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Residential Project Budgeting

kjpn

Hello, I am a designer with a background in mostly institutional work, and am doing some research on residential project budgeting. I have done some online research and wanted to ask if some of these ballpark %'s make sense proportionally to those with more extensive experience in this space. The project in question would be in the rural Midwest.


Construction budget:
~75% of total project budget

20% to utilities, site-work and foundations
25% to exterior
30% to interior

Soft Costs
~25% of total project budget

6 - 12% (of total project budget) professional design fees (architecture, structural, civil, MEP, interiors, landscaping, etc)
14% - 18% contractor overhead and profit
1 - 3% (survey, permits, insurance and financing costs, furniture?)


Some follow-up questions:

1. After talking with a contractor I was told that $175 - $225 per s.f. yields a pretty nice home in this rural location, while $250 and above starts to get you something relatively luxurious for country life. And I recently heard the project linked here might be in the lower $200's. Does the kind of quality in these photos seem commensurate to those numbers, to those working in residential?

2. Also had questions surrounding common ways for an owner, architect and contractor to approach coordinating the work of designers and consultants in the residential space.

One is where the architect coordinates and obtains services for all these (civil, MEP, structural, etc) and this is baked into their fee proposal or reimbursed by the owner at a multiplied rate.

The other is when the architect leaves some or most of these consultants to be worked out and coordinated by the contractor during construction. For example, perhaps the architect obtains the services of the SE and builds that into the construction documents, but lets the contractor manage and coordinate subs or consultants to work through the specifics of plumbing, HVAC ductwork, and any site-work or grading.

What are the pros and cons of each approach? Or am I off a bit on them.

Thanks in advance,

 
Aug 14, 20 4:27 pm
Wood Guy

Kjpn, I've never seen residential projects broken down like that so it's hard to say how accurate your percentages are. Here in the northeast US, houses like the one you show would likely be $250-350/sf for conditioned space only, or higher in some markets. I haven't designed a house that came in under $200/sf in over ten years, and I don't design very fancy houses, though they are high performance so the initial cost may be 5% more than a conventional house. Things may be a bit less expensive in the midwest, but Covid has messed with material pricing so who knows. 

Many residential builders use the CSI 16-division format, or something similar to it. They may mark up labor, subs and materials the same or it may be different for each category. Good builders I know shoot for a gross profit of 30-40%. With low volumes and high risk they need higher gross profits than you might see from commercial builders. It's not uncommon for residential builders to talk about their markup, but they may not mention that their labor cost is often inflated. So their markup is not the same as their gross profit margin.

In my experience, the architect or designer always coordinates civil/structural. Mechanical design is usually done by the HVAC contractor, though it would be better for the architect/designer to understand and coordinate it, and that happens on higher-end jobs. Electrical/lighting design is usually roughed out by the architect, with a lighting consultant brought in for some jobs, or the electrician provides some design (usually to the detriment of the project, no offense to electricians). Plumbing design is usually done by the plumbers as they work, though it's better to design it beforehand. Interiors are often by owner, which sets up difficult relationships. The only projects I have had good experiences with ID on are ones where we/I coordinated it, and some of my most contentious projects had IDs hired by the owner. Landscape design is often by owner, or not done at all, though it should be. Most architects will do a basic site/landscape plan. 

On custom residential projects the owner typically worries about the financing costs, not the designer. I have never had furniture included but it can be on very high end projects, say ones that are $600/sf or higher. 

I was a carpenter/builder for ten years and have spent the last 15 years as a residential designer, but I do a lot more renovations and additions than new homes, mostly in coastal New England. 

Aug 14, 20 5:54 pm  · 
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kjpn

Wood Guy, thank you so much for these insights. Your comments about cost/sf pricing, contractor fees, and consultant coordination are very helpful.

 · 
rcz1001

Wood Guy, what he's showing is a simplified project cost estimate break down for budgeting purposes by percentage. His labels for the two grouping is awkward but 65-75% of project cost is pretty normal for construction material and labor (construction budget). What remains is usually Contractor's O&P, Architect/Designer & Engineer fees, permits and other associated costs. I have seen similar break down when you start from a Total Project Budget. That would be the amount the client has secured and set aside for the project assuming property is already purchased and we are just talking about a construction project.  This is actually a simplified version of what I have personally seen with slightly awkward labels but I'm reading past that.

What I usually will see is a contingency. I usually would estimate from 25% to 100% depending on level of information or lack thereof. We usually will see rough dollar amounts in the estimate budgeting but this is usually a percentage budgeting like how much percentage of client's budget appropriation for the project. This can be informative in design so you constrain yourself from going ridiculous with overly expensive design choices.

Aug 14, 20 6:12 pm  · 
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rcz1001

I actually use some form of this for rough estimating how much goes where so I can scale the scope and design early on to be remotely realistic or simply inform the client that their budget is insufficient for the project. This is fine for pre-design early estimates using a basic rule of thumb approach and RS Means data for estimation.

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kjpn

rcz, thank you for the comments... that's exactly what I'm trying to do here and although I forgot to include it in my original post, I am factoring in some contingency. My client came to me and said "we have this much money", so I am trying to level-set how much they actually have to spend on a house and what the implications are in terms of square footage and quality (cost/sf).

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rcz1001

It can be a helpful tool to scale the home, especially when discussing project scope and how much to charge as well. There's more to the process for determining a price for your services that is fair to you in respect to what you are doing, your professional liability, and also be fair to the client. Trying to find a mutually agreed amount. Setting up an appropriate scale home is important. 

There are ways to save costs in some areas were #3-grade studs can be used (like in non-bearing walls) that you can modify space as well as eliminating unneeded walls to create a more open interior space to allow light in deep into the home. You can make that. 

This tool can also be helpful to quickly detect if what the client wants is realistic with how much money they have. This is when you ask them if they want to scale down the project to fit budget or they wish to secure additional funding for the scale of project they want. I'm sure you know this if you been doing this for awhile that it is your responsibility to be forthright with your client to tell them the good and bad news and with bad news provide them guidance and options for moving forward. (point made for those who are learning about professional duty to the client)


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rcz1001

I usually have something like this: (Labels used are non-standard but are used for discussion purposes)

Client Available Financial Resources (CAFR) for project: $________________

Planned Project Budget (PPB) = ____% of Client Available Financial Resources

Construction Budget (material and labor, etc.): _____% of Planned Project Budget

Soft Costs (to use your label): _____ % of Planned Project Budget. 

Soft Cost + Construction Budget should = 100% of Planned Project Budget.

Project Contingency = 100% minus Planned Project Budget percentage amount. For example: If Planned Project Budget = 75% of CAFR then Contingency should equal 25% of CAFR. The client may still have some undisclosed amount of spare money but we can not calculate off of undisclosed unknown amount of spare money so we should strive to scope project so Anticipated Project Cost (APC) will fit within the Planned Project Budget and not exceed CAFR if possible.

Planned Project Budget is the budget you are designing around. When a prospective client gives me their "project budget" in Houzz message or directly, I place that under CAFR. PPB is always less than CAFR (the project budget amount the client provides or which you clarify is the available amount of money for the project). 

APC is updated as you go through the design but early on from the very early rough (RS Means based or similar cost estimations). 

There are other labels you can use which you should use that are more compliant with cost estimation standards but I'm using the above merely for this conversation. It doesn't matter for discussion if you understand the intended meaning. 

Aug 14, 20 10:54 pm  · 
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rcz1001

In determining your anticipated (or estimated) construction cost, it is going to be something that will be constantly updated as you know more about the type of construction to be used, interior finishes, and pretty much have a more defined design. In pre-design, it is pretty much all over the map. Local contractor estimation range should be helpful over even an RS Means data estimate so when you gauge from the client what they are looking for, from other projects in similar nature and adjust for cost inflation adjustment and then factor a contingency. As I get closer to CD phase, Planned Project Budget would be closer to CAFR but still less than it. I like to approach things from a more financially conservative approach and go from there while respecting what the client has available. If the client wants more than what the CAFR allocates for then they need to secure more funds and the CAFR amount then be adjusted with the increased funds available and everything else can be adjusted in design and subsequent cost estimation, all accordingly.

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rcz1001

In the first estimate when we don't even have a design, PPB is like 50% to maybe 65% of CAFR but as time goes on with more detail PPB can be increased to and the contingency amount can be reduced. CAFR is the critical number not to exceed unless the client secures and allocates more money to the project. There has to be a safety margin between PPB and CAFR. 

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Chris Jackson

I like how this thread talk about around the importance of presenting many requests before scanning for a specialist HVAC transitory laborer since it's fundamental to get the equipment fixed by nothing not actually the experts, and one of the requests that intermittently come up is whether if the legally binding specialist is shielded and approved since this is critical family gear you would put in their thought. It in like manner helps with asking whether the repairman has association in working on a specific kind of rigging since they would acknowledge how to best address the issue in a short proportion of time. In case I got the chance to scan for a HVAC legally binding specialist I would attempt to find an approved one who has the capacity of fixing a particular brand of hotter/cooling system.

Aug 17, 20 7:16 am  · 
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Non Sequitur

what's a hotter system?

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Wood Guy

Is this one of those things where you just see where automatic word suggestions take you?

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rcz1001

We just haven't got around to the HVAC part of the OP's original post. I didn't get around the topic of whether the photographs fits the price.

 · 
eeayeeayo

I think he ran his comment through a bad translator app. All he seems to be trying to say is that if he were looking for an HVAC technician he would hire one who is certified/approved by the manufacturer to work on the applicable brand and type of equipment, because the equipment is critical to the comfort of the home's occupants, and because hiring an approved technician helps to maintain a chain of liability that leads back to the manufacturer. There was probably also some spam link attached originally.

1  · 

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