Build Cost Calculator

The build costs are all the costs associated with the construction activities of your development project.

Typically, the build cost would also include all site preparation works such as prelims, site welfare, demolition or stripping out of older buildings. Specialist items such as contamination are usually given a separate line within the development appraisal.

The build cost should also include things like connecting to utility services and/or upgrading service provisions to the site and the contractors profit and overheads.

Build costs MUST also include a contingency as developments can be subject to change whilst in progress. 10% is an industry standard amount for this.

You have four methods to do this properly:

1. Quantity Surveyor:

The first and probably most reliable method is to get an initial cost plan prepared by a QS. A QS will take the areas and plans for your development together with an assumed finish or specification to come up for a build cost and build cost rate for your development.

This will cost you money, but in my view its money well spent, especially if you are serious about buying the site. Accuracy is king remember, so spending a maximum £1,000 for this is worth so much more.

Of course, there is a balance to play, as we do not want to spend this money on every single site we look at, especially when we are completing an initial appraisal.

So then we can use the next method…

2. Use Your Experience:

As you build your experience, you will gain the ability and knowledge to estimate the build costs for a specific site, and after a lot of experience, you will be surprised how close you can be. For me personally, I can do this with most development types, both residential or commercial and this is where I start when looking at the build costs for an initial appraisal.

When I then transition into a detailed cash flow appraisal and full due diligence, I will then back up by numbers by getting a QS to ‘cost’ the development project.

Sadly, if you are new to development, this is something you will gain in the future

But there are two more solutions for you…

3. Contractors or Builders:

You can get a builder to provide you with a quote for building works fairly quickly and this can be a good method to establish the predicated costs.

There are some issues, however. A builder may over price or under price depending on the level of information they have and the appetite for the project. They will also have lots of exclusions and provisional sums, so if you are not careful, the build cost could increase significantly after these have been assessed or included.

But again…

You may not want to do this on all your development opportunities as you’ll be using up favours and potentially annoying builders all the time…

So… there is one final method…

4. The Arithmetic Way:

If all else fails you can set your build budget using your appraisal by making the build cost ‘float’…

So what does this mean..?

Well… you fix your GDV, other costs, profit and purchase price in the appraisal. By doing this, you will have one figure left which is your build cost. So effectively, you are setting or fixing all the other inputs and letting the build cost be generated arithmetically or automatically.

Its what is left after you allocated a budget to everything else…

Make sense..?

You can then look at this figure and do some analysis on it… simply put… do you feel comfortable with the figure that has been generated or not..? Does this figure provide a sufficient budget for the works..?

It’s a quick way to generate a build budget, but should be used with caution for obvious reasons.

Now that we have our methods of finding out the build costs for our appraisals, there are a few extra pointers and snippets of information worth mentioning:

1. Remember what area definition we are using for build costs and understand the potential issues getting this wrong can have. When we are quoting a rate per sq.ft for build costs, double and triple check we are using Gross Internal Area. This is the industry standard for build costs and is not the area used for sales or the GDV.

2. Another factor which will affect the overall price of construction which you pay is the procurement method. Two identical projects will generate a different build cost if a different procurement method is used. Typically you have the traditional method, construction management and design & build, so spend some time learning these and understanding the effect they have on the costs.

3. Take advice and understand the tax implications of build costs. When is VAT charged at 20%, at 5% and when is it zero rated? Getting this wrong can wipe out your profit completely..!

4. Do not listen to family, friends, people on social media or networking events when they are quoting or advising on build costs. Do your own due diligence..!

5. Do not listen to architects, engineers, estate agents or any self-appointed experts/trainers. They mean well but are not in the development trenches day-to-day like we are and do not understand build costs sufficiently to accurately predict them or provide advice. It is not their job to know what the build costs are.

Our calculator uses construction cost data to calculate the approximate build cost of any development you are considering. Only contractor costs are considered - professional fees, taxes, finance costs etc are not included here. This give you a quick insight into potential costs and the level of investment you would need to make.