Managing the cost of a project is absolutely vital otherwise you will get halve way through only to find out that you have run out of money and cannot complete the work.
The Cost Plan
The extract from the spread sheet indicated below shows
an example of a simple cost plan for a refurbishment
of a one bedroom flat which was being acquired on a
buy to let basis.
Schedule of work
|Room||Activity||Essential||Nice to have||Total||Progress||Spend to date|
|Repaint window & Skirting||£5||Done||£5|
|New buld for store||£3||Done||£3|
|Replace carpet 20sqm @ £10 pSqm||£200||Done||£190|
|New door handle||£20||Omit|
|Curtains (existing with new tie backs)||£30||Done||£30|
|Curtain track ( reuse existing)||£0||Done|
|New net curtains||£30||Done|
|Remove paper, replace and paint||£10||Omit|
|Replace light fittings & add shade||£5||Done||£5|
|Change heater switch||£5||Done||£5|
|Varnish doors and paint skirting||£5||Done||£5|
|New door handles||£10||Omit|
|Concrete floor (not budgeted)||Done||£10|
On the left hand column is listed for each room the work which has to done to give a workable facility. In the next column is indicated the budget for carrying out this work. In the next column have been added the items which are classified as things which are ‘nice to have’. In other words upgrades which push the refurbishment into a higher standard. In the case of a buy to let refurbishment this may be just the improvement which will give the property the commercial edge on others and enable you to let the property quicker.
Once the schedule has been completed you are in a position to total up the two columns and then you have the minimum and maximum cost for the project . For example above the minimum spend for the Lounge is £293 but if you were to add new curtains and door handle the cost would increase by £120 to a total of £413 . Remember to include for a 10% contingency because it is easy to forget something or often work can cost more if you find problems after the task has started.
Get quotations before you start
Also before you start any work get quotations for as much as possible, albeit for materials or labour or both. This way you don’t have any nasty surprises. Try to aim for 80% of your project as firm costs hence that will able to reduce the risk and possibly your contingency allowance.
Looking at the ‘Big Picture’
Once you have arrived at the cost banding of the work you can factor this into your overall financial plan. If for example you have bought the property as a home to let you can add these costs to the purchase price and see if the investment stacks up against the potential rent.
Don’t forget in a buy to let situation every week the property is being refurbished you are not getting income also the Rating Authority may charge you during that period plus, other utility services like gas, water and electricity. So you must factor this in the overall cost model.
Continuously Monitor Costs
Once you are happy with the budget you can start the work but then use the cost model to monitor costs. If you have got it wrong you may have to re-think future work to bring the costs in line with the budget.
This whole method may seem laborious but it is what
we call “The sleep at Night factor” because
the better you manage your work you will reduce your
risk and associated worries that your money will run
You can save a great deal of money by shopping around for the major items. Why not look at our directory of online DIY stores who will probably be able to save you money