How to stay on budget when building a home

Advice from a green building project manager: how to develop a construction budget and stick to it.

© Ecohome

The following is an interview with Patrick Ranger, General Manager at Belvedair, a construction company specializing in the design and construction of green homes. Patrick is trained in business administration and information management, and is an experienced green building project manager.

JP – Patrick, please tell us about your business and what drives you.

PR - I became aware at a very young age of the global environmental challenges we face as a society. I was raised to be very conscious of lifestyle, consumption, and the impacts of economic and urban development.

This early conditioning to environmental issues guided my professional orientation and led me to study administration at the University of Sherbrooke. At the beginning of my career in 2005, when I met my equally-passionate associates, we founded a consulting company named Synairgis, to apply solutions to environmental issues surrounding construction.  

In particular, we developed integrated green building design strategies for our clients, focusing on energy efficiency and LEED® certification. For my part, I focused on residential building, and how to develop the best energy-efficient measures for home construction while keeping to a reasonable budget.

During this time, I met Benoit Lavigueur, who founded BL Ecoconstruction in 2007. Together we worked on several projects, and eventually decided to combine Synairgis and BL Ecoconstruction to create a company that could offer architecture and construction services, all from under one roof. This led to the birth of our current company, Belvedair.

My training in administration now serves me more than ever, and one of our greatest strengths as a company is our ability to accurately estimate construction costs based solely on the needs of our customers, even at the very beginning stages of conception.

Creating a building budget
© Belvedair

JP - What advice would you give readers on how to stay on budget during a construction or renovation project?

PR - Obviously it is important to be rigorous in monitoring costs at every stage. It’s not enough to establish a detailed budget – you need to comply with it, and track all the expenses during construction and renovations to ensure that the established budget is respected. This is where beginning with an integrated design process proves to be invaluable.

Many designers will tell you that you have to make plans first and then select a general contractor. From our experience, this approach commonly leads to budget failures. The first piece of advice I would offer would be to do the exact opposite - choose a general contractor before beginning the design, and involve them in the process. This will help you evaluate costs from the first conceptual drawings, and during all the stages of the design.

Choosing a contractor should be based on their reputation and competence, and not on who comes back with the lowest price once the plans are completed. Bring them into the design phase at the beginning rather than waiting until it is done.

Also, unlike a designer, a contractor mandated to ensure compliance with your budget bears a real responsibility when he delivers estimates, because he will be required to build to completion based on those prices. This is not the case with a designer, whose fees you will have to pay even if the design cannot feasibly be completed within your allotted budget.

JP - How can you get the most value from your investment when building a house?

PR – Be sure to place the greatest priority on the components that are difficult to change in the future, like the structure and building envelope. If you end up needing to make material compromises in order to stay on budget, it’s better that those be aesthetic; don’t risk affecting the performance or durability. You can always make finishing upgrades in the future after your finances recover.

When considering resale value for the future, remember that a well-insulated and well-constructed home with durable materials and design will experience less depreciation. In addition, you (or future owners) will enjoy lower operational and maintenance costs. Never lose sight of the fact that interior finishes can go out of style, fade over time, or simply not match the tastes of prospective buyers. In contrast, a high-performance and durable home is appealing to everyone.

Creating a house building budget
© Belvedair

JP - Do you have any tips for choosing between multiple bids from general contractors’?

PR – Yes, the first thing to remember is not to approach this like you are comparing ‘apples to apples’. The components that are included or not included in bids will differ greatly between contractors, making it impossible to compare based on price alone.

I would suggest you select a contractor in the same way you would chose to hire an employee for a business – interview them to assess their skills and interest, and to determine if they are someone you think you can have a productive working relationship with. This is also the time to clarify any ‘gray areas’ in their contract bids in terms of what exactly they will provide, to avoid any conflicts during the build.

JP - What are some mistakes people make that cause them to to miss their budget targets?

PR - All too often people forget to include important items, or underestimate their costs. The costs of excavation, foundations, service infrastructure such as water and power, taxes, permits, land surveys, etc. can easily blow your budget if they are not anticipated or calculated correctly. 

Another common mistake we see is people comparing new home prices with the list price of similar-sized homes for sale on the market. A 30-year-old home usually requires a lot of maintenance work, and perhaps major renovations. In other words, an older house will have depreciated compared to a new house, so you can’t realistically expect their costs to be the same. In addition, current building standards are much more stringent than they were decades ago (though they still need improvement), so the annual operational costs would be lower with new homes.

Finally, a very common mistake we see is people estimating construction cost based on a per square foot basis, regardless of the shape, performance, or quality of finishing. I have seen projects estimated at $200 per square foot, which is fairly realistic if you calculate the house only, but some designers do not include full-height basements (and any finishing costs) as part of the area of ​​the house when they do cost estimates.

30 years ago, when most new homes were somewhat similar in design, performance and material selection, it was more realistic to do a ballpark estimate of building costs by square foot. Today, with all the varieties of design, fenestration, wall assemblies, etc., trying to assess building cost simply by considering the square footage of usable living space is now almost impossible to do with any degree of accuracy.

For any bilingual readers who live in the Montreal area, there is a workshop in French starting in February 2018 where you can learn more from Patrick about how to calculate a realistic building budget, and more importantly, how to build within it.