The stories of helping clients with the financial side of their construction journey can easily be summarised into four categories when the budget hasn’t been the centre of the attention:
1) They designed a home they couldn’t afford to build.
2) They didn’t manage the budget – and therefore didn’t have the money to finish.
3) They looked through rose-coloured glasses and thought they would get a bargain.
4) They over capitalized on the project and forgot about the commercial return and lost money on it. Regardless of your expertise these circumstances can quickly happen to your build so lets stop now and establish “Who is managing the budget?”
Planning well will avoid these circumstances which are distressing and can have a long-term financial impact, so let’s look at key tips to avoid the above happening to you.
1) Designing a home you can afford to build - Many kick off their project spending thousands custom designing, only to waste money because they would never have the budget to build what has been designed. A good designer should be advising you of estimate cost to build the design. A key point for first home builders are you cannot compare a volume builder with a custom luxury boutique builder. Decide what path you want to go down. Ensure you ask your designer to give you a rough per sqm build rate to use and apply this to your project.
2) Be Planning obsessed! The more time in planning equates to less building variations which are costly, and a smoother build journey onsite. Have you considered the way furniture would be placed, TV’s on walls, and kitchen layouts? which should all be known before you start. No one can clearly price anything until you know the finishes you want and where it is going. A great example of costs differences are if we look at flooring. Do you want concrete polished floors? or an engineered oak floating timber floor? If you want a concrete floor, are you having it heated? These two decisions alone are very different in costs and over a large area will be substantial. Structurally do you want a raked roof or a flat roof? These are a huge difference in cost.
3) Know & walk your plans – It's one thing to see plans on a computer screen, it is another to walk them to scale and to understand them. Spending a few hours at Lifesize Plans who have facilities around Australia is worthwhile. Here your home is projected along with the facades and elevations to actual scale. They also use furniture on your plan so you will quickly understand the function, flow, and size of the design. They will ‘bring your plans to life’, and you can walk away with confidence, and make changes before you start and save instead of during the build.
4) Manage your budget - Hard Early – Resist the temptation early on to spend on extras unless they are items you cannot do after the build. Variation's costs thousands of dollars and with sizable margins attached to them you will save if these can be completed after the build. There will be surprises along the journey so ensure you have a contingency fund. Common surprises include additional piering, electrical finishes and glass. Your project may take between one to two years to build so ensure it is spent wisely.
5) Black Friday Sale! From November onwards Black Friday starts the Christmas shopping season and saves thousands of dollars on electrical appliances. Here is where you buy your luxury oven, wine fridge or tv and treat yourself as saving dollars on large ticket items matters. Go directly to the retailer to secure your own appliances but know the standard list price and look for end of clearance lines too.
6) Know how to get that look without blowing the budget - The first item people look for in a home is space, therefore if you are building a big home it will cost a lot to decorate it. Work out how to decorate it without the look and the best way to do this is using platforms like Instagram and save images you like yet look how they make a difference to that space, for example, painting instead of paneling is more cost effective.
7) Rose Coloured Glasses – The naïve budget - No one is going to give you a huge discount or deal on building a home. The timber, steel, roofing, concrete and glass are regulated and traded on the stock market so these major components is governed by pricing structures that are market related. Everyone needs to earn a living therefore it is naïve to think if you are an owner builder you will save 50% on costs, and at what cost if it goes wrong? Be realistic because the main item to save on is labour. If you are using a builder, what can you do after the project or during the project if allowed?
8) Over capitalizing – Easy to do! Look at the area you are building in, what the real estate market is like, and what a potential buyer would be looking for in such a property. I always hear that "this is our dream home’" yet circumstances arise, and people sell it. Prior to building you should know the price of your land plus the home on top of it and whether you would make a profit on it before you start. You make money building. Treat it as a project until you move in, and at that point it is then your home and that way you will limit over capitialising.
Article written by Erin Smith, General Manager at Lifesize Plans.
Erin has been a passionate and avid new home builder and renovator for 30 years. Her diverse experience includes new builds, extensions, complete demolition and interior restoration, factory-built homes off the grid, custom luxury concept homes and volume home new builds. Her holistic and commercial lens ensures the right fixtures and fittings are right for the home.