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Jan 17, 2021
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Where To Begin

Post by 
Justin Dubrow
P

reparing to build a custom home, whether for your family or as a speculative investment requires a multitude of items to track and tasks to complete.  Achieving a successful outcome requires a deep understanding of the different processes involved and a strategy for monitoring the progress.  In order to maintain control and avoid costly mistakes we advise having a system in place capable of providing real-time status updates, eliminating guesswork and enabling data driven decision making.  As the owner of the project you will become the central point of contact for multiple vendors and the sole party responsible for final approvals and decisions.  Having the ability to provide a central location for all project team members to acquire the most current project information will help avoid miscommunication, schedule delays, and costly mistakes.  

Spreadsheets are a thing of the past.  Relying on Excel to track budgets and open items in construction projects creates too many opportunities for errors, and analyzing spreadsheets is difficult.  In 2012 JP Morgan Chase learned this the hard way with a $6 billion trading loss due to an Excel Copy-and-Paste error.  

At Dubrow Group we recommend using dedicated construction management software.  We rely on our industry-leading technology partners to provide us with systems that allow us to monitor a project and make decisions based on real time data and analytics.  We leverage automation to identify critical items, expedite schedules and eliminate human error by emotion-based decision making.

The following are four categories we recommend planning for before any work begins.

1. Set a Budget

Start by setting a preliminary budget number. That could be what you would like to spend and an amount you don’t want to exceed for the entire project. You can start to distribute it across the different budget line items as the project progresses. We like to use three main categories for our budget.

Hard Costs

Hard costs are those items are often referred to as “brick-and-mortar costs.” They’re relatively easy to estimate and typically make up the biggest portion of the overall project costs. Costs associated directly with the labor and materials for construction are hard costs. They typically include General Contractor and subcontractor labor and materials including all structural and mechanical elements, utilities, equipment and finishes, and landscape or site improvements such as grading, paving, soils, trees, and accessory structures like pools and tennis courts.  

Soft Costs

Soft costs generally refer to all costs other than hard costs, and they’re often intangible items that tend to be harder to estimate. Soft costs include items such as the services of an architect and engineer, permits and fees, insurances, and costs for the numerous items needed to support construction.  

Contingency

We always set aside a portion of the budget to cover increases in hard or soft costs that you can’t identify at the start of construction. Your contingency is a reserve you’ll use to cover any overruns during the project.  

2. Establish Budget Tracking Procedures

Once you’ve established your budget, you will need to prepare for tracking the money that’s been allocated to each budget line item as you award contracts, approve change orders, and pay vendor invoices. It’s important to present the budget in a way that allows you to quickly understand which items are tracking on, over, or under their allowance. You'll also need to be able to forecast future costs and savings in order to make informed decisions.

3. Assemble a Project Team

There are three main components to the project team, Design, Legal, and Construction. Depending on the project delivery method you choose, the team members may join at different times. Choosing the right team is a critical step to ensure that the project meets your requirements. The team needs to work well together and their interests must be aligned. If you haven’t worked with the same team members before, it will be necessary to use a strong pre-qualification process to make sure the different members are well matched for your project.  

4. Project Administration

Custom homes often take two or more years from conception through completion. Owners typically manage a dozen or more vendors, and there are many moving parts. Here are a couple of key things we do to manage the administrative activities.

•All the vendors will have their own sets of questions. And, it’s often necessary to coordinate with other vendors to answer one vendor’s questions. We recommend creating a detailed plan for tracking open questions so they don’t fall through the cracks, potentially causing schedule delays or rework. We also recommend a formal approval process for decisions to avoid your answers being lost or overlooked.  

•Custom homes typically require multiple revisions of plans and specifications. We recommend establishing a central location for the most current versions. The team will know where to look for the latest plans and specifications, which will minimize the errors that occur when team members rely on outdated materials.  

Next Steps

Once you have a strategy in place for executing the project, the fun can begin. Selecting the appropriate piece of land and developing concepts with the design team are some of the most enjoyable parts of a custom home build.  

Using Pinterest is an excellent way to share inspiration images and helps to communicate your vision to the design team. Interviewing architects and contractors should include tours of both their completed and in-progress projects, which can be educational as well as a source of inspiration.  

If you don’t believe you have the time or inclination to manage your custom home build yourself, contact us for information about hiring an Owner’s Representative to help you stay in control while avoiding all the legwork.

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