Once you decide to build a home, it can be excited to explore the different features and house plans you can follow, however, it’s important to follow a strict budget, when designing a home, to avoid overrun expenses. There will already be the possibility for delays and other unforeseen expenses, therefore it’s important to streamline plans to allow wriggle room for the unexpected.
Here are key elements and expenses you should consider carefully to avoid the pitfalls of being a homebuilder.
Estimating the final cost of a home can be a tricky aspect to nailing down a realistic budget for the construction project. There are many variables that will encourage overspending, if you don’t keep a certain limit in mind. Discuss the elements and features you would like in your home, and discuss costs of the project and the possibility of unexpected surprises. This will give you a basic idea of your budget for your home. Ask the contractor to explain the areas where you could save with cheaper options, such as fixtures, and areas where you may want to spend more, such as roofing.
Certain outside variables, such as location, size, and difficulty of projects will change depending on many factors. For instance, prices for lumber will depend on demand, type, imports, restrictions, and the amount needed. The cost of labor is another area where pricing will depend on outside factors, such as climate, size of the project, unemployment rates in building trades. If there was a natural disaster recently in your area, consider holding off on the project, since contractors may be hard to come by and may have raise rates due to demand.
Check government regulations for construction projects to make sure there are no new mandates that could create a delay, if the house does not pass inspection. Some communities have design review committees, who inspect floor plans and design to make sure the construction plans fit with the neighborhood aesthetic.
Although it may seem impossible, since there are many outside factors, it’s important to have a budget set for the project before you create plans, especially if you are financing the project with a construction loan. When choosing a contractor, have a basic plan in mind and compare bids of several different people. However, you must have a pretty good idea of what you want and need, or your bid will go through many revisions before the end, which would make it harder to pick the best deal.
In the end, make sure you have a stable budget and a contractor willing to work with your restrictions. Setting aside a percentage for overruns will also give you peace of mind, and if the unexpected happens, you will at least be prepared.
This article was contributed by freelance writer Lindsay Taylor.
Mike, aka The Dividend Guy, authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks Rock. He is a passionate investor.