When it comes to building your own home from scratch or renovating an existing property, a key (arguably the most important) part of the project is making sure you stick to your budget. A contingency fund (of at least 10%) is a good idea, but if costs are allowed to run ahead of budget it can make occupation of the new home difficult and even force the homeowners to sell up as soon as the project is completed.
In order to avoid financial disasters occurring, here are some tips to take notice of and bear in mind at all times.
1. Put Budget at the Top of Your Wishlist
Any wishlist presented to your chosen designer must have, at the very top of that list, exactly what the build budget is. It should be made clear from the outset that any plans drawn on your behalf must be capable of being built within and for that budget, if they are to be considered as fit for purpose.
Plans which demonstrably fail to adhere to this criteria should not be paid for and you should consider how to best proceed — if necessary, moving on to a designer who can more clearly show that they understand the budget’s importance.
2. Choose Designers Who Understand Costs
Only work with designers who can demonstrate a thorough knowledge and understanding of costs. It’s all too easy to get carried away with esoteric and grandiose design concepts, which will have a knock-on effect on costs. Yet that doesn’t mean that the self builder or renovator with budget restraints always has to put up with the boring or mundane designs. There are many ways of achieving that wow-factor without necessarily incurring significant extra costs.
What one must avoid is the total disconnect between design and costs that can lead to a whole lot of work, plans and money ending up in the bin. If you suspect that your designer or architect is not paying attention to costs and the budget, then cut loose from them as quickly as possible.
3. Keep Budgeting Throughout the Project
The budget is not a one-off, fixed thing. You don’t work out your budget and then simply trust that an evolving design, which may have seemed financially practical at the beginning, will continue to be so at its climax. At each stage of its evolution, advice should be sought to make sure that the project is staying on budget — and if necessary a changed management process put in place to formalise its impact on the cost plan.
Things are going to change, even after what you may have thought were the final plans. Planners might insist on changes. Helpful interested parties may suggest alterations, many of which could make the building more attractive or more valuable. However, each time there is a change, it must always be related back to the original costs and the budget — if something goes up, then something else must come down.
4. Always Add a Contingency
On most sites a contingency of 10% is usually sufficient. On a sloping site, on bad ground or where there’s a basement, then 20% might be a better amount.
Something is bound to happen during the build that may throw your costs out. You need a contingency to take care of the unforeseens on site. Contrary to most perceptions, a contingency is not normally used up in one or two disasters, but is instead used in the gentle and general creep in prices as each trade progresses.
If the ground is a bit soft you’ll have to dig deeper. Digging deeper means more time excavating. It means more soil away and it means more concrete in the foundations. A few more power points, underfloor central heating instead of radiators, a better kitchen or bathroom, that’s where the money goes.
5. Add Cost Savings to Your Contingency Fund
If you make a saving on one aspect of the build, don’t always rush out to spend it in making the building bigger or by choosing more expensive external materials. Instead, save it and use it — if it’s still available in the later stages of the project then you have the option to spend this on better internal fittings such as kitchen units, sanitaryware and flooring, once the principal costs have been expended.
Having that money ‘in the kitty’ might also be of considerable help if something unforeseen goes over budget. The chances are that most cost differentials are likely to be against you rather than for you — so make sure you pocket the ones that come in under budget.
6. Get Definitive Costs
You can’t get definitive costs at the initial drawings stage. All you can do at that point is to rely on professional opinion, your own calculations with respect to the build cost calculator and, perhaps, the judgement of a friendly builder who’s prepared to give you a rough estimate based on their experience.
As soon as you’ve got dimensioned or scalable drawings, arrange for one of the estimating companies who work within the industry to prepare you a full costing breakdown, listing all of the costs for labour, plant and materials. This is invaluable. It will, of course, demonstrate to you that you are on budget. But it will also be a formidable tool in negotiating prices with labour, builders and suppliers.
An alternative would be to send the drawings off to a quantity surveyor, but that’s likely to be a much more expensive option and the resulting information might not be directly relevant to a self build or renovation project.
7. Be Flexible
Nothing is sillier than pursuing plans for a building that you can’t afford to build. If your constant re-evaluation of the costs and budget prove that this is the case, don’t bury your head in the sand. Bite the bullet and call a halt. If your strictures about budget have been ignored by the architect or designer, then you should be quite within your rights not to pay for the work done. In which case all you’ll have lost is time.
If the costs have increased beyond the budget due to your demands and unsustainable aspirations then you are culpable in your own misfortune. To proceed without funds will only lead to heartache and frustration. Listen to the advice and start the design process again — the extra few thousand pounds now will save you much more later on.
8. Consider Project Management
The lure of project managing is easy to understand: you could end up saving up to 17% on your build costs if you take on the role yourself. That’s not even mentioning that you’re putting yourself in control of the project, which is itself a powerful motivation for some. However, any novice mistakes you may make will create delays and eat into the contingency you set aside in your budget.
If you can commit to the role – and feel like you have the skills to succeed at it – then you can certainly save money by taking it on. Equally, if you can’t commit or aren’t confident in your skills, not taking on the role can also be a money-saving decision — leaving it in the hands of a professional project manager is money well-spent.
9. Should you DIY?
As well as deciding whether to project manage, have a similar conversation with yourself about your DIY skills. Don’t just take on jobs for the sake of saving a penny or two if you lack the requisite ability – or the confidence – to finish the job to a standard you’d be happy to live with.
It is undeniably a false economy to tackle an aspect of your build yourself only to have it redone in the near future because your work wasn’t up to scratch. Worse still is to end up spending money repairing or completely redoing something you’ve botched — the extra cost of the labour and materials being something that could have been easily avoided.
But when it comes to the more straightforward aspects of a project that simply require a bit of legwork – for example, keeping the site tidy each night, basic landscaping and decorating – you should be able to use your involvement as a relatively easy way of reducing labour costs.
10. Watch Out for Extras
It is not unusual for extras to the original contract to cost 40% or more. If you don’t watch out and you let things slide without checking prices, you could be in for a very nasty shock at the end of the project.
Always insist on any extras, such as fitted wardrobes, more power points, garden walls etc., being properly costed and agreed in writing before they are enacted. When you then get the prices for the extras, relate them to your overall budget before commissioning them. If trades or a builder does things differently, just because they thought it would be better, without your prior agreement then you’re under no obligation to pay for them if they cost more.
11. Consider Subcontractors
If you had hoped to get a builder to do the whole job and the prices you’re getting prove to you that it is not going to be possible, then you might consider employing direct or subcontract labour for the various trades, thus cutting out the builder’s profit. It might involve you in more work and a greater responsibility on site, but if it gets you the home you want within your budget, then it’s well worth consideration.
On the other hand, if costs are still in excess of your budget, even when you’ve adopted this new build method, then the only thing to do is go back to the drawing board.
12. Phasing the Project
Having to go back to the drawing board at this point really goes to show that you haven’t paid the right attention to costs and budget. Nevertheless, in some cases, and especially if the project is intended as your long-term home, it might be possible to phase some of the work to fit in with your budget.
Detached garages can always be built later; the expensive kitchen can wait a few years while you get by on a cheaper alternative; ditto with bathrooms. You might want to consider splitting the project into weathertight and fit-out stages, meaning that you can approach the management of these stages differently too — perhaps using a main contractor for the first part and managing the finishing trades yourself.
13. Buy in Bulk
Taking advantage of any economies of scale that are available to you is a great way of keeping spending on track. Skilfully using the same materials throughout the build – exterior and interior – can be one option. Buying materials such as bricks, roofing materials and interior products such as bathroom tiles and flooring, for instance, in bulk, could afford you a stronger buying position than picking smaller lots of multiple types.
If you are also able to store the materials securely on site, you can also save some money by having these delivered at the same time, avoiding having to pay for multiple deliveries.
14. Buy Site Goods Rather Than Hire
The hiring of site goods – such as a site hut and toilet facilities – is often seen as a given during the build process, with funds earmarked for it in the budget from the earliest stages. But hire rates are sunk costs and it may make financial sense to buy the equipment up front, use it for the duration of the build and then sell it on afterwards.
You’ll often be able to recoup most of your money, and even if you end up making a small loss, it may still work out being less than you would have paid to hire them. Of course, this requires more initial expenditure, but it can add up to sizable savings when you come to sell the equipment.
15. Listen to Good Advice
As a novice self builder there’ll be a temptation to think that your project will be different from all the others that have come before it, and that you may be the only one who truly understands it. This, alas, is not true. One of the biggest mistakes a self builder can make is to ignore the good advice of the experts they are working alongside.
Of course, establishing what constitutes good advice – and learning who gives it – is the real skill.
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David is one of the UK's leading self build and plotfinding experts, and a serial self builder who has been building homes for 50 years. The author of Building Your Own Home, David spent decades as a speaker and expert at self build exhibitions such as the Homebuilding & Renovating Show. He has recently finished his fourteenth self build project.