How Much to Remodel My Home?
One dynamic that’s created real challenges for homeowners today is project costs. Clients ask “how much to remodel my home?”. It’s not uncommon for clients to say:
“Why does a contractor tell me the cost to remodel my bathroom is $30,000 when Google tells me the national average is $3,000 to $25,000?”
“Contractors tell me my kitchen will cost $65,000 but HomeAdvisor tells me the average is $25,001?” “Why is this?”
“Can you explain why contractors come to my house and say, “no problem I can remodel your bathroom for $7,500!” while another says, “no problem I can remodel your bathroom for $28,000!”? They both promise to make everything new and beautiful with the best materials . . . “trust me, you will love it!” they say.”
“Why does the job I wanted to do last year (or a few years ago) cost so much more this year?”
Frustrating it is. I get it.
I can’t count the number of times that I’ve heard the above. The reason there is frustration is primarily due to the Internet and social media. Today we can have well over 100 million responses to any question phrased any way in milliseconds. We can also watch millions of videos on YouTube on the same subject produced by millions of experts. It’s information overload. Who can you trust and possibly believe? Who can answer the question “how much to remodel my home?”
Here are the real facts:
You must think of your contractor as a trusted advisor, not simply a remodeling expert or project manager.
It’s virtually impossible to get a reliable cost for a project in your particular neighborhood or city by researching the internet. Why? Notice that the internet loves averages. And why is this? Because the average cost to do remodeling is the result of on-line surveys (easy to do on the internet – a few clicks and its done!). Every survey is for a different project – no two projects are remotely alike. Imagine for a moment if you wanted the average cost to remodel a master bathroom in Mission Viejo in the Casta Del Sol or Tres Vistas communities; or in “The Woods” in Lake Forest. You won’t find this information surfing the web. What you’ll find is averages for bathroom remodels nationally or if you’re lucky, maybe for a large megacity area like Los Angeles (by the way, Los Angeles county has a population of over 10 million residents, 88 separate cities, and is 4,751 square miles in size stretching from Long Beach to Gorman to the Antelope Valley).
Costs vary by city. Why? Because the codes, fees, regulations, tax structures, and material and labor expenses are different for every City. Did you know that the sales tax rate in California is 7.25%? So why are you paying 7.75% in Mission Viejo but 9.25% in Santa Ana? Both are in Orange County. Did you also know that in Orange County all freight that travels on any freeway is charged an additional 14.6% in energy, transit, freight, and district taxes? Consider further how much it costs to rent, purchase a home, purchase groceries, and buy gas in Orange County. As of March 28, 2020, a gallon of gas averaged $3.32 per gallon in Mission Viejo vs. $3.43 in Irvine vs. $2.00 in Colorado. As of March 28, 2020, the average rent in Mission Viejo is $2,118 vs. $2,507 in Irvine, an 18.4% difference. These unique differences for your local community are not found in national averages. It’s these plus all other community specific costs, the size of your project, and the products you use that drive the price of your remodel. These dynamics are different for every city and neighborhood.
When you hire a contractor to remodel your home (bathroom, kitchen, etc.), you hire the local contractor who has experience building and remodeling in your community. You hire the local area expert. Only a professional local area expert knows the dynamics of your home and the neighborhood, how it’s built, the pricing of materials, has relationships with the various Building Officials and other city departments, understands and can work with your HOA, etc. This is precisely why DAD’s Construction is the area expert for South Orange County (SOC), California. We’ve worked in SOC for decades! We know your home!
It’s no different than a real estate professional. You would not hire a real estate agent to sell your home in Lake Forest if their experience is in Laguna Woods. These are two dramatically different areas, each with vastly different demographics. And why do you hire an area expert to sell your home? So, you get the best price! Think of it one more way. If you own a Toyota, do you take it for service to a repair shop that knows Toyota’s or Honda’s? You take it to the Toyota expert of course! I’m sure the Honda expert could figure out what’s wrong with your car, but not before exhausting all other alternatives at your expense!
Prices always go up – month after month, year after year. So, when you are wondering why a $50K project from 2017 now cost $70K in 2020, here’s what you need to know:
Material costs have gone up substantially. Over the past three years materials increased 5–9% per year. If this was a one-time increase, 5% does not seem like much. However, looking at it across a three-year time frame, 15–27% is meaningful.
Trade contractors have increased prices. Most subs are small businesses. When times are tight, they lower prices to stay busy. In a strong market, their prices will skyrocket. Contractors today are paying 50% more for plumbing and electrical than three years ago.
Labor rates have gone up. With low unemployment, a significant shortage in skilled labor, increases in minimum wage, it’s obvious that labor costs will increase. Don’t forget that when labor goes up, so do the employment taxes and insurance rates. Look at what a lead carpenter five years ago versus today is making. Many remodelers are paying 30% or even 40% more across that time period (not counting the employment taxes). When you do the math, it’s easy to understand why the $40k kitchen is now $60k, or the $30k bathroom is now $45k.
Let’s talk for a moment on two important areas regarding labor and how this relates to “how much to remodel my home?”– taxes and insurance.
You may not know this, but employers pay a bunch of taxes on their employees. These taxes are paid by the employer – and these are passed on to the client. Social Security (7.45%), Federal Unemployment Insurance (6%), State Unemployment Insurance (currently 18.8%), Employer Training Tax (.10%), etc. The higher the labor rate, the higher the taxes. Every new tax and regulation increase’s the cost to do a project.
General Liability Insurance, Workers Compensation Insurance, Health Insurance, Vehicle Insurance, etc. Workers Compensation Insurance with zero (0) claims – a perfect safety record, costs a minimum of 35% (that’s $.35 for every dollar paid in wages). Therefore, for a carpenter who’s making $40 per hour, the Workers Compensation insurance alone adds another $14 per hour to the labor rate. Now that $40 becomes $54. Health insurance is simply unreal. This increases about 10-12% each year regardless of claims.
In general, the base hourly rate is doubled to cover the cost of all the mandated taxes and insurances. In our example, that $40 per hour for that carpenter becomes $80 per hour. None of this goes into the contractor’s pocket – it’s all cost.
Whether it’s a loaf of bread or a bathroom remodel, these costs are passed on to the consumer. If they weren’t, the company would go bankrupt.
With costs going up, you might receive an estimate for a project at $50k but by the time you finish it has grown to $60k. Now you know why. I hope this helps answer the question “how much to remodel my home?”
If you truly want a high-quality job that will last and the best possible experience, it’s critical that you understand the costs associated with remodeling and have complete faith in your contractor – your trusted construction advisor – DAD’s Construction.
If you would like more information on enjoying the best bathroom, kitchen, and interior remodeling experience, or simply to answer the question “how much to remodel my home?”, call DAD at (949) 380-0177 or at email@example.com for a free in home consultation (DAD’s serves all of South Orange County California including Lake Forest, Mission Viejo, Foothill Ranch, Portola Hills, Irvine, San Clemente, Rancho Santa Margarita, Laguna Niguel, Laguna Hills, Newport Beach, and Aliso Viejo).