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How To Start an Itemized Budget?


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By David in Pensacola, FL on 12/1/2004


OK, I'm trying to do my 1,000 hours (or more) of planning. I seem to be clueless as to how to go about creating an itemized budget before interviewing contractors. Where do you start? How do you come up with figures relevant for your area? Do most people do this before talking with subs initially as the book suggests or what? I have an overall budget but don't know how to break it out.

Thanks for any assistance you can provide.

David

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By Craig in Chapel Hill, NC on 12/2/2004


David - That is one of the tougher parts. I would recommend starting your itemized budget by looking at building-cost.net and punching in some details. While that isn't going to be exact, it should give you some idea. Also, if you check some of the owner-builder lending websites or Owner-Builder Book forms, there are several spreadsheets that tell you that trade X should cost Y% of your budget (which is also typically how your draw schedule is laid out with the construction loan).

For example, my draw schedule is as follows (again, these percentages are more of a rule of thumb vs. actual costs, but it should at least let you get into the ballpark for each trade).

Item Completed %
Clearing/rough grade2
Footings2
Foundation3
Floor (framing/subfloor)4
Walls/sheathing7
Roof framing/sheathing5
Outside doors/windows4
Plumbing rough3
Heating rough3
Electrical rough3
Fireplace2
Outside trim/boxing2
Siding/veneer7
Roofing shingles2
Insulation2
Sheetrock/Drywall6
Interior trim6
Kitchen cabinets/tops4
Ceramic tile3
Interior painting2
Well/septic3
Plumbing fixtures3
Furnace/AC3
Electrical fixtures set3
Concrete drives/walks2
Decks/pour porches/rails2
Exterior painting2
Final grading2
Main floors (wood/carpet)4
Appliances2
Screens/storm windows/gutters1
Misc.: wallpaper/mirrors/cleanup1


Total100

Hope this helps get you started. This should get you an idea of what to expect from your subs. Take note, for example; a house with brick veneer on all four sides would definitely be more expensive than the same house finished with vinyl siding.

Hope this helps you get started.


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By Michael in Cave Creek, AZ on 12/2/2004


I approach budgeting as an iterative process. The first is looking at homes of the type you like in the neighborhood you want and seeing what they sell for. That would be an upper bound on the cost. You should be able to beat this number by 10% to 40% depending on the details of your project.

Next, figure out how much the land you want or may already have costs. Now you have an accurate figure for 20 to 25% of your budget. Next, try to guess what the building costs. You can guess between $50 and $150 per square foot. $50 would get you a most basic house with a lot of self-work. $150 should get you something very fancy and elaborate.

Try to peg the number down a little better by deciding on a plan and finish quality that you like. I use RS Means Residential Construction Costs. This probably gets your estimate to within 25% of the true number. Others use web-based cost estimating tools. This is not good enough yet.

So list all of your trades/materials on the left side of a sheet of paper or spreadsheet, maybe in the order they get done. Plans, permits, utility connection fees. Site utilities, grading etc. Ask your building department and utilities what all of this stuff costs and write it down on your spreadsheet. You will be amazed how much money you can spend before any footings are poured.

Next start calling all of your trades, and ask three to five people who are responsive and courteous to you to give you bids. As you talk to the people, you will get a feel for their level of interest and skill as well as how compatible they are with you. As the bids come back take the number from your favorite trade or supplier and plug the number into your spreadsheet.

Now add some for general conditions that you are responsible for. Like an outhouse and the dumpster(s). Interest payments on your loan, etc.

By now you should have an estimate within 5 to 10% of your true expected cost. If the number is high, change the quality of your finishes or use more economical materials. Stucco instead of stone. Formica instead of granite, etc. Since you won't know the true cost of your project till the end stick a 5% to 10% contingency in your budget. More if you are scared of the sub-surface conditions on a hillside where you may encounter rock.


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By Paul in Indianapolis, IN on 3/9/2005


Has anyone tried using software such as "2005 National Home estimator"? How accurate was it? Does it cover regions?
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By Kari in Colbert, WA on 3/9/2005


I am pretty sure the building-cost.net site uses that as their estimator and it is configured regionally. Quite a few posters have used the website as a baseline - but as with anything, specific finishes can greatly change the bottom line. I periodically go to the bookstore and look up things in the 2005 Estimator Book and it is fairly close to the bids we are getting. I should have bought it originally -- save me the trips -- But I bought so many useless books at first I thought this might be another one. I am sure a lot of contractors use it for their bids too, since it is what it is designed for.
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By Heather in Baton Rouge, LA on 3/10/2005


David,

I used Excel as our budgeting and tracking tool. I started with the timeline listed in the back of The Owner-Builder Book and added some things that I knew we would have. For example, I have framing labor, framing lumber, bricks, mason labor, flooring, flooring labor, etc.

Then I made a column with the highest of the three bids from each of the subs. This was our starting point of what to turn into the bank. The next column of my spreadsheet I named "Our Cost" and put what I thought we would pay for each item (if we still were undecided about the sub then I went with the middle bid). My final column is what we have actually paid for each item.

This has helped me to see what we told the bank, what our target was, and then where we actually are for each trade. It has been very helpful! But, I must say that my husband & I are both accountants, so analyzing numbers comes easy to us. If you are interested in seeing a copy of my work of art, private message me and I will send it!

Heather


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By Heather in Baton Rouge, LA on 3/15/2005


This isn't really a budgeting tip, but it will help you organize and make everything run more smoothly:

I bought a 4-inch binder and made tabs for each of the main phases of construction & planning. The tabs included: Excavation/Site Work, Rough Carpentry, Insulation, Drywall, Exterior, Flooring, Plumbing, etc. Then I put clear sheet protectors to hold magazine cutouts, examples, and business cards behind each tab. I filled each section with blank paper and started calling. I filed each bid behind the appropriate tab and when I need to reference something I knew exactly where it was.

This book has been our savior through this project. I kept all handwritten notes, pager numbers, cell numbers -- everything -- in my book!

Heather


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By W in Reno, NV on 3/17/2005


Yikes, I tried that website building-cost.net and it showed my cost at only one third of what we'll be paying. I re-ran it telling it highest class (and cost) of everything, and it came in close on some trades, yet still only HALF of what we will be paying. Is it just not that accurate?


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By Kari in Colbert, WA on 3/18/2005


Well, yes and no. Specific finishes can really change things greatly - for example: granite vs. tile, tile floors vs. travertine or high-end hardwood with inlays, carpet, cabinetry etc. Then there are construction costs such as ICF vs. stick-built, brick vs. lap siding, PEX, Manibloc vs. standard plumbing, tile roof vs. asphalt, and on and on. Even with the Building Costs "high finishes costing option" I think they come in low for certain areas -- I know it is adjusted regionally but perhaps that is based on past years not what is currently happening. (I think? The labor part, anyway.)

Spokane had a huge building boom, the biggest they have ever had, and it drove labor prices up significantly. I also know if we chose the best of everything we could double our costs to build easily. BUT, there is a possibility you are paying too much for things. Depending on how many quotes you have received you might be getting fleeced -- more bids the less likely that will happen -- also, if you have friends in the construction field they can help tell you too.

You really need to find out what GC's are paying to build for a similar house. Our county website lists each permit granted by the month, who is building it, and the address and their estimated cost/value. It gives you an idea of what the GC down the street is really paying to build that house. Maybe your city has a similar feature? Anyway, just some ideas of why your cost is so much higher. Good luck.


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By Kenneth in Lees Summit, MO on 3/18/2005


I haven't used it in a while since I am not budgeting at this point, I am spending.

I found the building-cost.net site to be very inaccurate for specific trades or work packages, but the bottom line was pinpoint sharp with the total of the bids we turned in to the bank. My spreadsheet is now inordinately detailed at over 20 pages long, and the bottom line is within 10% of what the website gave me at the beginning of the project. However, I haven't used it recently...


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By Eric in Evansville, IN on 3/19/2005


When you say the bottom line was accurate, are you referring to the bottom line that includes the GC markup section?

Thanks for your input!

This seems to be the most user-friendly way of getting a rough estimate of the costs of building a particular house -- it is reassuring to hear that it may be "close."

I wish more O-Bs would post their experiences with the websites estimation accuracy.


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By Paul in Indianapolis, IN on 3/19/2005


Your posts are very interesting but do not answer my question. I was interested in the book or CD produced by Craftsman Book Company. For example, they sell a book called 2005 National Home Estimator. They also sell a CD. I assume that using the book you could look up estimates of every major product in the home. This should result in a closer estimate without spending a lot of time on the phone with vendors.

I tried the website, but after entering all information, it hung up and never gave an estimate. I think the book or CD may be much more accurate but I do not wish to spend the $40 to find out the prices are not at least close.


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By Don in Baldwin, MD on 3/19/2005


The National Home Estimator from Craftsman Book Company is pretty close. There are some caveats naturally. Some material processes have wild swings. Plus, you will miss some things, no matter how detailed you are. Keep at least a 10-15% contingency value in your estimate.
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By Paul in Indianapolis, IN on 3/20/2005


Thanks for the input. I think I will buy the CD. By the way, the site does not work for the Macintosh. I used VPC to get results. I was surprised by the very high estimate for insurance. I used class one and two for everything but if I need to add 10%, we need to go back and take some out of the design.
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By Eric in Evansville, IN on 3/20/2005


Paul,

I'm surprised your estimate was high... that makes me concerned.

Using level 1 (Best) for everything our estimate came out low in my opinion. We are going through UBuildIt for our home and were told it would be roughly $100/ft where this website said it would be ~$85/ft even including the GC markup. Now I realize that we are using the highest end of materials (i.e. stone, brick, marble, granite, tile, wood floors, stainless appliances, etc.) but still the difference is dramatic.

Some on here have said that the website's estimate's bottom line was accurate but there may be discrepancies in the line items. I wish somebody who has finished the planning process and actually collected bids could comment on the accuracy.


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By Paul in Indianapolis, IN on 3/20/2005


Only the insurance item seemed high. The total price seemed about right. I guess I need to get the book or CD. I need to get down to $75/sq ft or cut the size down.
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By Kari in Colbert, WA on 3/20/2005


I have collected bids and we have started construction, three or four bids for each trade, to be exact. Your concerns and questions will only truly be answered once you do the same with the bid process. It is possible to project a ballpark figure in this initial planning stage but that is all it is, a ballpark estimation. We had to drop a few things when we started to get a few bids in and realized the particular features were just too expensive to include. That happens to everyone I am sure, since most of us have budget constraints. We have spent $800 dollars in plan changes because of that, but will be saving thousands of dollars by changing things.

The great thing about O-B'ing though is you can squeak a few things in sometimes or through diligence find outstanding deals. We have had quite a few "as luck would have it" opportunities. Also, if you feel a trade is too high priced go to the O-B Book and figure out the percent for that trade adjusted to your budget.

If it is 2% for excavation for crawlspace, just for example, and your budget is $200K or so you would get bids in at about $4K, assuming a standard-type lot. But, if you have to dig in granite or steep slope etc... you could figure your bids will come in higher. If something came in high, I then spent time researching and figuring out why. Sometimes that let me find some deals and other times I realized we will pay premium if we want that.

Also prices on labor and materials truly do go up and down all year, so you won't be exact even if you try. I think the cost estimator overall is fairly accurate. Ubuildit here projected a very high cost per square foot and I have found that not to be accurate in our area, so either they were trying to scare us into using their budgeting service or their subs are expensive. That is just my experience with them.

Anyway, get your bids and then you'll know; and in the process (which is fun, actually) you will get loads of great info and leads and also feel like things are starting to take shape. Good luck.


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By Jason on 3/26/2005


I've been putting together my budget and found this Excel file. Go to themodernbuilder.com and download it. It's free, too!! Should be on the front page.

-JED


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By Gene in Dallas, TX on 10/17/2008


Heather,

I know you posted this a while back... but I would love to see the spreadsheets.

Thanks,

Gene

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