This is an update of a post I did some years ago, mostly to update numbers – due to inflation, and because of how hot the remodeling and construction market has become, costs have risen significantly since my initial post.
Budgeting is an important concern on any project. By starting out with reasonable goals, understanding what you want from the project, keeping some important ideas in mind, and developing realistic cost estimates from the start (and revisiting these as the design progresses), you should be OK.
Intent
First of all, think through your reasons for taking on the project. Are you adding needed square footage? Increasing functionality? Making aesthetic improvements? Wanting to add value to home? Understanding your own goals can help make decisions about budgeting easier.
Determine Scope
What is the smallest or less involved project that will achieve your goals? Ask yourself what project will have the most value to you – i.e. give you what you want in the most cost-effective manner. Is it a minor remodel (mostly cosmetic improvements)? Is it a major remodel (involving opening up floor plan, new kitchen, etc.)? Is it an addition, perhaps as part of a remodel? Or is it a total tear-down (or I should say, deconstruction) and new building?
Determine Budget
Think through what your budget is, and remember to consider not just Construction Cost but Project Cost. The Project Cost includes professional fees (architect, consultants etc.), permit fees, bank fees, insurance, in addition to the cost of construction.
Be realistic – account for reasonable costs to estimate your budget. I once had a potential client who came to me wanting to do a full second story addition for $40K – and wanted to have it completed (designed, permitted & built) in 4 months!
Some homeowners try to hide (low-ball) their true budget from a contractor, thinking this strategy will lead to a lower cost estimate. I believe it’s better to be up front from the start about what the actual budget is, and then develop a team that works together to respect (and meet) that budget.
It’s always wise to include a contingency in your budget (5-10%). This is especially true in a remodel, where you often don’t discover issues until the existing walls are opened up. A contingency has the benefit of making you feel more at ease entering into a project, and can allow you to splurge on some things further into the project.
Rarely does a client’s initial budget equal the initial construction cost estimate. And guess what? – usually the former is lower than the latter. On most projects there is some juggling of the elements of the project – the budget, scope, or schedule. For example, often the clients have to raise their budget to achieve their goals and program, or if their budget is set in stone, the scope has to be reduced.
Ballpark S.F. Costs
To estimate construction cost early on in a project, the easiest way is to apply typical square foot costs. Numbers I often use are:
- New construction = $300-350/s.f.;
- Major remodel = $250-300+/s.f;
- Minor remodel = $150-200/s.f.
Remember that the smaller a house is the more these numbers will tend to rise – economy of scale. On an addition project, remember to account not just for the new construction, but also the cost of work to the existing parts of the project. For example, in a full second story addition, don’t assume the construction cost only includes the area of the addition, times the new construction factor. There will be significant costs to the existing portions of the house too, where the structure to support the new second story needs to come through to reach the foundation, to connect new to existing plumbing, electrical, mechanical systems etc, in addition to elements such as stairs to reach the new second floor.
Strategies to Control Costs
- Think small – the best way to control budget is by reducing the size and scope of your project. Often rooms can be combined to serve more than one function – an office can act as a spare bedroom when needed, or the laundry can be located in a mudroom or powder room. Is a separate living room really needed?
- If you’re planning a teardown and new house, consider a remodel of the existing structure. This is not always a cheaper option – it depends on the project.
- Keep the floor plan simple. Keep the design simple. Use straightforward vs. complicated elements and details – there can be beauty in the simple expression of natural materials that don’t need elaborate trimwork to “spruce it up”.
- Prioritize your program and concentrate on highest value goals. Save the splurging for the parts of the project that will have the most impact, or mean the most to you. This might be in the areas guests will see, the areas you’ll spend the most time in, or it may be in the master bath – every project, and every client is different.
- Phase work within a master plan – sometimes it makes sense to break the project up into pieces, and implement them over time as budget allows.
Other Strategies to Control Costs
- An open plan makes a house feel larger.
- Limit moving of structural components.
- Limit mechanical/plumbing/electrical work.
- Limit extent of house affected.
- Be creative with materials and finishes – sometimes the imaginative use of off-the-shelf materials can have more of an impact than expensive “fancy” materials and finishes.
- Let components of the architecture do “double-duty” – for example an exposed (perhaps colored?) concrete slab in the basement acts as both the structure and the finish floor.
- Do some of the work yourself. Some clients act as their own General Contractor (G.C.), which can save contractor overhead and profit costs, and sales tax on the project. There are risks associated with this approach, so be careful.
- Research and source building materials and finishes yourself.
- On some projects the owners can stay in the house during construction, and save rental costs during the course of the project. There may be higher construction costs associated with this approach, however (for example the cost of taking more care every day to protect the inhabited portion from construction dust etc.), that may partially offset the savings.
Tips
If you don’t have one already, shop around for contractors – interview 2 or 3 to get a range of cost estimates. And don’t always opt for the lowest bidder!
Select a contractor early in the design process, and get their input about constructability, schedule and construction cost as the design progresses.
Understand the timeline needed to design and permit a project. In Seattle it can take at least 6 months to get a project permitted, so remember to factor this into your plans.
Do multiple cost estimates as the design is refined.
Keep long term costs in mind – for example, upgrading to a more efficient heating system can be a big up-front cost, but will pay for itself over time in reduced energy costs.
Salvage/recycle/reuse
Consider adding an ADU (Accessory Dwelling Unit), or Backyard Cottage. This can be rented out, and provide income to offset its construction cost.
If you have a too-short, substandard basement, consider raising the house a couple of feet to turn it into a fully functional new space.
Consider recycling an old house! A client several years ago bought a house for $1.00 from a builder who was going to have it demolished. We deconstructed the existing dilapidated house on his lot, and had the house he’d bought moved to the site and installed on a new foundation/basement: http://www.seattlepi.com/default/article/Imagine-paying-just-1-for-a-home-plus-moving-1242517.php
And lastly, I recommend not making decisions based on some theoretical future home buyer. Unless you’ll be selling your house within a year or two, it’s better to make decisions based on your own goals and preferences.
