Over the weekend I spent some time watching “Selling House Australia” and “The Block”. I mean who doesn’t love a good renovation show, seeing the transformation of these homes change before your eyes. Am I right? They're awesome and great inspiration for people that are looking at renovating or building in the near future! However, they are not real life........
While watching these shows I began to understand and realise why the public generally have unrealistic expectations on how much it actually costs to engage a registered builder to renovate a home and I felt that it is my duty to explain the costing process and how these costs can add up very quickly. There was a particular Episode on Selling Houses Australia (Season 6, Episode 4) in ‘Erskinville’. The house was a typical double storey terrace home with many issues, structurally and cosmetically.
The host Andrew walks through the home commenting on the numerous aspects of the home and highlighting the issues. These issues included:
- Severe rising damp throughout the home
- Original 50s/60s Kitchen, very poorly kept.
- Leaking roof around existing skylight
- A bathroom behind a cupboard that’s more of an outhouse, very poorly kept.
- Very old rundown exterior to the front and rear of the house including a balcony
After the ‘experts’ come in and assessed the house they estimated the costs to fix up the house would be $40,000. The owner's response was "Oh that's a lot of money"
I repeat $40,000!!
Now with that $40,000 they:
- Demolished kitchen, bathroom, courtyard, pulled down concrete walls and stripped them bare.
- On the ground floor they installed a damp-proof course at the base of the walls to cause the rising damp issue. These walls were then re plastered and painted.
- New Skirting boards and ornate cornices throughout
- Installed new timber bi fold door to the rear of the house
- Installed new Velux skylights.
- Installed a Remote control window in the ceiling
- Installed a brand new Kitchen with stone benches, shaker doors and Smeg Appliances.
- Resprayed Bathroom, new tiles and new plumbing fixtures
- New Glass Balustrade to the staircase
- Completed a courtyard makeover including a timber day bed, concrete pavers and a vertical green garden
- A complete repaint of the exterior and interior of the house
- Installed timber look vinyl floor in the kitchen and dining room
- Installed new carpet in the living and bedrooms
- New pendant lighting throughout the home
- They were able to ‘splurge’ a little bit on the window furnishings and go with timber shutters
- Make over the first floor balcony.
And this all cost $40,000 and only takes a few days to complete the work. Yeah sure!
No wonder the general public have unrealistic expectations on the costs and time frame of a renovation!!
I am going to take you through a realistic cost breakdown of these items when you engage a registered builder and experienced tradesman to complete the work. Now this is just a very rough guideline based on what I could see on the screen so it’s not 100% accurate. These prices include materials and labour
- Demolished kitchen, bathroom, courtyard, pulled down concrete walls and stripped them bare, including bins to remove the demolished materials. $5,000
- On the ground floor they installed a damp-proof course at the base of the walls to stop the rising damp $10,000
- New Plaster throughout home for walls and ceiling with Skirting boards and ornate cornices $10,000
- Installed double glazed timber bi fold door to the rear of the house $3,000
- Installed new Velux skylights. $2,000
- Remote control window in the ceiling $3,000
- Installed new Kitchen with stone benches, shaker doors and Smeg Appliances. $15,000
- Resprayed Bathroom with new tiles and plumbing fixtures $5,000
- New Glass Balustrade to the staircase $1,000
- Complete courtyard makeover including a timber day bed, concrete pavers and a vertical green garden $8,000
- A complete repaint of the exterior and interior of the house including all doors and timber windows $15,000
- Installed timber look vinyl floor in the kitchen and dining room $2,000
- Installed new carpet in the living and bedrooms $2,000
- New pendant lighting throughout the home $3,000
- They were able to ‘splurge’ a little bit on the window furnishings and go with timber shutters $2,000
- Renovate the first floor balcony(this can be tricky it may have needed structural work completed with new waterproofing, tiles etc) estimate $8,000
This comes to a total of $94,000. This is what it physically costs the construction company to complete the works.
Then, on top of that $95,000, the company needs to add their ‘break even’ point for the project. This means adding an amount to the project to help pay for the numerous expenses the construction company needs to pay for throughout the duration of the project. This includes numerous Insurances, office rent, Wages, Tax, Superannuation, travel/fuel expenses, bin hire, temporary fencing, toilet hire, scaffolding, floor protection…….. I could keep going on and on but it just gives you an idea of what the builder needs to pay for behind the scenes and that's just to stay in business.
THEN, on top of that, the company needs to make a profit.
I need to stress. You want your builder to make a profit, because a profitable business is a sustainable business. A sustainable business lasts long term and that’s what you want your house to do.
There is a common misconception that builders run projects on huge margins and that most building companies make excessive profits. I can honestly tell you now that is most definitely not true. There are hundreds of construction companies that go bankrupt every year because they don’t know how to price projects, they take short cuts, they don’t allow enough for their business expenses or they don’t add enough margin at the end (profit)
Profit Margins do vary from business to business but as a general rule it’s recommended a construction company adds 20-35% profit margin to projects.
Therefore if we are using the above “Selling Houses” project as an example:
$94,000 for raw costs of the project plus
$5,000(an example) company expenses during time of the project plus
20% profit margin
= Total price for the project is $118,800
So what the experts say would cost $40,000, in reality would actually cost approx $118,800. Almost three times the amount!
Another thing that completely bugs me is that in reality construction sites are MESSY, they can bring stress, and decisions need to be made early and in a timely manner to keep things progressing. The magic of TV condenses it into a half-hour timeslot. Obviously not realistic and it’s not all bells and whistles by picking pretty cushions and prints
Yes, it is stressful but building or renovating your dream home is so worth it!!
So next time you receive a quote from a reputable, registered builder or any trade think about their 'behind the scenes' extra costs associated with running a profitable business rather than just your project.