Part 1: Why Renovations Cost More Than New Construction

You have decided to renovate your home.  There are excellent reasons to renovate a home: your family grows, you want a larger bathroom, or you’ve always loved the location but hated the kitchen. Renovations need to happen and we think they are great.

Where it becomes frustrating for a homeowner is to find that this project is going to cost 30%, 40% or 50% more than they anticipated. And that’s the key word-Anticipation.  When you’re making a decision to spend money, the last thing you want is a surprise. A recent survey showed that 40% of homeowners in the US went over budget on their renovations. We hypothesize that some of this extra spending may be a misunderstanding of actual costs of a renovation project. We’ve outlined just a few reasons why the costs of renovation can be higher than costs for new construction:

The Construction Site is a House is a Construction Site

A quality general contractor will ensure that the crew packs up their equipment and sweeps the site clean at the end of each day. On a typical job site, it’s still a mess. There’s waste, debris, and dust. This is construction.  With a renovation; you may be living on that job site. This means the contractor needs to go to greater efforts to localize the waste, debris & dust and implement measures to minimize your lifestyle. Just like wax & polish are an upcharge when getting your car washed, providing these much needed services take more time and material from the contractor.  This can mean an increase to the project cost.

Economies of Scale

Much like bulk retail stores like Sam’s Club, materials prices decrease as more quantity is purchased. Unfortunately, the opposite is true when only a small amount of material is purchased. A bathroom is a huge deal for many homeowners! It is not a huge amount of material in the construction industry. When your contractor goes to buy all the different materials you need, you end up paying a higher cost for these materials.  A project with different styles and types of materials can cost more than one with a simple style and unified material palette.

Labor Costs

On renovation projects, it can be a challenge to get in the efficient mode of production. You may be asking 1 trade to come in and do 300-400 square feet of work (drywall, tile work, paint). In a larger project, different trades can come in and crank out more work-it’s an efficient use of their time and a product of space. It costs just as much for a subcontractor to mobilize for a small project as it does for a large project.  Also, an important factor that is often over looked is the craftsmanship of your contractors.  John Doe down the street can do it cheap, but is he qualified, insured, and have the necessary resources to get it done?

Unforeseen Conditions

No matter what type of renovation; you hear the phase ‘prepare for unforeseen conditions’.  This could be asbestos tile under a floor in your kitchen or the wall behind your tub is completely rotted. If your contractor is familiar with renovations-they will tell you to have a 10%-15% contingency fund to account for these unforeseen conditions.  In the worst case-they don’t mention this and then something happens in the middle of the project and you’re left feeling uninformed, unhappy & over budget. Either way-it’s an anticipated cost and can drive up your bottom line.

Matching Materials

In some cases, you may have some exterior finish like brick or wood siding to match. In other cases, you may be asking that to match wood flooring or a particular door casing/millwork detail. If this is the case, this will certainly add some additional cost to your project. It’s not your fault you want the floors to match. And-it’s not the contractors fault your floors are 80 years old. It’s just a matter of knowing this fact and deciding what areas of your project you can compromise on and what areas are most important to you.

What’s a homeowner with dreams of renovation to do?

Well, you’ve already equipped yourself with more than most: educate yourself on the realities of renovation. Rules of thumb on cost per square foot may not be 100% accurate for renovation work. Continue to get educated. Do research online for typical costs of renovation in your area. One resource we think is pretty user friendly is offered by Houzz.

Another way to help manage cost estimates is to make smart design decisions. Check back here next week for Part 2 where we identify smart design moves to help reduce the bottom line.

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