The Ultimate Guide to Budgeting your New House or Remodel Project – Part 2
Once you begin to narrow your focus on the target budget for your project it will be important to understand how your budget will be allocated to the various project pieces. Every home project budget can be broken down into TWO main parts —
the Hard Costs and the Soft Costs.
Hard costs are those costs related to the physical construction of the project — the costs of materials and labor, and the general contractor’s fees to build the home.
The soft costs are typically everything else and include the costs for building permits, city application fees, and professional fees for your architect, engineers, and interior designer.
The Anatomy of a Budget
When we speak of a project’s construction budget we typically focus on the Hard Costs, meaning, how much money you have to build the house itself, and not what it takes to get you ready to build. For instance, if a client comes to us with a $750,000 budget to remodel their home, the first thing we typically ask is “does that include your soft costs, or is that your construction budget?” Their answer will tell me how much frosting is in their bowl (link to first blog)!
If the answer is “Yes, that’s all-in, including soft costs” I’ll know that we have something less then $750,000 to actually spend on construction — typically 20% to 25% less. So, we can now budget about $150,000 for soft costs, and $550,000 for construction. Keep in mind, however, that a $550,000 construction project looks vastly different than a $750,000 construction project.
You can see why having the conversation about budget before you start designing the home is so important. The right architect, and more so, a good architect, will help you define your budget’s anatomy accurately so they can establish a vision that corresponds with it.
Final Thoughts and The Most Useful Tool of All!
Just like the hammer your contractor uses to build a home, your project budget is a crucial tool that will guide you, as the homeowner, in your decisions from the very start to end of the project. Like any tool a project budget is one that needs to be properly crafted, treated with respect, and used in the right situations. Your budget will help shape the design of your home, inform your design decisions, and help everyone on your project team deliver a fully frosted cake.
Be sure to let us know if we can help you define your project budget and show you how to use that tool to make a beautiful home for you!