, such as lumber, have stabilized somewhat and are anticipated to drop further in 2023.

But what about those ultra-cheap builds that we’ve seen on TV?

If you’ve been watching a lot of those home-building reality shows, you might think you can build a house for next to nothing. But the true reality is, those shows don’t necessarily give an accurate depiction of how the builders saved money. People on these shows are sometimes able to get materials donated to them, or they get free labor from friends, which can affect the total cost.

Auburn University student housing development project Rural Studio has been able to build homes in that $20,000 range, but for an average person, this can be incredibly difficult, as trying to control labor and materials costs is nearly impossible. However, once the house is built, if you have a smaller house, you’re likely to save a significant amount on monthly utilities and maintenance — that tiny house lifestyle is where the savings add up.

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How others did it: 4 case studies

While building a house for $20,000 might be a challenge, there are still ways to build a house cheaply. These four builders figured out how to be innovative when building and saved a lot of money in the process:

Case study #1: Going tiny

Shannon Black built his first tiny home with only his own construction experience to guide him.

“I’m originally from New Mexico and built three regular-sized homes while living there,” he says. “I moved to Washington when the tiny home movement was just beginning and decided to build one.”

Black chose to go with a wheeled home. He says the trailer for it was a big part of the budget, as he decided to use a trailer specifically made for tiny homes. Because the home was built on wheels, it was not subject to any required permits or inspections.

He used primarily new materials except for the doors, which he purchased used, and also put in RV hookups for power, water, and sewer.

Black says there are certain building materials you shouldn’t use in a wheeled tiny home, such as drywall, because it can crack when the home is being transported, but otherwise, much of the materials used are the same ones that would be part of any home build. “I used regular windows and doors,” he says. “For the most part, it had everything you’d find in a larger home.”

Black enjoyed the process so much, he decided to make a business out of it and started up Big Freedom Tiny Homes out of Bellingham. “It’s a learning process,” he says. “I’ve built 13 tiny homes so far, and with each one, I keep learning.”

Total cost: $30,000

Case study #2: The shipping container home

Gainesville, Florida, resident Troy Rosslow thought about building a home from a shipping container for 15 years before he took the plunge. “I’d been involved in the building trade for about 25 years,” he says. “I worked in home improvement and contracting.” After changing careers to become a licensed social worker, he maintained an interest in construction and building.

He decided to build a tiny container home in the backyard of his own residence, with the intention of using it as a rental. His budget was originally $12,000, and Rosslow says the project came in at a total cost of about $16,000. “We had to do some improvements to our existing house in order to make it fit, had to clear some trees, and upgrade our existing electrical panels to be able to hook the container up to them,” he says.

The home did not require any special permits, as it is considered a temporary portable structure and isn’t attached to a foundation. “Containers are kind of unique in that way,” he says. “They are already a structure and are structurally sound, so many of the permits and inspections aren’t required.”

Rosslow says the biggest problem he found was the volume of air space within the home. “We had immediate problems with humidity because when you’re in a tiny space like this, just breathing adds a lot of moisture to the air,” he says. “And containers are very tight — literally welded together — so I had to make some adjustments for that.”

With the success of his first container home, Rosslow has gone on to teach workshops to other interested builders, and he has plans to build a full-size home made from shipping containers. “My family has outgrown our current home, and I realized that using containers to build a new home would be the most cost-effective, sustainable thing I could do,” he says.

He estimates the cost of the new home, which will be approximately 3,000 square feet, to be about $150,000, not including land. “There’s no way I could build a traditional home of that size for that price,” he says. “Plus, this is a labor of love, something I’ve wanted to do forever.”

Total cost: $16,000 for tiny home; $150,000 for full-size home

Case study #3: Off-the-grid home

In Alaska, it’s still relatively easy to get away from it all and build in a remote area. For Doug Garrison and his wife, Jeanette, building an off-grid cabin was an affordable way to have a retirement home that they loved. The couple came to Alaska from Michigan in 1982, after a stint in the military introduced them to the state.

They started spending time on the island of Seldovia, located in Alaska’s Kachemak Bay, and an opportunity came up to acquire land there. “We had friends that had a cabin on the island and we spent a lot of time there,” says Doug. “When we heard that there was a lot available, I knew I wanted it.”

Garrison realized that building might be a challenge. “I had no building experience,” he says. “I did hire a contractor to do the framing, but I did everything else myself.”

To top it off, Seldovia is only accessible by boat. The water-only access proved to be one of the most difficult aspects of the build, as getting materials over to the island was no easy task. “I had 6,000 pounds of materials brought over by barge, and everything else I transported myself on my 18-foot skiff,” says Garrison.

Their budget of $20,000 included the contractor for the framing, building materials, a heater, propane appliances, and most of the home’s furnishings. “The biggest savings on the build was simply by doing it ourselves,” he says. “If I didn’t know how to do something, I researched or asked friends for advice. I even did the electrical myself — and I’m not an electrician.”

The remote location also meant Garrison was able to avoid having to get any kind of special permits or inspections, and while he initially got a generator for his electrical power, he has since gone solar. “We’ve purchased two solar panels in the last five years,” he says. “If I had it to do over, I’d probably go 100% solar — it’s that efficient.”

His only other regret was trying to cut corners on things he shouldn’t have, such as windows. “I initially bought used windows,” he says. “They, unfortunately, didn’t last, the seals started breaking and they were drafty — so I ended up buying new ones anyway.”

Garrison says that building his cabin was a process, but was an affordable way to have a remote home that they could enjoy. “I’d advise anyone looking to build off-grid to ask lots of questions, and do as much work as you can yourself. It was a lot of work, but I also saved a lot of money.”

Total cost: $20,000

Case study #4: The owner-contractor build

Also, in Alaska, firefighter Ben Lewis decided that the only way he was going to get the home he really wanted was to build it himself. “I started working as a carpenter when I was a senior in high school and was in the industry for 12 years before I got hired as a firefighter,” he says. “My wife and I had talked about building our own place for a long time, and I knew I could save by doing the bulk of the work myself.”

Lewis started by seeking out the perfect lot, which took some time by itself. “I found one lot I really liked, and I decided to get the soil tested before I bought it. I hired an engineer to run soil samples, which was kind of expensive, but it saved me money in the long run because, as it turned out, the soil wasn’t good for building,” he says. Lewis and his wife ended up finding their lot just outside the city of Anchorage.

Lewis did the footings, foundation, and framing himself, as well as all the interior trim work and some of the flooring. “Just on the framing alone, I saved at least $40,000,” he says. “We got a bid for framing when we started that came in at $50,000, and I did it myself for about $10,000.”

He did hire an architect to create the plans, as well as subcontract some of the more specialized work, like electrical and plumbing.

The proposed budget for the build was about $125 to $150 per square foot. Lewis says they went a bit over that — mainly because he wanted a high-quality, energy-efficient home. “I think we ended up spending closer to $175 per square foot, but that included things like in-floor heating and triple-pane windows,” explains Lewis. “If I’d hired someone else to build the home, there is no way I could’ve afforded those extras.” The finished home is right at 2,800 square feet.

Lewis recommends that anyone looking to build their own home should take their time and research the process. “We took about a year to plan our build, and the construction took about 14 months,” he says. “You should always have a buffer with your budget because costs inevitably end up being higher than you think.”

For Lewis, the satisfaction outweighs any of the difficulties that building your own home can bring. “I live in a house I built myself,” he says. “That’s the reward.”

Total cost: $350,000

Being your own builder

For most people, the expertise required to build their own home makes this a risky proposition, especially for homes of traditional size and construction methods. However, for those willing to explore solutions such as tiny homes, factory-built “pre-fab” homes, or even container homes, it is possible to save money while creating a unique place to live.

Header Image Source: (Alex Robert/ Unsplash)