We are getting ready to close on the sale of The Puzzle House this week, and I’ve finally received all the final invoices and receipts from this rehab to determine where we stand on budget (see final numbers broken-down below).
This project was a bit different than most of our others, in that we used a General Contractor to do most of the work. Instead of the GC providing a fixed-price bid at the outset of the project (which would have been VERY difficult, since there were a LOT of unknowns), we agreed on a “cost plus” model, which basically means that he passes on all of his actual costs, plus he gets a fixed fee for managing the project and supplying the contractors. So, the final budget was a reflection of the actual contractor costs, plus a GC fee for his management.
Because there were a lot of unknowns, because it was a big project and because we were using many of the GC’s contractors, it was tough for me to estimate the rehab costs upfront on this one. My original estimate was $45,000-50,000 for this project, but we ended up around $54,000. There were several reasons for the overages:
- I budgeted about $2500 too little for electrical work. Part of that was poor budgeting on my part, and part of that was that our electrician was required to do a bunch of work by the county that he didn’t expect (and therefore I didn’t expect). Another part of the electrical overage was from the HVAC contractor screwing up and installing an electric heat-pump instead of a gas furnace, which required an upgrade to the electrical panel and some additional wiring. Technically, this was a contractor mistake, but the work was done, everyone made a good-faith effort, and I’m not going to make my contractors eat the extra cost (that was about $750 of the overage).
- We ended up doing some nice trim work in the living room and dining room. This required some design consultation and a good bit of additional carpentry. We also decided to go with some upgraded molding in the dining room and kitchen. This ended up being an extra $1000 or so.
- When we asked the county for our final inspection and Certificate of Occupancy, they came back with two requests I hadn’t expected — insulation throughout the crawl space and replacement of a non-tempered window in the master bath. These items ended up being an extra $1500 or so.
- I under-estimated the cost of the structural work we needed to do by about $1000.
- We decided to upgrade to granite countertops instead of our typical laminate. This was an extra $1000 or so.
- We had a lot more inspections than I had anticipated, and my GC offered to have his guys wait around for the inspectors on each occasion. While it freed up my team from having to sit and wait for inspectors, it still cost money for all the waiting around. This was probably another $500.
Between those five items, we were over budget about $7500. We saved a little here-and-there in some other place and went over a bit in some places, so that $7500 above was pretty much the overage for the project. Not our best work in terms of budgeting, but the renovation turned out great, we learned a lot, and in the scheme of things, 10% over our (maximum) budget isn’t a disaster. I’m actually very happy with this project as a whole.
Here is a detailed breakdown of the final budget numbers:
Not sure if I expected the GC fee to be more or less. 2k on a 50k job is about 4%. Is that typical?
Given the overage, are there any unique lessons to be learned here?
Hey RHH –
This is on the low…there are a few reasons for this:
1. I’m good friends with my GC… 🙂
2. I tend to have my Project Manager do much of the scheduling and oversight, so this fee is more for the pulling of permits, his expertise and the use of his contractors than it is for the day-to-day management, which tends to be the more expensive part from his side. In fact, he was only at the project a handful of times, so his hourly rate was likely still pretty decent.
3. He does a decent amount of work for us, and I pay him pretty much the same, regardless of whether it’s a small job or a big job, so it averages out.
All that said, I’m getting a very good deal here, so I’m not complaining. My GC is worth a whole lot more to me than that…
Hey Nathan –
There are always lessons… 🙂
First, I think it would have been possible to keep on budget had we needed to. But, we realized during the project that by doing a bit higher-end rehab (adding nice trim, upgrading to granite, using all hardwood on the first level, etc), we could likely sell for a good bit more. So, we went that route. Even so, there were some mistakes/lessons on our end:
– The biggest is that I need to expect that when using a GC, there are going to be charges I’m not used to. For example, the guys waiting for the inspections, the porta-potty, etc. Basically, I’m paying his non-licensed guys by the hour, so if there is an under-estimation in amount of work, I eat it, not them (I’m used to a fixed-priced bid and them eating any overages). So, I just need to get accustomed to working with my GC and his typical way of working and the costs that go along with that.
– The other big lesson is that higher-end houses have some extra costs associated with them! I’ve been accustomed to using the same materials for 35 houses now, and forget that higher-end finishes can be significantly more expensive. Hardwood and granite were big ticket items in this house.
– This is the first time I’ve worked with the county inspectors (this house is in a different location and normally I get the city inspectors) — they were a good bit more demanding during the inspections, and we spent a LOT of money fixing stuff that we never would have suspected they’d make us fix. This included a lot of rough electrical work, insulation and windows. I need to account for the possibility of failing inspections every once in a while… 🙂
– Lastly, we did a LOT of carpentry in this project — from structural work, to trim, to subfloors, to new doors, etc. Normally, I get fixed bids for those, but this time I used my GC’s carpenter. He is awesome, but not great at estimating the time for jobs — I need to factor in his inability to estimate for future jobs.
There are a whole lot more lessons that I’ll apply in the future, but these are the big ones…
Hey J:
So in the end, was the upgrade to granite worth it in this market? Would you do it again?
Great stuff J. Did my Gravatar work?
Hey Brian –
Yes, the upgrade was not only worth it, but I’d argue it was necessary to get the look we needed to sell this property at the top of the market range. I’ll post more details on Friday, when we (hopefully) close on this one!
Shane – It did! 🙂
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