SETTING A PROJECT BUDGET
Estimating the cost of home construction and renovation is tricky business. There are many factors to consider, and it’s not always clear which have been included when gathering rough figures. Adding to the difficulty, each project comes with its own unique particulars, which makes generalizing difficult. Furthermore, at the beginning there is usually only a broad idea of what the project will be, without the drawings and details required for a methodical calculation. And yet some notion of cost is necessary before initiating design. So how do you set a reasonable project budget from the start?
The first step is to recognize the main categories of expense. This will allow you to keep track of what is and what is not included when discussing figures with contractors, architects, friends, and family. The biggest factor will be direct construction costs, which tend to drive soft costs like design and permitting.
CONTRACTOR
The general contractor will, by far, be the largest expense of your project. Their job is to hire, coordinate, and oversee all of the trades needed to execute your project (plumbers, electricians, roofers, etc.), as well as to procure materials and products. Some of the work, usually carpentry, will be done by the contractor themselves. In addition to their direct labour and site supervision, a contractor will charge some kind of project management fee. Traditionally this is known as “overhead and profit” and is applied as a percentage to the construction subtotal (15% is typical).
Construction expenses vary depending on the details, of course. The most important factors are the extent of the work area and the intensity of the renovation. Here are some rough current per/sf figures (apply to gross floor area, including basements):
New Laneway House = ±$480/sf + HST
Addition = ±$590/sf + HST
Gut Renovation = ±$350/sf + HST
Incidental (new paint, wood flooring and other items required to accommodate the main areas of work, but not moving walls or replacing trim) = ±$60/sf + HST
Underpinning = ±$100/sf + HST
Exterior (decks, porches, renovation) = Varies
At the early stages, this will only give a rough idea, and the ultimate cost will likely be less or more depending on many undecided factors. Use ±15% to give yourself a reasonable range.
OWNER-SUPPLIED ITEMS
In general, it’s best to leave fixture and finish purchases up to the contractor. This is because the contractor is ultimately responsible for their installation and should verify that orders are complete, coordinate delivery, and deal with any problems. The added management cost is usually more than offset by the trade discounts contractors receive from suppliers. In short, let them have the headache—it doesn’t cost you any more.
The typical exceptions to this rule are appliances and decorative light fixtures because these products are marketed directly to consumers, and procurement by the homeowner is relatively straightforward. A suite of kitchen and laundry appliances usually ranges from $15K–$30K + HST. Decorative light fixtures can vary a lot depending on quality and quantity. For a complete house, we usually advise a budget of $7K–$14K + HST.
CONTINGENCY
As with many things in life, estimates frequently fall short of reality. Often there are understandable reasons for this. For instance, demolition may reveal new problems and complexities: beams that have been hacked, floors that are out of level, wiring that is not up to code. Additionally, there is the ever present phenomenon of scope creep: Once it’s clear how nice everything will be, suddenly things that seemed fine before, like those old fidgety doors, suddenly feel in need of replacement. Also, inflation can be a significant factor, especially of late. On balance its good to have an extra 10% or so on top of the construction cost to cover these possibilities.
PROFESSIONAL SERVICES
Making your dream house come true requires serious design effort. Typically this is led by an architect who will also consult with structural and mechanical engineers as needed. At our firm we offer full architectural services from schematic design through construction. For a typical project our fee will be 10–15% of the construction cost, plus $4K–$7K + HST for engineering, depending on the project’s requirements.
Architects structure their contracts differently, and there are pros and cons to each approach. We use a combination of hourly rates with upset cap limits to provide flexibility while maintaining budgets. Typically the difference in cost among design firms is based on the level of service offered. Beware, however, of trying to save money by minimizing professional services. This comes with its own costs: namely your time and access to an architect’s ability to steer construction expenses down. As a poignant example, when bidding a project out, our fee is almost always less than the difference between a contractor we recommend and the high bidder brought in by someone else. Good design, it seems, pays for itself in more way than one.
REGULATORY
Each permit your project needs will come with its own fee. The building permit fee is usually relative to the area of work, with most Toronto renovation fees being around $1K–$3K, depending on scope. If special approvals are needed, like tree permits or minor variances, such fees are in the same ballpark. There are a few additional indirect costs that come with the approval process: property survey, arborist, and designated substances survey among them. But in total, all the regulatory costs can often be largely offset by the government’s HST rebate program if the project is substantial enough to qualify.
With all of these costs and advice in mind, hopefully you feel more empowered to set out a budget for your home construction project. Ultimately, the more closely aligned your budget is with your design expectations, the smoother the process will go and the happier you will be when the last bill is paid.
