How to Budget a New Construction Project in Houston

A budget is a promise to your future self. Put the line items in the spreadsheet before you put a foot on the lot. Most first-time Houston builders skip this step and try to budget after they have already committed. By then, the deal is dragging the budget instead of the budget driving the deal. Here is the framework I use.

The Five Major Categories

• Land
• Hard costs
• Soft costs
• Financing costs
• Contingency

Every Houston new construction budget I run starts with these five buckets. Then I fill in line items inside each.

Land

Purchase price. Earnest money. Title and escrow. Survey. Phase one environmental if required. Demolition if the lot has structures to remove. Land carrying cost (taxes, weed cutting, fencing, security) from purchase to start of build.

Hard Costs

Site Work

Clearing. Grading. Drainage. Erosion control. Temporary utilities. Foundation prep. Soils-related foundation upgrades.

Foundation

Forms. Rebar. Concrete. Plumbing rough under slab. Inspections.

Framing and Shell

Lumber package. Trusses. Sheathing. Windows and exterior doors. Roofing. House wrap.

MEP Rough-In

Plumbing rough. Electrical rough. HVAC equipment and ductwork. Inspections.

Insulation and Drywall

Insulation install and inspection. Drywall hang, tape, float, and texture. Paint primer.

Finishes

Cabinets. Counters. Tile. Flooring. Trim and millwork. Interior doors. Paint. Plumbing fixtures. Lighting fixtures. Appliances.

Exterior

Siding or stucco. Brick or stone if applicable. Exterior paint. Driveway and walkways. Fencing. Landscaping. Sod.

Soft Costs

Architectural design or stock plan license. Structural engineering. MEP engineering. Permit fees. Impact and utility tap fees. Builder's risk insurance. General liability insurance pro-rated to the project. Project management software. Legal fees for contracts and entity formation. Accounting and bookkeeping for the project.

Financing Costs

Loan origination points. Appraisal fee. Title insurance for the lender. Inspection fees per draw. Interest accruing on each draw from the day it funds until payoff. Extension fees if the build runs long.

Contingency

Ten percent of hard cost minimum. On older lots, on tear-downs, or on first projects, push it to 15 percent. Contingency is not slush. It is a line item that reflects the reality that something always comes up. The day you do not need it is the only day you are glad you had it.

Where Beginners Under-Budget

• Soft costs. Almost always 30 percent low.
• Utility tap fees. Often missed entirely.
• Builder's risk insurance. Forgotten.
• Construction loan interest. Underestimated by months of accrual.
• Contingency. Set too low or skipped.
• Final landscaping and driveway. Cut to make the budget work, then added back at the end at higher cost.

Draw Schedule Structure

A typical Houston new construction draw schedule for a hard money or construction loan runs five or six draws. Foundation. Framing complete and dried-in. MEP rough-in inspected. Drywall complete. Trim and finishes complete. Final and certificate of occupancy. Each draw releases a defined percentage of the loan after a third-party inspection verifies completion of that milestone.

Tracking Actuals vs. Budget

The budget is not the spreadsheet you build before the project. It is the spreadsheet you maintain through the project. Track actual spend against the budget at every draw. Variance over five percent on any line item gets a conversation. Variance over ten percent across the whole project triggers a re-forecast and a real decision about contingency.

Where to Build a Real Budget

At Coffee & Construction Houston, we walk through real BEDDIEO budgets line by line. The room is The Construction Lounge. The firm is BEDDIEO Construction & Design. You can also read about my work as a Houston developer.