A budget is used to anticipate the total cost of a given project.
Many costs associated with construction are non-negotiable. It’s pretty tough to barter with the city or architects over the costs of permits and drawings.
Everything in this section should be taken with a grain of salt, as it highly depends on your location, personal skills and personal preferences.
Here is a rough take on budgeting for OffGrid.
20% Reserve for unforeseen issues
10% Live support, administrative and legal fees
Backups / Contingency
When you live OffGrid it is important to have a certain financial reserves. If a vital systems breaks and you do not have a local backup installed or a workaround is impossible you might be in a position of having to source things quickly. If your water pump break in middle of summer whilst having farm animals, heating breaks in middle of harsh winter, power dies entirely, etc etc. It is highly recommended to have backups in place for vital systems such as : water, electricity, heating. These backups don’t necessarily need be able to fully replace your default setup, but they should be reasonable sized to carry load for a while. Pricing of vital systems goes up by roughly 15-20% for having a fallback installed. While it may look a big “price increase” you will need it sooner or later, 100% guaranteed some day something vital will break.
Having systems setup from the start to take a possible breakdown into account can ease a lot of stress and basically removes the need for spending “emergency $/€” to workaround something until it gets properly replaced. Ex: having a generator is a legit “workaround” for your electric system, good to use when maintaining batteries, changing cables, installing new solar panels etc, but it is not a “backup” for when your main inverter dies. It is exponentially more expensive to run a full household 24/7 on a generator to maintain everything while you need to wait for your new inverter to arrive. The proper backup would be to have 2 inverters setup, use one as default and resort to using the 2nd if the default one fails. Casually order a new inverter. When it arrives, run your generator for 20 minutes whilst replacing the broken one.
Planning your construction budget
There are many ways in which you can budget for a project, and experience usually determines which method works best. One of the most common and proven ways to plan a construction budget is to split the expense between hard and soft costs. In accounting terms, the soft cost of a construction project is any expense that is not directly related to the physical building of the project. You can think of these as all of the services you need before and after construction. Also known as intangible expenses, soft costs typically make up 30 percent of a construction project’s total budget.
The other 70 percent of a construction project’s budget is traced back to hard costs. Also known as “brick and mortar” expenses, hard costs are expenses that are directly related to the physical construction of the building, road, bridge, or other project. Because hard costs are tangible – physical products with fixed costs – it is usually easier to estimate and control costs in this category. Soft costs are essentially any other expense that does not fall into this category. Compared to hard costs, soft costs are more difficult to estimate because service fees tend to fluctuate.
By dividing your construction budget into these two categories at the outset, you can better manage your budget. You can get a better feel for all of your expenses in both categories and it will be easier to identify possible expenses that you may have accidentally left out. By looking at your costs in terms of hard vs. soft, you can see more clearly which expenses your project management team can firmly apply cost control measures to and which expenses are less under your control.
The real estate costs vary greatly depending on the location and the scope of the project. In highly sought-after locations, the cost of land can represent up to 60 percent of a project’s budget. In less desirable locations, your land costs can be less than 10 percent of your budget. Regardless of the property’s value, it is important to establish a realistic budget range for your real estate investment. Remember, the cost of land doesn’t just stop at the price of the land itself. It also includes the real estate fees, financings, and taxes that make up your total investment.
In accounting, land is viewed as a cost of capital – a one-time expense that maintains or continues to add value for more than a single fiscal year. Land acquisition costs are a critical aspect of a construction project’s budget as they ultimately determine the profitability of the product. In the case of a new construction project, the value of the property will inevitably increase. Calculating an exact value from the start shows you or the customer how much the value has increased thanks to the investment in the constructed asset.
Construction projects require a wide range of professional advisory and other services, which are considered soft costs. Depending on the scope of your project, they may be subject to dozens of different professional services and permits required to proceed with construction. Various fees are incurred during the construction project, but here are some of the initial fees associated with pre-construction: Building and occupancy permits from local governments and associated costs of filing permits and facilitating transactions. Surveying, tuition and testing fees, such as geotechnical or ecological. Architecture and design services, including master planning. Professional engineering stamps, e.g. B. by civil, electrical, mechanical or civil engineers. Accounting, banking and real estate fees
Once the project drawings and permits are approved and all pre-construction work is complete, the project will move to the construction phase, where you may face additional fees. Depending on your area, you may have to pay local waste disposal fees for construction rubble and waste materials. Once built, your project is subject to additional inspection fees and final accounting services.
A fundamental aspect of realistic construction budgeting is predicting your labor costs. Craftsmen, subcontractors, equipment operators and other professionals have costs associated with being on site.
Construction labor costs are one of the most difficult expenditures to estimate. By the time the project begins, it is difficult to predict the exact number of hours it will take workers to complete the job. However, labor cost estimates are critical to assembly and communication with employees to keep production on track and on budget. Improving labor productivity is an essential way to keep your construction project profitable.
Equipment and Tools
Every construction project requires equipment and tools of different sizes and purposes. Depending on how equipment and tools are used, it could be a hard or a soft cost. In the direct construction of the project, equipment is used that is necessary for the demolition, clearance, leveling and filling of land, or for paving driveways and parking lots. If you already own certain equipment or tools, they are considered capital expenditures for accounting purposes.
Contractors should use their material and work lists to determine the types of equipment and tools they will need for the job, and how many of each. Based on this list, contractors may need to rent their equipment from trusted suppliers in their area.
Always choose a reputable equipment dealer when renting heavy equipment and tools for construction projects. Knowledgeable suppliers will work with you to select the right tools and equipment and clearly define the associated costs in advance.
Utilities and Taxes
Depending on the project, you may need gas, water, sewer, and electrical installations. These utilities have their own associated permit and connection fees that must be factored into the overall budget of the construction project.
It is possible that your project is also subject to local and state taxes administered by different agencies. Tax rates depend on the size and type of construction, with larger construction investments being taxed more heavily. Make sure you work with a certified accountant who has experience in home finance to ensure that you are properly debiting all taxes.