Revealed ... The Elephant in the Room (and discover how to eat one) !!

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Has anyone ever asked you how to eat an elephant ? I'll share the secret in a moment ... it's a life skill worth knowing ... in case you ever find yourself short of groceries but have an elephant to hand.

 

Talking of elephants, in Episode Three, I mentioned that I had grown up in Africa waking up each morning to the sound of Lions roaring. Yes, really !!

 

I revealed the #1 Circus Skill all Homeowners need to master to deliver their Home Makeover projects successfully - if you haven't listened to it yet, make sure you don't miss out.

 

Without giving too much away, in that episode I described four competing forces that exert influence on all Projects that must be balanced for Home Makeover Projects to end well. Actually, I let slip that there's a fifth key force that I'll be exposing in a few episodes time. Something to look out for.

 

Of the four forces, I explained that COST is the Elephant in the Room, the big kahuna. And this is because it’s the one we are most affected and driven by. For most of us, except perhaps the very rich, cost typically dominates all project decision making. The most common approach Homeowners take is to push to get the biggest bang for our buck, and we’ll often tolerate the project taking longer and accept some reasonable quality compromises so long as we achieve most of our dream outcome.

 

Talking about very rich people, I once worked for a very wealthy individual and his wife who had built a magnificent mansion as their family home. His wife was the designer and architect – highly skilled with an incredible eye for detail. The end result of their efforts was extraordinary, a combination of amazing design and epic opulence. But I once heard him joke that although he had set his wife an unlimited budget ... yes, you heard right, an unlimited budget for their ground-up development, she’d still managed to overspend. If you were to see the property, you'd understand why.

 

Anyway, back to elephants. The old, classic question asks ... how do you eat an elephant ? For me, growing up in Africa with elephants on the doorstep … well, almost, knowing how seemed important. In case you don't know, the answer is ... one bite at a time.

 

So starting today we're going to eat the elephant in the room, Home Makeover Project Cost, one bite at a time. And we're going to keep going over the next few episodes until we're done !!

 

Hello and Welcome to Home Makeover Project Secrets, the show that equips Home Owners with the skills and understanding to execute successful home projects, that goes behind the scenes of Home Build Projects to unlock the secrets and share insider tips and strategies to save money and time on any and every home project. What you learn will give you the confidence to embark boldly on your next project and you’ll know what to do so your story has the happy, dream home ending you deserve.

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I’m your host, Andrew Philips …

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When I talk about "Home Makeovers", I include renovation, remodelling, alterations, additions, going up into attics and down into basements, redevelopments and even ground-up new builds. Any and every project where you're going to be appointing professionals, designing something, buying materials, carrying out construction work, employing contractors and sub-contractors, suppliers and manufacturers and even if you're doing some or all of the work yourself. All things home build.

 

The information I share, teach and coach is focused on universal principles – it applies just about everywhere – although terminology may differ between countries. But don’t let that put you off. You will easily be able to check online to verify those few terms for where you live.

 

I'm delighted you've joined me for today's episode.

 

Because we are dealing with what might be unfamiliar territory, terminology and processes, the show notes and transcript will be uploaded to www.thediypm.com so you don't need to take notes while listening. We also include any links to resources, free gifts and other useful information. We do this for all podcast episodes so you can always easily refer to the key information shared each week.

 

Just to be consistent and to avoid confusion I’ll just refer to costs in US Dollars – but the principles of everything I’m talking about are exactly the same whether your currency is Pounds Sterling in the UK, Australian or Singapore Dollars, Indian Rupees, Euros in the European Union or whatever.

 

And now, back to elephant eating.

 

We'll start with the Appetiser ... which is an overview of the commercial cost process of a typical project – a birds-eye view. And it unfolds something like this …

 

Most homeowners usually start a Home Makeover adventure with a gentle prod ... actually sometimes not so gentle ... from some circumstance or need or event which makes us start thinking about reshaping or reconfiguring our home. It might be the arrival of a baby or the evolving needs of kids as they grow up or the perception that the kitchen and living areas need rearranging because they no longer meet the requirements of family life. In the current Pandemic, many Homeowners have explored how they can create more formalised home offices within their homes, driven by the unexpected arrival of enforced home working. And then the discovery that home working is fabulous but doesn't work so well when you're trying to have Zoom calls while toddlers are crawling all over you or yelling their heads off.

 

Whatever the driver may be for your home makeover project, you'll probably start by imagining how you might solve that need, you'll start dreaming. There are a few reasons we so often refer to Home Makeovers as "dream home" projects.

 

Gradually your dream ideas may progress to rough sketches on bits of paper. You start pacing out spaces - can we fit a bed against this wall, if we removed these kitchen units we could install a desk and shelving over there and so on.

 

Before long we're discussing the ideas with our partners and perhaps families, friends and neighbours and very soon the elephant enters the room. If not handled correctly, that elephant can make a real mess.

 

So how much will these dream ideas cost ? And can we really afford them ? Or how much are we willing to spend ?  Gradually numbers start to dominate our thought processes.

 

And we move into Stage One – which we can call Cost Planning. We might start to throw ball-park numbers at chunks of work we are considering. These are often loose guesstimates ... usually instinctive, that may be informed by what friends, family or neighbours have told us they spent on their projects.

 

Let's imagine a dream project which might look something like this ...

 

Extension for new kitchen diner - $ 30,000 maybe $ 40,000

New remodelled kitchen - reusing some of the existing cabinetry - $ 20,000 but better if we could keep that down to $ 15,000

Home office - very simple to start with so let's say $ 7,000 but that’ll probably exclude a new laptop

Wouldn’t it be great if we could add the new deck we were talking about last summer - Okay we'll say that's $ 10,000

 

And that all adds up to somewhere between $ 62 to $ 77,000.

 

We've probably missed a few key costs not yet taken into account. But it's a start. And we mull over how we feel about spending around $ 75,000 on the project. Don't get hung up if that's a much different amount to what you are thinking about for your project - less or more, the principles I'm talking about are valid for most project values from as little as a few thousand $ to literally millions.

 

At this Cost Plan stage, there may be very little science behind our guesstimates - especially if this is our first project of this kind.

 

Although you might be surprised at how much your instincts have been influenced by say TV Shows you've watched - like Property Bothers, Grand Designs, Home Makeover on Netflix, many different HBO shows and others of a wide variety of types. Most Homeowners at some point find themselves watching TV Shows that demonstrate how wonderful a successful project can be for folks as their home is transformed or focus on the pain and suffering people experience when their projects come unstuck. Mostly we're looking for inspiration, design ideas, new concepts, examining what other people do. And in amongst those Shows we start to pick up snippets of cost knowledge.

 

The most common basis for developing a cost plan is using square foot or square metre rates depending on whether you work in Imperial or Metric. These tend to be market average costs calculated on an area basis. The area affected by the works x rate = total cost. The rate will vary significantly between towns and cities, states, regional and national locations and of course countries. And very often they are expressed as a cost range - from this to that. The cost range is likely to be influenced by the size of the project, the type of work being carried out – like bedrooms are generally cheaper to build than bathrooms or kitchens - and the quality standard from basic to average modern to high end. Getting a sense of those local costs where you are is just an internet search away. Here's an example ...

 

Picking a random location … Google suggests that new-build costs in Arizona in the United States ranges from $ 100 to $ 155 per sq. ft. This is from basic to average modern properties.

 

By comparison, in the UK - Google suggests costs might vary from £ 1,800 per m2 to £ 3,000 per m2. Converting to US $ and sqr ft this equates to a range from basic at $ 230 to $ 385 at the high end. But even across a relatively smaller country like the UK, prices vary considerably between different regions with cities typically more expensive than rural areas, the south of the country being more expensive than the north and so on. So it's important to try to find locally relevant costs.

 

By doing a bit of digging via the internet you should be able to get a sense of what the cost range might be. The example I have just given was for new-build - you need to use costs that more closely reflect the type of work you are planning as alterations and renovations should not be as costly as full new-build.

 

A few warnings about using costs quoted to you whether from the internet or neighbours, friends and family ...

 

The first warning is that quoted costs may not include everything. So you need to know what is or isn't included in the totals. We'll be digging deeper into this topic in the next episode so do join me so you can understand this better. But to explain this briefly, for example, you need to know do the quoted rates include professional fees - like architects fees - or not; Or, do they include direct costs - costs paid for work items directly by you, the Client, instead of through the General Contractor if you’re employing one - this might be items like loose furniture, audiovisual equipment such as TV's, sound systems and so on.

 

The second warning is being wary of assuming a quality standard - the cost ranges shared a few moments ago vary significantly between basic and high end so as you establish your target cost be aware that this may go up or down as you dig deeper into the quality you are aiming for.

 

Having imagined our dream project and developed a simple, high-level Cost Plan, next we start wrestling with how we can afford a total like that. Some may be fortunate enough to be able to go straight to their savings while the rest of us may have to raise the funds with a loan or increasing our bond or mortgage and sometimes from the bank of mom and dad.

 

And while we're working out how to pay for our dreams, we're likely to start to put a bit more meat on the bones of the Cost Plan and we begin to develop the details of our project a bit further and we move to Stage 2 as the Cost Plan evolves into a Budget.

 

A budget is a more detailed version of the initial cost plan and should be a live document - something that will evolve from rough guesstimates to more and more accurate costs until we finally have fixed costs once the orders have been placed with contractors, suppliers and manufacturers.

 

Like the cost plan, a budget typically starts with high-level chunks of work which is then broken down into more and more detail as we become clearer about the specific design. An example of this could be floor finishes ... what we'll be putting on the floors ... like carpet, wood strip, ceramic tile, stone slabs, marble or vinyl. In the initial Cost Plan, those floor finishes are included in the "lumpy amounts" or chunks of work.

 

In the Budget we start to split down those lumpy amounts into more specific allocations. So in our original example, we had allocated say $ 40,000 for the kitchen diner extension.

 

That may have been based on an area of say 320 sqr, ft. at a rate of $ 125 per sqr. ft. 320 x 125 = $ 40,000 – so quite basic.

 

Breaking that total into smaller cost centres or cost elements might look something like

foundations

external walls

floor construction

roof

ceilings

electrical - separated into power like plug sockets and lighting and lighting control

floor finishes

wall finishes

and so on.

 

Even if you've never done this before, you only have to stand in a similar type of room within your own home or in a friend or neighbours' home and by looking around you, you can see most of the stuff you will need to build or buy to get the work done.

 

Once a Cost Plan has evolved to become a Budget you are ready to start getting more accurate prices and costs for the specific elements of the work.

 

I need to point out that the cost process I've been describing must run in parallel with the design process. While I'm focusing our attention today and over the next few episodes on costs, we mustn't forget that the design process is what becomes the driver for getting to detailed and eventually final costs for the project.

 

On simpler, less complex projects, you may be planning on doing the design of the works yourself for the concept and then intending to work with your contractors to add and develop the design details. If this is the case, then you can proceed straight to getting quotes, bids or tenders.

 

If, however, you plan to appoint an architect or interior designer then the best time to do that is while you're still just imagining the project but before or as you are starting to develop your initial Cost Plan. These experts will typically have a very good idea of what works, like those you are planning, should cost and they will work with you to help you develop both the overall Cost Plan and the more detailed budgeting. I'll be diving into the best ways to work with architects and designers in another series of future episodes.

 

But staying with our high-level overview of cost processes ... so your Cost Plan has evolved into a more detailed budget and now you're ready to get more accurate and even final costs for specific elements.

 

Another elephant which we'll need to eat - yes, there's actually a whole herd to deal with to deliver our Home Makeover successfully and we definitely want to avoid being trampled – and that is the whole process of getting the best prices for the works - by bidding, tendering, quotes and negotiation. And this is another topic we'll focus on in more detail in another episode.

 

For now, just to put this on your radar, but depending on the size and complexity of the project you will need to go through a process of getting actual contractors, suppliers, manufacturer's, specialists and others to provide their fixed offers for the works. Even if you choose to appoint a General Contractor or Main Contractor who will handle appointing most of the sub-contractors, there will still be a surprising number of different companies or specialists you'll end up working with.

 

Once you have a Budget that is based on mostly fixed costs or reliable budget costs you will move to Stage Three as you start to appoint the various contractors and others. Again we’ll focus on this topic in future episodes.

 

Stage 4 is when the works commence.

 

As the project unfolds, the cost process involves monitoring costs against the fixed prices and budgets. You will need to firm up any costs that were still budgets when works started but now need to be fixed so those works can be carried out.

 

This typically involves making regular payments as works are completed, dealing with requests from contractors and suppliers for increases where the scope changes – like for stuff you or they didn't know about when they submitted their original prices and so on. You may need to issue instructions to them to add extra work and items or for extra costs that might arise if you change your mind about selected works.

 

And then as the project draws to a close, you move to Stage 5 as you start to agree Final Accounts with each contractor, supplier, consultant and others - everyone who has done work on the project.

 

If you've successfully managed the costs during the execution of the works then there should be few surprises when the final accounts are being negotiated and agreed. But this can be a time of nasty discoveries when contractors suddenly present claims for a whole lot of extras they thought you knew about but you realise you didn't and they demand payment but you're not sure whether or not their claims are legitimate. In many, badly run Makeover Projects, this can be a time of frustration, endless arguments, and terrible anxiety and stress for you if the costs start to spiral above the budget and available funds.

 

Avoiding a miserable Final Account process depends on the accuracy of the original Budget planning, how well you managed the original contractor appointments and then monitored the costs during the on-site phase of the works. Which is why this will be covered in much more detail in future episodes.

 

This may all seem rather daunting and overwhelming for you but by taking small bites across the course of the upcoming episodes, I'll be able to help you understand exactly what needs to be done step-by-step through the process so your confidence grows and your grasp of the most effective process improves.

 

Even if you do employ experts to assists you - architects, designers, even a professional project manager, understanding what they are doing and why will really help you to be a great client to work with and will make their jobs easier so they can get the best results for you which must always be to secure the lowest correct cost, the most appropriate length of time to properly execute the works, achieving the quality standard you expected from the outset and all done safely. Your goal is smiling, happy faces on move-in day with a few tears of joy and satisfaction, pride and delight. And definitely none of the ugly tears of frustration, disappointment, anger, and embarrassment.

 

Looking ahead to next weeks' Episode we’ll be continuing our elephant feast by focusing in more detail on item costs and the commercial drivers behind construction projects. This will give you a deeper understanding of how contractors work and think from a cost perspective to empower you as you manage the commercial aspects of your project. A bit like going into the kitchen to watch the chefs preparing the meal for us.

 

To make sure you never miss an episode, why not subscribe to Home Makeover Project Secrets on our website at www.thediypm.com where you'll also find our blog posts and details about our upcoming Project Masterclasses and Training Courses.

 

If you have a question about a project you're planning or already running, please reach out and email me on faq@thediypm.com . If you have a challenge to overcome then I can just about guarantee others are also facing the same or similar challenges. We'll be answering listener questions in FAQ episodes every few weeks. It’s always reassuring to know you’re not the only one battling away …

 

It's been great to have you with me today and I look forward to having you back for the next Episode of Home Makeover Project Secrets.

 

All the best on your Home Makeover project adventures.

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Andrew Philips, Project Management Coach