If you’re just beginning your project, it’ll be a while before you have a budget in hand, but you’re no doubt wondering what to expect. Here’s an introduction to the expense categories you’re likely to find in your project budget.
The first time you see a budget for your new construction or remodeling project, you’ll want to be sitting down. Preferably at a table with your builder so you can ask all your questions. A budget for a custom home could easily climb into the seven figures and will no doubt include dozens of businesses, so it’s going to be complex.
However, taking the time to truly understand it will help you feel confident in your decision-making and your builder’s expertise. Ultimately it can build the foundational trust you’ll need to work together effectively.
Let’s take a look at the major categories of expenses associated with building so you’re not surprised when you look at your own budget for the first time.
A typical budget for a new construction home or major remodel will be hundreds of line items long. This isn’t that. Instead it’s a look at the main categories of expenses you’re likely to see in a project budget with details about what’s typically grouped under each category. Keep in mind there will be costs associated with both materials and labor.
For example, the cost of windows includes the window units, installation materials (flashing tape, sealant, nails), any equipment rentals (like a boom), and the labor required to install the windows.
That level of detail can quickly become overwhelming, so we’ve deliberately kept this list simple, which means it’s not comprehensive. It’s an overview of what’s typical.
Site work
What’s included? Site work expenses may include things like:
Builders’ fees vary, but a typical range is 10–20% of the total construction costs. Interviewing several builders before hiring will help you gain an understanding of the typical rate in your area — learn more about hiring a good builder. Architects’ fees vary, but 8–15% of the total construction costs is typical — learn more about hiring a good architect.
What included? Foundation expenses may include things like:
What’s included? Framing expenses may include things like:
What’s included? Exterior finishes may include things like:
We asked this question to a number of builders, and most felt allocating 10–15% of the construction budget was fairly typical. Of course, the actual cost will depend on your project’s design. For example, modern homes might be on the higher end because expansive glass is a signature feature of this style.
What included? Major rough-ins expenses may include things like:
What included? Interior finishes may include things like:
Value engineering is the process of deciding how to balance functionality, quality, and cost by making changes to the design, methods, or materials originally planned for. Practically it’s what happens when a project is over budget, and it becomes necessary to reduce the square footage, swap in less costly finishes, and take other cost-cutting measures.
Builders and architects advise against value engineering the building envelope, or the components that protect your home from the elements, like your walls, windows and doors, roof, and foundation.
"[When value engineering] try to start with the things that can be changed later. Keep the building envelope and HVAC systems, and scale back on finish quality and square footage. Try to spread the cuts across all line items, rather than taking the quality out of a single component, like windows."Nick Schiffer, Owner of NS Builders
Remember, you can upgrade your countertops later or put up wallpaper after the fact, but it’s going to be a lot more costly to open up your walls and replace low-quality windows that failed prematurely.
Find more pro tips on how to make cuts when your project is over budget.
What’s included? Final steps may include things like:
What’s included? Other costs may include things like:
Traditionally, bidding has been the established way for homeowners to select a builder. But is it the best way? And if not, what should you do instead?
