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Residential Construction: Cost Comparisons for Your Next Investment

You’ve been buying lumber. You’ve been sourcing materials. And you’ve been pushing your crew hard to meet the deadline on this residential build. But every time you review the budget, you find yourself wondering how the cost comparisons could have been so off.

Maybe this year you were a victim of skyrocketing lumber costs. Maybe you’ve had a ton of unusually fussy clients. But even so, estimating for residential construction is a difficult skill to learn. If money problems and inaccurate estimates have been happening way too often lately, you’ve come to the right place. We’ve put together a list of ways that you can improve your residential construction estimates. All you have to do is keep reading.

  1. Flesh Your Costs Out As Much as Possible

With residential construction projects, one miscommunication or underestimation can ruin everything. A relatively simple way to make your estimates more accurate is to be as granular as possible when you’re planning.

Is your customer looking for a marble-top kitchen counter, huge windows, and oak hardwood flooring? Do they want expensive carpeting or high ceilings?

You don’t want your team or your subcontractors to be confused about what the project is and the type of work that it entails. In addition, you’ll also want to make sure that you and your clients are on the same page.

Misunderstandings at this stage can result in expensive and time-wasting redos. When you make a point of diving into the finer details of your projects, however, you can often predict the cost of the residential building construction.

  1. Have a Couple of Estimating Methods at Your Disposal

In construction, there are very few people who can do everything on a project. Everybody’s a specialist. And in residential construction, that’s typically a good thing. But because most construction people are highly skilled at one or two things, it’s not easy for team members to calculate costs for the entire build unless you adopt a company-wide approach.

Two popular strategies that you might want to incorporate into your construction business are the unit price estimating method and the square foot method.

With the unit price estimation, you’re calculating how much you’ll have it’ll cost to construct the different parts of the house. And when you’re going with a square foot estimate, you’re calculating your numbers by multiplying the construct cost per square footage of the build.

Although it may seem tempting to take just one of the two strategies and keep it moving, there are benefits to gaining technical proficiency with both approaches.

Why?

Because while unit price estimating may be extremely accurate if you have a detailed list of parts required for the build, square footage estimates are often a lot faster to produce.

You won’t always have the luxury of having several weeks or months to submit a bid. By having one detailed and one quick method of estimation standardized within your business, you can get the best of both worlds without losing major money because of inaccurate quotes.

  1. Be Careful About Underestimating Labor and Subcontractor Rates

The problem with many residential construction jobs is that costs can vary widely for reasons that have nothing to do with the square footage. On paper, a bare-bones house might not require all that much work to construct.

But when you’ve got a client who wants a tiny luxury house or a bunch of handcrafted components, suddenly the house that might have taken about 40 hours of plumbing work in different circumstances is easily a 60 or 80-hour affair.

And that’s before you start to realize how things like productivity can be difficult to account for in a project.

When you’re submitting your bid, it’s easy to think in terms of what the hours involved would look like in a perfect world. But that’s where you may want to consider having a standard cushion in your price estimates that can account for things like construction delays or problems with the build.

  1. Consider Using Residential Construction Estimating Software

At the end of the day, you’re a busy person. You’ve got projects to oversee, crew members to manage, and subcontractors to keep track of. And during the busiest parts of construction season, you might not have time to sit down. Never mind continuously calculating and making flawless price estimates.

One faster and easier way to make estimates without having to compromise on your general productivity is to use residential construction cost estimation software. It can help you save time. And it can help you avoid making the types of mistakes that end with your company taking out new residential construction loans while watching your margins shrink.

In addition, another nice thing about software-based solutions is that the more you get used to using them, the faster it becomes to get things done.

Don’t Let Cost Comparisons Eat Into Your Bottom Line

The 2021 real estate market has led to headlines around housing shortages and rising prices. If you’re a general contractor, now is a good time to be in business. But if you’re not careful, you could be hit with cash flow issues due to inaccurate cost comparisons.

By using a combination of software solutions and tighter internal estimation practices, however, you can quickly and efficiently make bids without having to worry about whether you’ve undersold yourself.

Are you looking to learn more about running and operating your construction business? Check out our site for more advice.