A crucial objective for any builder is to figure out how to increase the profitability of new construction projects. While we do provide guidance on how to reduce construction mistakes and avoid cost overruns, it is ultimately up to each builder to decide what their plan of action will be to reduce overall costs. The following are just a few examples of what a builder may choose to do in order to keep their construction budgets in check.
Reduce Home Size
One way to reduce your construction budget is to reasonably decrease the size of the home you’re building. After all, a reduction in square feet results in a reduction in cost in nearly all aspects of the home, from the foundation to the roof. Look at the blueprint and ask this question: is the layout efficient? Try to find areas of waste that may increase the home’s size, but not its desirability. Eliminating those areas may result in a more profitable home without risking a sale. Be strategic, though. Reducing the size of high-visibility spaces like the kitchen or master bedroom may make a sale more difficult.
Decrease Project Complexity
Builders may find success in managing construction costs by decreasing the complexity of their projects. It is fine to have a more complex build on a custom home, if the client desires something specific and chooses to pay for it out-of-pocket. It may not be the best decision to add custom features if they do not apply to a specific buyer in mind, which may affect the home’s overall desirability. Even if the cost of the materials for a more complex build is negligible, it may take more time to build; and therefore, will have a higher labor cost. Also, a more complex project increases your chances of encountering costly construction mistakes.
During any build, mistakes or additional costs will happen – whether it is due to human error, act of God, an over-budget item, etc. If anything goes wrong during a build, your construction budget should account for any contingencies or unforeseen costs that could arise. Careful planning and dependable partnerships can help reduce the risk of major budgetary issues. For example, construction delays are costly and can be unavoidable, but if delays are occurring too often due to unreliable sub-contractors or a lender that fails to come through on funding when you need it, you should consider making a switch. Hiring a more dependable sub-contractor that will show up when scheduled or partnering with a lender that has a track record of success in paying loan installments on time can have the potential to reduce the risk of certain types of delays. This will allow you to strike a portion of your contingency fund from the budget, but remember: you should continue to account for these contingencies in your construction budget software until your new partnerships are proven to be reliable over time!
Reduce Hard Costs
The cost of building materials can fluctuate and the retail landscape is always changing, especially as more suppliers sell via the internet. The result is that the price you have been paying on materials for years may not always be the lowest available pricing. You may want to ask yourself the following questions: How often do you compare your local and online suppliers? Do you always use the same store for all of your purchases because it is the closest store, out of habit or loyalty? Are you taking advantage of contractor pricing and the benefits available to you at supply stores? You may find that certain stores are worth a longer trip due to the discounts you may receive on some or all of your materials, especially if they have a rewards program.
With a few strategic decisions and some additional research, you can increase the profitability of new construction projects by reducing your construction budget. If you need a lender that will help keep your projects on track with timely financing and sophisticated construction budgeting software, contact Snap.Build today.