Maybe you have big design dreams, but have you thought more about your budget? Here's what you need to know about calculating the costs of your real estate project.
If you don't have a ballpark figure in mind for your budget, your project can stall before it ever gets off the ground. So how do you develop an accurate budget?
1. Get familiar with the standard cost estimation techniques
There are several different methods available to help you with project cost estimation:
Analogous estimating is the least accurate method of estimation you can use, but it's a place to start. Use this type when you don't know much about the project you're doing.
Analogous estimation can help you get a very vague, ballpark figure. Under no circumstances should it be taken as your final, accurate quote. However, it can give you a solid place to start.
Parametric estimating will take a little bit of research, but you'll have statistics backing you up. Basically, you'll take the costs from another project done in the past and compare them to yours.
Three-point estimating is a more accurate version of parametric. Instead of finding one source of statistics for a project, you'll use at least three and judge against variables in cost to determine an estimate.
Finally, we come to bottom-up estimating. This is the most accurate way to develop a budget, but it's also the most time-consuming.
You'll break the project down into smaller components, price those components, and then add them together to get an estimate for your project.
2. Acquire documentation
One of the keys to estimating your project is to document everything, including the purpose of your estimate. It's even endorsed by the U.S. Government Accountability Office.
This can help you out with parametric and three-point estimation in particular. Remember that prices change with the times, so gather up-to-date costs of contracts and materials, not to mention any vendor quotes.
3. Know your resources
One of the most popular ways of developing your own estimate is to take inventory of the resources you already have. After that, write down what you still need to purchase—and don't forget labor and any equipment you'll need.
From there, you can calculate an estimate. This pairs well with bottom-up estimating.
4. Check the competition
If your project is personal, you may think that you don't have any competitors. However, it's almost guaranteed that someone close to you has done a similar project.
You can directly ask them, or you can use a program that can gather data for projects like yours. This can help with three-point and parametric estimating as you get prices for current projects rather than historical ones.
Project cost estimation: keep your numbers straight
You want your project to succeed, and we do too. Even if numbers aren't your forte, money is like fuel for your project. You need to have an idea how much you'll require.
With the right budget—or at least a general figure—you can develop a plan of action. A budget will give you peace of mind and make your design dreams a reality.