RE: Projected Costs vs Real Costs
From: Pablo Halpern (phalpernworld.std.com)
Date: Fri, 31 Mar 95 09:51 CST
Bill made some excelent points regarding why projected costs are so often 
wrong. Another thing to keep in mind is the time-span of this project. 
Because residents are involved before construction (often before 
site-selection), years can pass between the time a group comes together and 
the time the first household moves in. During that time, prices invariably 
go up. A few years back, New View took a survey of our members asking "what 
do you want to spend on a house?" and "What is the most you are willing to 
spend on a house?" We exceded everybody's upper limit! However, if we were 
to take those numbers and correct for inflation, we didn't do as bad as we 
thought (although we still are way high). 

The moral of the story: increase your target budget each year to account for 
inflation. It will make your target budget more realistic.

Another suggestion: Add a hefty 25% contingiency to your early budgets. 
Reduce this contingiency and revise your budget at milestones that increase 
budget certainty: e.g. once you know how much your land will cost. When 
construction begins, your contingiency should still be 5% and prefereably 
10% of your total budget.

Finally, there are customizations. For most people, cohousing will be their 
first (and possibly only) experience in having a house built for them. The 
temptation to customize your house is irrisistable. Customization costs 
money. Even for inexpensive items like windows, there are design costs and 
development costs associated with just being different. New View made some 
mistakes that cost stretched out our time-line, partially caused by our 
architects time being used for customizations (even though people pay the 
architecture fees associated with their own customizations). At the very 
least, people should be aware that moderate to heavy customizations will add 
5-10% or more to the cost of their house. The bank mortgage the full amount, 
either, so you might need more than a 20% down-payment. Depending on the 
group, it might be feasable to severily limit customizations.

- Pablo

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Pablo Halpern                          phalpern [at] world.std.com
(508) 435-5274                         Hopkinton, MA, U.S.A.
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