When a home no longer meets a customer’s needs, they have two options. They can move to a different house or they can modify their existing home. Renovations and additions are increasingly popular with people who don’t want to enter the real estate market or who are mostly happy with their homes.
If you want to accommodate these quote requests, you need to provide accurate estimates. Not only will good estimates prevent surprise costs during the project, which can increase customer satisfaction, but they will also keep your business profitable. Use this guide to provide better estimates for home additions with all costs covered.
A home addition adds living space to your house. It increases the livable square footage by adding an extra room — or rooms — to the property. There are multiple types of home additions your clients might want, each of which will range in complexity and price. Here are a few popular additions and renovations:
Attic or basement conversion: This renovation turns an existing space into a livable, climate-controlled environment. An attic can become another bedroom or home office while the basement becomes a recreation space.
Guest suite: These spaces can be connected to the main house and will enable the owners to rent the space to a tenant for passive income or house an aging relative.
Added bedroom: A traditional addition will add another room and potentially another bathroom to the house.
Garage addition: The homeowner will either convert the garage into a bedroom or enclose a garage where there is currently only a carport.
You can already see how some of these projects are more complex than others. A guesthouse will need a full bath and a kitchen if the homeowner wants to rent it out. However, a converted attic might just need some insulation, drywall, and carpeting.
As you work with customers to build their dream additions, you need to provide detailed estimates of their costs. Even before your client starts to pick out luxury kitchen appliances or expensive bathroom tiling, you can give them a base number for what the project requires. Here are a few main factors that affect home addition costs.
The square footage of a project matters when calculating cost. Many home addition project estimates are generated based on the cost of materials per square foot. The bigger the project, the more expensive it will usually be.
However, size isn’t everything. Your team will also need to evaluate how complex the addition is and what the work entails. For example, if you’re renovating a basement, you don’t have to worry about pouring a fresh foundation or working with roofers. However, if the homeowner needs a whole need addition to the size of the house, these elements come into play.
To better quantify the variables in materials estimation, break down the different elements involved. For example, you can use estimator tools and project management software to understand how much drywall you need based on the square footage of a project and also use these tools to track labor costs.
It’s easier to estimate individual costs and expenses and add them together than to start with a single large-scale estimate. This will also make your budgeting more effective.
Fortunately, you can also use software tools to quantify the complexity of a project — measuring the size of a project and estimating the costs accordingly.
Typical materials used in home additions have different costs. While these costs vary by industry demand and other economic factors you can use a ballpark estimate to track your expenses when budgeting for a project.
For a few examples of materials costs: a square foot of drywall costs between $1.50 to $4.00 in 2023, which comes out to $15 to $60 per panel. Pouring concrete costs $3 to $5 per square foot. You can see how estimating concrete costs would be easier than estimating the materials costs of drywall. If your client wants a more upgraded option, your cost estimates will go up. Their personal choices can impact the final cost.
Here are a few essential apps we recommend to estimate the various materials needed to complete a home addition.
Concrete estimating software: Understand how much concrete you need to lay a solid foundation and build walls that last.
Framing estimating software: Insert project details to know what kinds of beams, columns, and joists you need for a job.
Drywall estimating software: Stop overbuying drywall with more accurate estimates. You can stay within budget and won’t have to haul around unnecessary materials.
Painting estimating software: Know how much paint a project needs before you order it.
Flooring estimating software: Use the square footage of the project to understand how much carpet, laminate, or marble you need.
When you use all of these tools, you can generate a comprehensive estimate that is backed by data. Your client doesn’t have to trust your mental math.
Labor costs will also vary depending on the complexity and size of the project. Larger projects might need more workers while more complex tasks — like plumbing and electrical installation — will require you to hire skilled professionals and subcontractors. By accurately tracking your labor needs, you will be able to create more accurate estimates for future projects.
Your labor costs will also vary by region. Look at the hourly mean wage for construction workers across the United States. Texas and Florida workers usually earn around $18 per hour. This is considerably lower than workers in California and New York who average $28 an hour. Know the labor market in your specific area and the prices your contractors expect.
Before you can even pick up a hammer, you need to have the proper permits from the local government. Contractors are usually expected to cover the cost of project permits, making them crucial to include in your cost estimates.
Permit costs can vary significantly between localities, as well as between different kinds of projects. Depending on these factors, permits could cost anywhere from hundreds to thousands of dollars. Typically, the more complex the project, the higher the permitting cost on average.
Be sure to familiarize yourself with the average permit costs in your area for different kinds of projects. This will help with the accuracy of your estimates, as well as help prevent any unexpected permit costs.
With experience, you can start to plan for unwanted interruptions that slow down your project and drive up your costs. Some teams even develop an emergency budget with each project just in case something happens. A few potential problems include:
Permits getting rejected at first;
Weather events stopping the project or destroying your progress;
Structural issues you encounter partway through;
Problems sourcing labor, which drive up your costs;
Materials that arrive damaged or are broken before installation;
Changes the client wants mid-project.
These issues won’t crop up with each project, but it’s good to have backup plans in place for when they do.
Even a simple home addition will have several moving pieces and costs that need to be tracked. You don’t have to keep up with all of these costs on your own. Here are a few ways to reduce time spent on estimates while increasing their accuracy:
Construction software estimator tools can help you send accurate estimates to clients to help you win bids.
Use construction software internally for contractors to manage your overhead.
Modify final costs after a project is complete. This will help you budget in the future while keeping your books accurate.
Compare upcoming bids to past projects. You can evaluate the costs of similar additions and apply them to current clients.
It’s okay if bookkeeping and accounting aren’t your passions. Digital tools can help you spend less time creating estimates and tracking costs so you can spend more time working and managing instead.