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Understanding Your "Project Spend" Versus Your Construction Cost
Understanding Your "Project Spend" Versus Your Construction Cost
When embarking on the journey of building a new home, it’s crucial to distinguish between your “project spend” and your construction cost. Many homeowners focus solely on the cost of construction, overlooking other significant expenses that can impact the overall financial planning of the project.
Project Spend vs. Construction Cost
Your construction cost refers to the direct expenses associated with building your home, such as materials & labour. These are the obvious costs that come to mind when you think about building a house. However, the project spend is a broader term that includes all expenses related to the project. This encompasses not only the construction cost but also the costs for plans, approvals, and consultancy fees.
When homeowners initially conceptualise their project, they often focus only on the visible aspects of construction. It's easy to overlook the costs associated with getting the necessary approvals, hiring consultants, and drawing up plans. These additional expenses are crucial and can add up significantly, affecting your overall budget. Therefore, it’s important to include these in your all-in spend right from the start.
Understanding Your Borrowing Limitations
Before you dive into the project, it's important to understand your borrowing limitations. Knowing how much you can borrow will help you define a realistic project spend. Always consult with your financial adviser or lender to get a clear picture of your borrowing capacity.
This step is crucial because it ensures that you are financially prepared for the journey ahead. Understanding your borrowing limitations helps you set a budget that is achievable a. It also allows you to make informed decisions about what you can afford and where you might need to make adjustments.
Allow for Contingencies and Changes
Building a new home is a dynamic process, and changes or unexpected costs can arise. It’s wise to have a buffer in your budget to accommodate these contingencies. This financial cushion ensures that you’re prepared for any surprises and helps keep your project on track without causing financial strain.
A good rule of thumb is to set aside 10-15% of your total project spend as a contingency fund. This buffer allows you to handle unexpected changes , it's common for homeowners to change their minds or make small additions as the build develops.
Engage the Right Consultants Early
Engaging the right consultants, including a builder, at the very beginning of your project can save you significant amounts of money. A knowledgeable builder can provide insights into cost-effective solutions and help you understand the full scope of your project spend. This early engagement often leads to substantial savings that can be allocated to other areas of your project, such as fulfilling your wants and wishes.
Consultants such as architects, engineers, and builders bring valuable expertise to the table. They can identify potential issues early on and suggest ways to optimise your design and budget. By involving them from the start, you can avoid costly mistakes and make more informed decisions that align with your vision and budget.
Maximising Your Budget
One of the biggest benefits of understanding your project spend is that it allows you to maximise your budget. When you have a clear picture of all the costs involved, you can make more strategic decisions about where to allocate your funds. This might mean investing more in certain areas that are important to you, such as high-quality finishes or energy-efficient features, while being more cost-conscious in other areas.
At Veo Building Co., we specialise in helping homeowners navigate their project spend efficiently. By collaborating with us from the start, you can ensure a smoother, more cost-effective journey to building your dream home. Our experience and expertise help you make the most of your budget, ensuring that you achieve the home you’ve always wanted without compromising on quality or exceeding your financial limits.
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