|
Are
You
Lucky
If you had not
planned on some serious attention to budgets and cost then you are either
not serious about designing a house, or you are wealthy, or you are
shortsighted. If it is the latter, let it be said clearly; Cost
estimating is the number 1 priority in design if you really intend to have
the design built. Hence the reason for it being right up front as the
subject of Chapter 2. Furthermore costs change all the way to and during
construction. COSTS ARE ALWAYS CHANGING.
Next, more bad news;
Cost estimating is NO fun and takes time and patience. For me it is by
far the most tedious and frustrating part of designing buildings. Of
course maybe you are a numbers person with lots of patience and time. Good
for you, the following information will be enjoyable (very hard to
imagine).
Why is Cost
Estimating so horrendous?
-
There are only two types of
information available on construction costs; the very, very, very
general (cost per square foot) (sq. ft.) and the very detailed (unit
costs).
-
Very detailed costs although good
just before construction are impractical starting out at the beginning
of the design.
-
The very general seems too 'iffy',
more like guessing. In fact budgeting is often called 'guestimating'.
-
Builders will attempt to discredit
sq. ft. costs and steer you away into details much too early. Basically
many builders will refuse to help you at this stage partially because of
inaccuracy but also because they do not want to be held responsible when
the cost comes in higher than expected.
-
Costs ALWAYS come in higher than expected. The purpose of
budgeting is to limit that tendency.
-
Budgeting and cost estimating takes
lots of TIME. And you end up in the budgeting stages with that something
called a 'guestimate' (read plus or minus 20% if you do a good job).
Is there any
good news?
-
You
will avoid drastic redesigns since
hopefully just before construction you will not find it will cost twice
as much as you can afford (or want to spend).
-
There are
pretty good books available for all stages of the process; budgeting
through final construction estimates.
Click here to see
several available.
-
You will feel more secure and in
control of your design.
-
You will spot
inflated prices.
-
Eventually after a house or 2 you
will build a library of costs and experience. Your time will be cut to a
fraction of the amount of the first house.
Costs are
Always Changing, Why is it like this?
This is tough to swallow. There are NO fixed elements in
Construction costs, NONE. Everything going into cost is variable over: time, region, exact
location, house type and individual builder.
You and the builder want (at least
by the end of the process) good fixed costs you can go to the bank with.
Yet nothing in the industry is fixed.
Boy what a fix! (Pun intended). Let's break the reasons down.
-
Everything is subject to inflation.
-
Things
in the city cost more than the country.
-
Things
far away cost more than things close (often).
-
The
whole world is in competition.
-
A custom
house costs more than a standard builder's production
house and the more custom it is the fewer previous examples there are to
base prices on.
-
Some
materials are more expensive than others and these too change (a quarry
closes up).
-
The
material coming out of the ground (trees, etc.) vary in cost –different
lumber suppliers, drought, bugs, overseas demand, shipping costs, labor
costs.
-
One
builder has just finished his house and is hungry for the next one,
another builder has many in his pipeline and is not.
I think you get the point.
Because of this 'Catch 22' (is my
age showing by using this book name?) of no fixed costs you can expect two
things; one good, one not so good.
- The
builder may have legitimate reasons to want more money regardless of how
good your estimating was.
- The
banks expect costs to change and the builder to need more money. They
build in a % for these (called a contingency factor) but do not tell you
so. They want the tightest job possible and when you really squeal
usually some money will be available.
Basic
Guidelines
Ok, if you are still reading you are
not person number one (not serious) or too wealthy to care. So next
are some details and a sample budget as well as a reference
table.
You got the
message from above that there are two general types of estimates; the
Budget and the Cost Estimate. To repeat; estimating starts at the very
general (cost per sq. ft.) and gets more and more detailed until just
before construction begins.
There are 4 stages of cost
estimating in the building industry.
-
The
Preliminary Estimate: the Budget Guestimate done before anything is
designed.
-
The
Design Completion Estimate: done after you have completed the design
but before Construction Documents.
-
The
Construction Document Estimate: done after all the construction details
and specifications are worked out.
-
The
Final Construction Estimate: done after revisions resulting from the
previous estimate and after review by the builder, bank and any other
authority involved.
In housing often the last 2 are
combined.
For the
remainder of this Chapter we are going to discuss only the Preliminary
Estimate; your Budget and Guestimate. The other estimates will
be mentioned in subsequent chapters.
Your First Budget
This is the easy part, take
advantage of it the short time it lasts. A simple question- what can you
afford, or how much do you realistically want to spend? Consider
this carefully. Debate it, go to the bank for a preliminary mortgage per
net worth review. Then establish a cost range; a low and a maximum high to
spend. The amount in the middle is your budget target.
Let's say after studying the matter
you feel confident at $150,000 and could stretch if absolutely necessary
to $250,000. This makes $200,000 your budget target with a leeway of
20 to 25% either way up or down. This is a good healthy safe range which
will avoid redesign and disappointment in the end.
So what is next?
Next decide the caliber or type
house you want. You have dreamed about this already so it should not be
hard to decide. The industry breaks these down as follows and the eBook
has more discussion and graphics on the matter.
- Economy
- Average
- Custom
- Luxury
And I have added these 2
- Architectural Custom
- Architectural Luxury
Cost manuals are available for
sale by others which can give you the basic costs (per sq.ft.) for the
first four types. See the end of this chapter for links. The last two are
for houses designed by architects and are usually one of a kind and
very unique. Costs for the last two start at Luxury and go up with little
upper limit.
There is one other category to
mention. It has had revitalization in demand for maybe 30 years or more
now and the above categories really do not cover it. Let's call it the
'Post and Beam Revival'. Revival since really it goes far, far back to
the Greeks if not further. Here in the US. you see its earliest form in
barns. A simple technology; some posts and a beam between with a roof. For
the purpose of getting your budget started, if your heart is set on a P &
B add 20% to the cost of one of the categories above. (and if anyone has
some hard comparative numbers please email me).
You may at this time be wondering
why I do not just give you some of these 'basic costs' particularly since
they are so 'basic'. Believe me I would love to but you remember the
paragraph above where everything is variable in
construction. Well that is the reason. $100/sf. in North Carolina might be
$200 in the suburbs of New York City, or $150 next year for x y and z
reasons. After all, the manuals I referred are whole books on their
own. I would be gravely misleading you by inserting some numbers
here.
Now the 3rd Step
-
Research the neighborhood and builders available. Choose a
couple of builders and home owners who have recently built there.
Interview them. Find out what cost per square foot
they think is reasonable at that time and market place for your house
type. Don’t be put off if builders resist giving you information, be
persistent. Tell them outright that considering them for the project
depends on giving you this information and other help as you go.
Ask to see plans of the houses they are quoting as an idea of how close
a ballpark everyone is talking.
-
Divide your budget target by the
per sq. ft. amount. You have your first rough size to
consider. Is this large enough? Enough bedrooms? garage? etc. Look at
plan books and the neighbors again or use your past houses as experience
and decide now on the feasibility and desirability of your design
project. For example; lets say you get a sf. price of $100.
Target budget of
$200,000 divided by $100/ sf. is 2000 sq. ft.;
Lets say this is (for me) around a
large 2 bedroom, medium 3 bedroom home with
an unfinished basement and small 2 car garage. Suitable? Great, on you go.
Not suitable? Maybe its time to shelve the project until next year.
If it’s a go decision then the next
step is before you. Are you the hands off type? Or the hands on, or I
just want
to know type? If you are the former then really you can stop here, hire a
designer, or design something yourself around 2000 sf. and hope for the
best. But if you are hands on (or just more careful) you will want to proceed
as follows.
The 4th Step
The 4th budget
task (the real task) is to break down that $100 /sf. $200,000 into house
'parts'. In this way as you go forward in the design process you have
'line' item budget targets to help you see where you can add something
special or where you are over the mark. In short it allows you to balance
and juggle with some intelligence. For line items you use the typical
trades that go into a house and the average % of each that over time
history has shown as 'ballpark' accurate in preliminary estimating.
How? You use any source at hand,
your bank may have one, or your favorite builder. It's basically a simple
spread sheet such as below where each trade is granted a % of the whole
cost (which obviously comes to 100%).
 This particular spreadsheet owes its origins to the FHA but it has been tweeked
by me over time according to experience. The %'s here are for an
average to low cost house of modest size and appointment. Meaning if
you are planning a more luxurious home with say lots of windows and some
stone veneer, the percentages must be adjusted. The eBook version of
this chapter will show you how as well as provide an 'active' spreadsheet with all the % cells completed.
There are also several major cost variances
that should be mentioned that the handy spreadsheet does not cover. We
will only list them here, once again see the full eBook for more.
|
