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Home Building Budget Breakdown

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There are many variables and choices in a home building budget breakdown. Much depends on the type of construction you choose. Modular homes, log homes, shell homes, and various panel construction methods are changing the face of construction, yet the general percentages tend to hold more or less constant for the hard costs. Most of the savings on modular homes, and other kits and shells is saved in labor.

Home Building Budget Breakdown: Hard and Soft Cost

Home Building Budget Breakdown: Hard Costs of Materials and Labor
Despite the fact these are hard costs, it is possible to save on both labor and materials. It is also possible to pay dearly for both, if you try to cut too many corners in the wrong ways. Generally it’s best to leave construction of the shell to the experts. If you feel up to hanging drywall, laying floor covering and doing interior painting, then make arrangements to have your builder responsible for the shell only. It is important though to only take on tasks you feel you can do correctly enough to suit your family. If in doubt you will have to hire the work done.

The budget should be based on your priorities. It is important to identify your priorities. For example it is more important to most people to get a sturdy house that will endure through flood, storm and earthquake for over a century, than it is to get the finest wool carpets. If the budget is low you can save on cabinetry, appliances, and plumbing fixtures, as well as floor coverings, wall coverings, and interior trim. It is vital though that you make structure a priority, and this means employing a quality home builder of good reputation to build the shell at least. An alternative might be to have a shell home built by a structural insulated panel company or a log kit dealer who offers these services. Modular homes are also an option.

It is important to note that half of your hard costs will be labor and half will be materials. For example when we speak of framing a home, half of the cost is labor and half is materials. The only exception is with structural panels, insulated concrete panels and modular homes. These construction methods trim the cost of labor considerably. For traditional construction, about one quarter of the hard costs will be spent in framing. About 12% will be spent on cabinets, while 7% go to floor coverings. Plumbing, electrical, HVAC, siding, windows, appliances and drywall each account for 5% each of the hard costs. Excavation and structural concrete amount to about 10%. Roofing and insulation are about 3% each.

Home Building Budget Breakdown: Soft Costs

Whatever the total hard costs are, you will pay at least an additional 50% more for the soft costs. Soft costs include permits, off-site utilities, builder costs and profits, architect fees, landscaping, surveying, state taxes, and clean up. Many people try to cut corners on the soft costs, and these are the costs many people resent most. Why does your state get eight percent in taxes, and why are permits another eight percent? It may seem absurd, but these costs are built into our laws.

One of the most frequently questioned costs is the home builder or contractor’s profits. Why does your home builder or contractor deserve 10 to 30 percent of your home building costs? The answer is simple. He spends out most of it in indirect costs, and the rest amounts to his labor and his staff’s wages, for the year’s work they will put in on your home.

The average home builder’s budget includes his general office expenses, including paying his staff, outdoor toilet contracts, tools and rentals on large equipment, on site expenses, liability insurance, and maintaining his trucks and other vehicles and equipment. The overall profit margin for any building contractor business is less than 20% of gross income. Small independent builders can sometimes give you a better rate than most because of low overhead.

Home Building Budget Breakdown: Saving Money

Saving on a home budget is possible, and usually involves sacrificing quality on floor coverings, appliances, and cabinetry. Another way to save money is to contract with the home builder to only build a shell, and leave you to complete the interior. If you plan to do this, make sure that your home loan officer knows this so that arrangements can be made for you to withdraw the rest of the loan money for completing the home.

Alternatively some home owners only borrow for the shell, and pay for the interior finish out of pocket, as they have time and money. This is a very economically sound strategy, if you have sufficient income and savings. A homeowner can finish a few rooms to live in, close off the rest, and finish it at a leisurely pace over the next few years, rather than having to pay for all of it at once. This is especially helpful if you plan to have more than one bath. Simply have the plumber block off the rough plumbing to the bath till you are ready to install the fixtures.

Creating your actual home budget will take a lot of research and an understanding of local prices. There are wide discrepancies in the cost of building materials, and construction labor in different areas. There are also differences in costs according to quality in appliances, floor coverings, wall coverings, and plumbing fixtures. Your budget will reflect cost in your area, and the quality of each type of material you choose. This home building budget breakdown though is a starting point to begin exploring the costs.


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