For any homeowner thinking about a remodel, it's essential to prepare a preliminary budget. But that isn't the end of the story. Of course, the purpose of creating a budget is to both understand and control costs. But,it's even more important to understand the nature of the beast. In any remodel or building project there are 2 general categories of costs to consider; the hard and soft costs associated with your project. Understanding the difference is key:
Hard costs include the fundamental materials and labor involved in building. The nuts and bolts structural work as well as work needed to improve the site per City or County codes. We'll given you some examples of hard costs here:
1) Building costs: Cost of construction as it relates to the structure
2) Site improvements: on- site work such as grading, sidewalks, drainage, etc.
3) Landscaping: most cities require a landscape plan
4) Contingencies: This is an amount budgeted in a construction loan to pay unanticipated costs incurred during construction. Think of it as a project "slush fund" that allows you some wiggle room. The amount typically ranges from 5-10% of total cost for new construction and 10-20% for remodel work.
5) Change Orders: When changes to the scope of work are implemented upon agreement by the architect, homeowner and contractor or subcontractors. A Change Order is work that is added to or deleted from the original scope of work of a contract, which can alter the original contract amount or completion date. They are the #1 reason for taking a project off budget and avoiding them is important. How? The best way is to work with an experienced architect and general contractor with a team in place to manage the project.
Other common causes for change orders are:
- The project's work was incorrectly or "vaguely" estimated
- The customer or project team discovers obstacles or possible efficiencies that require them to deviate from the original plan.
- The project team is inefficient or incapable of completing required deliverables within budget, and additional money, time, or resources must be added to the project. This is common when hiring one-man contractors. They just don't have the bandwidth to manage all the details of a project. This ends up costing money.
Soft Costs are slightly more flexible items including the costs associated with your design work, the finishes chosen, appliances, and the like. These costs also include permits and fees, which can change, off-site improvements like sidewalks & traffic lights, and equipment such as security systems, sound systems, etc.
There is always a cost range which correlates with the products and materials you choose. Knowing the hard costs and then budgeting for soft costs will help you understand the feasibility of your ideas and allow you to identify your project's priorities, recognize trade-offs, and revise your estimates.
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