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Home Building: 8 Ways to Stick to Your Budget
When remodeling or adding on, know thyself, plan well, and beware of 'scope creep'
Houzz Contributor. My name is Bud Dietrich and I am an architect located in the Tampa Bay area of Florida. I am licensed to practice architecture in Illinois, Florida, New Jersey & Wisconsin and I am a certificate holder from the National Council of Architectural Registration Boards (NCARB). Since 1996 I have worked from my home office and provide full architectural services exclusively to the single family residential market. My passion is to transform my clients' houses into their homes. I strive to have the "new" home accommodate my clients' lives without fighting them at every junction. I look to add curb appeal to encourage a beautiful streetscape. And I design any addition to look and feel like it has always been there.
Our projects have won numerous design awards as well as having...
Houzz Contributor. My name is Bud Dietrich and I am an architect located... More »
Inevitably, any new client will ask me "How much will the project cost?" The answer isn't always straightforward and easy. You see, a home construction budget, in both its creation and its maintenance, is more art than science.
Sure, it's easy to say the project is a new 2,000-square-foot house that will cost $200 per square foot to build. But what does that represent? Will it be the home you want? Does it factor in all of the intangibles and idiosyncrasies that any home construction project has? And you can certainly ignore any cost-per-square-foot guideline if it's an addition or remodeling project. Dealing with an existing house, especially one that's a little older, has its own set of rules.
Having said that, the best approach to identifying costs for your specific project and location is to talk with several architects, designers and builders. Each will probably give you a different "number," so you'll have to drill down into the detail of what that number means. Just remember that the devil is in the details.
Sure, it's easy to say the project is a new 2,000-square-foot house that will cost $200 per square foot to build. But what does that represent? Will it be the home you want? Does it factor in all of the intangibles and idiosyncrasies that any home construction project has? And you can certainly ignore any cost-per-square-foot guideline if it's an addition or remodeling project. Dealing with an existing house, especially one that's a little older, has its own set of rules.
Having said that, the best approach to identifying costs for your specific project and location is to talk with several architects, designers and builders. Each will probably give you a different "number," so you'll have to drill down into the detail of what that number means. Just remember that the devil is in the details.
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1. Identify the project. Will it be a new home, an addition to your existing home, a kitchen or bath remodel or some combination of these? Each has its own budgeting method. While a simple "per square foot" cost may work for a new construction project, it definitely won't work for kitchen and bath remodels. And for something like an addition or renovation to a historic home, toss out any sort of cost guidelines. The best approach to establishing a budget for projects like these is to talk to professionals with experience.
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| 2. Identify the pieces within your budget. Clients often don't identify all of the pieces of the budget. Sure, the largest piece might be the construction costs, but there will be many other costs. They can include land costs, legal fees, moving, decorating, landscaping, impact fees, architectural fees, permit costs and financing costs. At the outset, identify all of your potential costs and assign each a value. It would be a shame to finish the house but have no money left for landscaping or furniture. |
| 3. Know thyself. If you just have to have that beautiful range that costs as much as a new luxury car, don't budget for the generic range from the local appliance store. Think about what you really want and how you really want to use the home you're creating, and make sure you've budgeted for it. |
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4. Expect to splurge. In the budget, allow for the few places where you'll want to splurge. For example, the kitchen backsplash is a place you may want to do something truly special and remarkable. If you spend a lot of time in the kitchen, the backsplash is something you'll see several times a day for many years. Even if it costs a significant amount, allow yourself to splurge a little on something you'll enjoy.
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| 5. Have a plan. A sure way of busting your budget is to defer decisions or, as they say in Washington, "kick the can down the road." Construction has started and you haven't made nearly enough decisions about what tile, what plumbing fixtures, what trim, etc. The builder starts pressuring you to make decisions or, worse, just does something without your input. You may find yourself tearing out work or, worse, have to live with something you really don't like because you don't have the time or money to change it. The best way to avoid these nightmare scenarios is to have your architect and/or designer prepare a detailed set of drawings and make all of your decisions before starting construction. Then, don't change your mind. It's easier said than done, but preparing a plan and sticking to it is the best way to stay on track. |
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6. Have a contingency. Like other laws of nature, the law of a construction project is that "stuff happens." It could be a problem with the bearing capacity of the soil or uncovering rotted wood when getting ready to build the addition. The best way to deal with the unknown is to allow for a contingency in the budget.
The best approach is to start with a higher contingency, say 15% to 20% and then gradually reduce the contingency as you go through the project phases. When you first start the design, you'll have a line item in your budget for a, say, 20% contingency. After the drawings are done and the pieces of the project are identified you might reduce the contingency to 10%. As you you go through construction, you'll be able to reduce the contingency even more so that when construction is complete the contingency is zero.
You don't have to spend that contingency. If it isn't used, consider it found money that you can save. That's a great way to feel good about staying on track and coming in under budget.
The best approach is to start with a higher contingency, say 15% to 20% and then gradually reduce the contingency as you go through the project phases. When you first start the design, you'll have a line item in your budget for a, say, 20% contingency. After the drawings are done and the pieces of the project are identified you might reduce the contingency to 10%. As you you go through construction, you'll be able to reduce the contingency even more so that when construction is complete the contingency is zero.
You don't have to spend that contingency. If it isn't used, consider it found money that you can save. That's a great way to feel good about staying on track and coming in under budget.
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by Lewis Aquatech
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| 7. Beware scope creep. A sure way to bust your budget is the dreaded "While we're it we might as well ... " You may justify it by saying "it'll only be a few hundred dollars," but once you do that a few times, you'll have added a bunch of work and will definitely blow your budget. Remember that you made a plan and remain determined to stick to it. |
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| 8. Consider tradeoffs. Sometimes it's difficult, if not impossible, to pass by that truly remarkable item that you find during the project that's not in the budget. When this happens, take a look at your budget and what you have left to accomplish, with the goal of reducing the cost of something else to afford this new find. Is there a part of the work, such as painting a few rooms, that you can do yourself? Maybe you can use carpet in lieu of hardwood in the guest bedroom. Get what you want and stay on track by moving budgeted amounts from one pocket to another. More: Follow a Ranch Home Remodel from Start to FInish |
Ideabook updated on June 16, 2012.
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Having worked as an architect in the custom home and residential remodeling market for 25+ years, I have been trying to write a blog about people and their budgets, so far unsuccessfully. Unfortunately it's been tough to get past the part where I throw my clients under the bus for having unrealistic expectations and an undisciplined approach to budgets and choices (which by the way are all based completely on emotion). This article gives people constructive concepts to help them understand how to create an effective approach, know why the budget creep is happening, and perhaps the most important point of all, that for the most part they will probably be their own worst enemy. Suzze - if you make sure your plans are detailed and complete, the contractors will be forced to have realistic allowances in their bids. I'm confused . . . who didn't do their homework? (see rule #5). If you leave the allowances up to the contractor, don't be surprised when they put in the allowances on the low side, as they need to look competitive in order to get the job. In this economy more than ever.
Thanks Bud.
-Jason
Without a design, my budget is really close to worthless. I can closely predict what a particular house may dictate construction-wise, but I cannot possibly know what finishes an individual may want in their home. The vast amount of selections to make with an even larger range of pricing for this items makes it nearly impossible to define a budget. Plan, plan, plan is the only way to have a project hit budget. And, if you choose not to plan and wing it along the way, please do not blame the contractor. We would love to have detailed material lists so we may price your home/addition/ kitchen accurately. It is equally frustrating for us to wait for your decisions, re-schedule due to changes you have made (or not made). We are forced to bite our tongues every time you ask " why is it costing so much and why is it taking longer than you said it would."
I also have to say that having every line item chosen at the drawing phase is a difficult task. Easy to say here, to tackle that before ground is broken, but some items need framing, window placement, and a visible site line before we can decide what lighting and tile will work in the space. The trick is to be a couple steps ahead of the timeline. Weekly meetings with the crew and homeowner is so helpful. Find out what the next phase requires in place. Some items need lead time as well...i.e. Many tile lines need 4 weeks or more to be ordered and shipped. Always leave a little extra time for problems. Too little shipped or wrong color ordered etc.
In my 15 years in this business I have yet to be on a job that didn't evolve a bit from the original drawings. We can not see into the future {if only} and know about that termite damage inside the plaster walls or the mistake the builder made 50 years ago that has remained unseen until the walls came down...We have to remain open to a bit of wiggle room and a lot of patience and understanding throughout the entire process.
SO before you renovate have these 4 things in place...
Architect
Designer
Contractor
Therapist
Happy Renovating people!
Thanks!
Project creep is rampant at this stage - "could use some better lighting in the master bedroom", "pocket door would be really great on the master closet", "that laundry chute in the guest bathroom is enclosed in a ginormous box rendering the closet of the room next door practically useless - let's rip it out, oh, and that means that the cabinet the chute comes out in the laundry room needs to be replaced", "getting rid of carpeting on the hallway stairs would make cleaning much easier - but does that mean I have to replace carpeting in the hallway with hardwood, and where would that project stop and how much would it cost", etc. etc.
Once he drills down on a theme for the various aspects of the original project, he comes up with a budget that includes contingencies and options for savings. This pulls me back down to earth and I start setting my priorities - OK, pocket doors are out, is there a less expensive option for medicine cabinets/lighting/tile that is acceptable, do I want to spend the money on radiant heat in the floor or save it for the hallway project? He helps guide me toward products that meet my needs in my price range, keeping in mind how this project blends with the rest of the house and an eye toward how it would look to a potential buyer in the future.
It may not be the ideal progression - some folks wouldn't want to go through the dream stage and have to give up parts of that dream - but my contractor spends time thinking about ways to accomplish the dream theme when the reality might not fit the budget. He's well worth his fee, I trust him implicitly and have recommended him to friends and colleagues many times.