Budgeting for a custom home: Tips to keep your dream home project on track
Budgeting for a custom home can be challenging, but with careful planning, you can keep your dream project on track. Here are some essential tips:
DEFINE YOUR BUDGET EARLY: Start by determining how much you can afford. Consider your savings, financing options, and other financial commitments. Establish a realistic budget that includes a buffer for design changes and a contingency for unexpected costs that arise during the build. You’ll want to understand the total costs of your project including design, estimating and engineering before any work ever happens on site. You may also have certain development costs for utilities, land clearing, or re-zoning and permitting that add up quickly. Don’t forget about the end of the job either, when you’ll want some form of landscaping so your space around your home doesn’t become a dirt patch.
PRIORITIZE YOUR NEEDS AND WANTS: Identify what is essential and what is optional. Prioritize features that are most important to you and be willing to compromise on less critical elements if necessary. It’s easy to get sucked into the Pinterest and Instagram images without understanding the true costs of the materials and labor to accomplish the work. Ask about allowances for a budget, and what your designer or contractor is seeing in the way of material and labor pricing in your market. Having a realistic allowance budget for items like tile, electrical & plumbing fixtures, and other finishes will help keep the budget in check.
GET DETAILED ESTIMATES: Work with your custom home builder and architect/designer to get detailed estimates for each phase of construction. This includes site preparation, materials, labor, permits, finishes and any associated fees for management, supervision, and revisions of the home design. A detailed construction proposal will ensure that you have the best understanding of the overall amount you can expect to invest in your new custom home. Anything that is left vague will likely not be accurate and could create higher costs than may be comfortable for you financially.
PLAN FOR CONTINGENCIES: Unexpected costs can arise. Set aside 10-15% of your overall budget for contingencies. This buffer ensures you have funds available to address any unforeseen issues without derailing your project. Ideally, with good planning, your home build goes smoothly and you don’t need to use these contingency funds, but it’s best to plan for the worst and be pleasantly surprised when you have some extra funds to upgrade your outdoor space or do something else fun.
MONITOR EXPENSES CLOSELY: Regularly review your working budget with your builder to verify you stay on track. Your builder should use some form of software to help manage and monitor costs, and provide you with the appropriate reports and backup for any invoices and expenses on the project.
AVOID MAJOR CHANGES: There is no understating how important it is to make any and all decisions prior to the start of construction if possible. Knowing everything that will go into the home before you break ground will set the project up for success and create the opportunity to make minor changes if desired in some instances. Changes to the design of materials during construction can significantly impact your budget. Avoid making drastic changes unless absolutely necessary.
CHOOSE QUALITY OVER QUANTITY: Invest in quality materials and craftsmanship. While it may be tempting to cut costs, high-quality elements can save you money in the long run by reducing maintenance and repair costs. Often, people will try to save a dollar and end up spending two to fix it. That one dollar turned into three and now you have a much more expensive material than you planned on. Good quality materials are often easier to install and last longer, saving you money in the long run.
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