CONSTRUCTION COSTS SHOULDN’T BE THE ONLY COSTS ON YOUR MIND WHEN YOU ARE THINKING ABOUT RENOVATING YOUR HOME
If I had a dollar for every time I was asked: “what is it going to cost me to build my home?” I’d be a millionaire…
This question is asked by friends, by family, by work colleagues, at social gatherings….everywhere you can imagine.
Unfortunately, it isn’t as straightforward question as you would think… it is, in fact, the ‘million’ dollar question.
The answer, however, is a bit more involved than you might think.
It’s not a matter of simply looking at a picture (or imagining what you describe) and plucking a figure out of the air about how much your project is going to cost, as many people assume (and some professional unfortunately imply).
This is one of those ‘You don’t know what you don’t know’ moments.
Playing ‘Ostrich’ isn’t the Answer
Don’t put your head in the sand on this topic. Most peoples biggest fear when thinking about renovation is budget blowouts. PLaying ‘Ostrich’ whether it’s by accident or design is one of the big reasons blowouts are so common.
Having a realistic cost figure so you can formulate a budget figure that is realistic is the best start you can make for your project – and it is never too early to start to get a handle on it. But to do this you need to understand the coal realities.
A Big Difference
Unfortunately, most people think and talk about costs, they are talking about construction costs when the conversation should be about project costs.
So what’s the difference you ask? A big one – is my answer.
Construction cost refers to the costs associated with constructing and/or renovating the building. While project costs are the sum of all the other costs associated with your project from the inception through to occupancy
There are many variables and hidden related costs that you need to allow for and if you don’t make allowances, expect to get a very rude shock. Without considering the weight these costs can carry and allowing for them, you won’t come even close to coming in on budget.
And It’s the kind of weight that could stop your project dead in its tracks.
Too many budgets are formulated using only the “ construction costs,” not considering any of the other “soft costs,” setting their maximum available amount of money at a level well below what will be necessary to complete the project.
When the budget is gone, the construction stops – period. Or you’re only alternative is to increase your loan to meet the shortfall. Not a position you want to find yourself.
So what Costs are you talking about?
So, here are some of the other costs you need to be thinking about.
Costs associated with the foundation and the building itself
- Windows & Doors
- Structural steelTimber
- Hardware (bolts, nails, screws)
- some fitout and fixtures items
OTHER PROJECT COSTS
These are the rest of your cost that will include things like:
- Professional Fees of your project team : Architect and Civil, Structural, Electrical, Mechanical, Engineers, as well as Landscape Architect, Interior Designer, and other specialty consultants depending on the size and complexity of the project.
- Council Approval fees & Charges
- Construction Costs including Variations & Contingency
- Furniture and other fitout items that need to be purchased or allowed for outside the build or contract cost
- Swimming Pools (if included)
- Hard and soft landscaping elements (if included)
- Rental and moving costs, if moving out
- Financing costs and Increased Mortgage repayments
Your Project Cost is really the sum of all of the above. It important to develop a Project Budget that includes all the possible project components so you can work out how to fund each. This way the funding for the entire project is identified early and the problems associated with unidentified costs are minimised, reducing the chance of budget blowouts.
In the initial budget stage, these costs will be non-specific, but they should be defined as such, and always be calculated by erring on the high side.
I’m not trying to talk you out of renovating but the old adage ‘Forewarned is to be forearmed’ is very apt.
These costs are going happen whether you allow for them or not.
Forewarned is to be Forearmed
Your home renovation budget should be well-planned and realistic if you calculate all these factors into it. It’s important also to add a little extra to that budget so that you have room for the unexpected. An accepted minimum amount to cover any unexpected costs is in the vicinity of 5-10% as recommended by the Australian Government initiative Your Home. The size and complexity of your project will dictate this figure.
It’s never too Early
As soon you have drawings that you can measure accurately, with areas and linear meters is the time to start getting an idea or possible costs.
It is important to be upfront about what your construction budget is to your consultant team and ensure that you get a number of costings done along the way to ensure that your proposed project is within your budget.
Being realistic about your Renovation Cost realities means you’ll be able to be realistic about your budget and the affordability of your project. Getting this right will go along way toward setting yourself up for renovation success.