If there’s one commonality we all have when we’re building a dream house or renovating an existing home, we’re all budget-constrained. The general experience of folks is that they make plans expecting it will cost $x, only to then have it cost-out at $x plus 20 percent. But then you can’t afford another 20 percent, so go back on the habit trail to scope it down, until you roughly get to the number you wanted in the first place, only to then have that number balloon when you actual go to build it. And yes, it happens to pretty much everyone.
So here are some of my thoughts on budget as you undertake a big project, with the idea of really keeping the numbers under control:
- Have a real budget and then knock off 20 percent. By real budget I mean how much you can actually spend, then take that number and take off 20 percent. If you’re lucky you may actually come in under your original number, but even that may be a reach.
Once you have a better sense of what you want to do and have some plans, start shopping it to the only person who can really tell you how much it is going to cost: the contractor. Make it clear to your general contractor or builder that every line item must be bid by three different sub-contractors, meaning you will want to get at least three quotes from the plumber, the electrician, the framers, etc. The general contractor should be able to show you these quotes. Have him explain why he went with whom. You don’t always have to take the lowest bid, but if you don’t, understand why not.
- Lock the contractor’s profit.Everyone gets paid, it’s just figuring out the best way to pay people so that their incentives are aligned with yours. One way of doing this is by ensuring that the contractor gets a fair profit… but then that’s it. Generally, the way it works is that on things like change orders (when you change something during construction) or a re-do, the contractor gets 20 percent on top of the price of the change. Make sure he knows that’s not going to happen with you. This makes sure he’s aligned with what you want and isn’t pushing change orders for his own financial benefit.
University of Salford Press – CC BY SA 2.0
- What are the three most expensive words when building a house? “Might as well.” As in, “As long as we’ve already torn down that wall, we might as well put in a fireplace. After all, how often do we open the wall?” Or, “As long as we’re changing out the toilet in the bathroom, we might as well retile the floor.” No might as wells! You have a budget, so stick to it. You can’t afford a fireplace or retiling the bathroom. Maybe in the future, but not now.
- See if the government can help. As we mention throughout our blogs and videos, there’s a world of rebates and incentives that pay you to make your home more energy efficient and sustainable. Examples include a 0 percent interest rate loan to upgrade your HVAC; tax credits for solar, geothermal and super-efficient furnaces and boilers; rebates on insulation and new doors and windows, not to mention another 5,000 programs spread across the country. Find these rebates and use them.
- Don’t get caught up in your kitchen and baths. If a renovation costs you $100 per square foot, it isn’t unusual that a kitchen and bath cost you $1,000 per square foot if you let it. It’s always the place for a tremendous amount of expense, which also means opportunities to save.
First off, get away from imports. No imported tile, countertops or cabinets. See if you can find locally sourced material, particularly things that are made by artisans in your area. This is particularly true of tile and cabinetry; deals can be had. Also, troll the stone yards for countertops; invariably there are some scrap or “orphaned” pieces that may just fit your space beautifully. There’s nothing more of a commodity then countertops; buy it anywhere at the cheapest price.
If you’ve read my blogs, you know what I think about high-end appliances: don’t bother [what I hate about my house]. You’ll pay twice as much for something that works half as well. It’s almost the same thing with toilets and fixtures: get Watersense products and don’t go too high-end; at some point you start paying for design not functionality.
- Scope, scope, scope. Build a smaller house or a smaller addition. There’s no larger point of leverage for the cost of building than how big the project is. So rather than going big, go small. If you want a 1,000-square-foot addition, see if you can get by with 750. Even that small of a change could likely save you some big bucks.
Obviously, this list isn’t exhaustive, nor must you do every step. Instead, think of each as an opportunity to maybe lighten up your budget and use the money for something else (like furniture).