For every renovation or construction project that is completed on budget, there is another that goes over budget. Budgeting is not difficult, it is probably one of the easier aspects of a construction project.
As we look at our past projects, there are key elements that determine whether a project will be completed on budget, or go over budget.
1. Determine what you want and need
Consider everything you may want to renovate as part of the project. For example, if you’re building an addition to your house, you may not be able to march up some of the products, such as interior doors, to look the same as the older part of the home. This may lead to wanting to replace all the interior doors in your home. Consider how one item may lead to another item that may want or need to renovate or replace.
2. Invest in design
A clear and comprehensive design allows you to see what your project will look like before it is built, and helps your contractor price the project accurately. And when construction starts, it gives your builder clear instructions on what to build, reducing errors and the need to rebuild. Design can be as simple as floor plans, or more detailed such as 3D drawings and furniture placements.
3. Stick to the plan
Changes to the plan and additional work usually lead to additional cost. Changes in work can come from several sources: homeowner initiated changes, contractor suggested changes, and unforeseen condition. The first two – homeowner initiated changes, and contractor suggested changes, are the easiest to control.
4. Allow for contingencies
Your well conceived plan may have to change. Structural or mechanical items that are hidden behind walls may increase costs. Or a building inspector could impose an additional requirement. Generally, the older the home, the greater the possibility of additional work being required. And the more complex the project, such with wall removal, the greater the possibility of additional work being required. A well conceived plan and budget will have an allowance for such items. You contractor or builder should be able to suggest a reasonable allowance, based on their past experience with homes or projects such as yours.
5. Choose a Fixed Price Contract
Contractors and builders work either on a fixed price contract, or on a time and materials basis. With a fixed price contract, the contractor assumes most of the financial risk. With a time and materials contract, the homeowner assumes most of the financial risk. A fixed price contract is the closest to a guarantee that the work can be completed on budget.
6. Read and Understand the Contract
The contract may include assumptions, exclusions and allowances that may incur additional cost to you. Make sure you understand what assumptions and allowances the contractor is making in the contract.