Is It Cheaper to Buy Land and Build a House in the Denver Area?
Many aspiring homeowners look at the cost of homes in the area and wonder if it would simply be cheaper to buy land and build a house. $650K for a 1,000 sqft ranch home in Boulder? That’s out of reach for most people. And that’s when the search for a vacant, buildable lot ensues.
With a custom home, you get to design every detail, tailor the space to your lifestyle, and create something entirely your own. However, buying land and building a house can cost significantly more than purchasing an existing home.
Between land prices, construction costs, borrowing challenges, and the time involved, building a home can quickly exceed the cost of a regular real estate transaction. Let’s look into the costs associated with building a home in the Denver area. If you need house remodeling in Boulder, foundation repair in Denver, an addition in Aurora, or anything else, please do not hesitate to give us a call. We’d be happy to give you a free estimate.
Land That You Can Build on is Expensive
Many buyers don’t realize that not all land is immediately buildable, and lots with improvements already in place often cost a premium. If you aren’t careful, you could end up buying a lot for which you can’t receive a permit, install septic, or add other necessary updates.
Vacant Lots With Improvements are Priced at a Premium
Improved lots—those that already have utilities, access roads, and proper zoning—are significantly more expensive than unimproved land. Why? Because they save buyers months (or even years) of prep work. In Colorado, buying unimproved land means navigating miles and miles of red tape and performing extensive testing. Perc tests, for example, are often required to assess whether the land can support a septic system. You’ll also need a soil stability test before you start building.
Also, permits are not guaranteed! If you purchase a lot without knowing whether the county will approve your plans, you could face expensive redesigns or, worse, a complete denial. If you see a plot of land on Zillow that was recently purchased and re-listed a year later, there’s a chance the owner couldn’t get permits for their project.
Colorado’s building codes and land-use regulations vary by county. For instance, properties in unincorporated areas may require additional zoning reviews. The time and money needed to get unimproved land ready for construction often offset any initial savings.
Borrowing Costs For Land are Higher Than Houses
Financing land is more complicated than financing a home. Most people who buy a house get a 30 year mortgage at a 7% or lower interest rate (as of 2025). Land loans, on the other hand, typically have shorter terms—usually 15 years or less—and higher interest rates. That means the monthly payments will be quite high until you own the land outright.
Lenders also require larger down payments for land. While a home mortgage might allow for as little as 5% down, a land loan usually requires 20-50% upfront. Furthermore, you’re likely competing against cash buyers or well-funded developers. Sellers will usually accept an all-cash offer vs. an offer from someone with a loan.
You’ll Need to Maintain a Home Elsewhere During Construction
Don’t forget that you’ll still need to live somewhere during construction. Construction timelines can be unpredictable in Colorado because of our weather, and labor issues, permit delays, or backlogs from material providers can push the timeline back further. If you plan to build a custom house in Denver, prepare to weather the storm in a rental or your current home.
Costs of Building the House Itself
Land is expensive, and the house won’t be free either. You will need to account for materials, labor, design, architecture, and more.
Home Construction Mortgage Costs
Construction loans work differently from traditional mortgages. They are short-term loans that cover the cost of building your home, and they can usually be converted into a standard mortgage after construction. To apply, you will need detailed building plans, a timeline, and cost estimates in hand. Note that interest rates on construction loans may be higher, and lenders release the funds after different phases of the construction project.
Costs of Materials
Steel, concrete, and even basic items like drywall and insulation can be surprisingly expensive in Denver. And since you are picking out each material yourself, you may be tempted to go way over budget (it’s a common pitfall!) Exotic wood floors, granite countertops, smart lighting, cathedral ceilings, bay windows, high end appliances – before you know it, you’re building a $2M home.
Your general contractor will include the cost of materials in the initial planning phase, and they will be itemized. But every luxury material you add (like ceramic siding) may significantly increase the cost.
Costs of Labor and Architecture
Architectural fees for custom home designs can add up to 5-15% to your overall budget. It’s well worth the cost, but there’s a reason that big developers build the same style of home over and over again. Then you have structural engineers, the drywallers, framing crew, and every other type of professional involved. The home build will function as a mini economy during the project.
Building a Custom Home is Still Incredibly Rewarding
If you already own the land, you’ll be building equity in the home very quickly. You can also borrow against the value of the land to fund the construction of the house. And as long as you don’t build something extremely odd, the custom home will most likely appreciate more than a cookie cutter house.
But most importantly, you’ll have a home that is 100% uniquely yours. You can build a life in a space that reflects your personality, and every time you pull into the driveway, you will be overwhelmed with pride.
We Are Denver’s Custom Home and Builder and Renovator
At Arise Constructions and Remodels, we build custom homes, fix foundations in Boulder, renovate properties, and much more. If you have a potential project in mind, we would love to hear from you. From large-scale additions to kitchen and bathroom remodeling, we are here to help.