She Works Hard for The Money Part 1

Hey there, and welcome to episode 43 - today we are going to dip our toes into a pretty multifaceted topic. This is something that is on lots of people’s minds, and I have to say, it’s one of my favorite things to talk about, to think about, it motivates me to stay creative and expand my thinking and it really goes hand in hand with a lot of the sustainability issues that are so vital to interior design and architecture. 

We are talking numbers today in the form of dollars and value. Now I want to acknowledge, money can be a sensitive subject, but I come from the Suze Oreman school of money philosophy that if we don’t talk about money with candor and honesty, it can be pretty much impossible to understand the value of things, including ourselves. So - consider this your content warning - if hearing cold hard numbers and money talk in general strikes you as gauche or makes you feel nauseous, this may not be the episode for you, because I am going to dissect a lot of elements for you today. And I’m not going to shy away from talking about certain things that may not get spoken about in polite society - and the reason I’m doing that is so that if and when you embark on a renovation journey you can act from a place of information and knowledge and NOT feel blind sided by costs at every twist and turn. Because that is a common piece of feedback I hear not necessarily from clients because I work to educate my clients but definitely from friends and acquaintances that chose to work directly with a contractor or installer or even just buy a few pieces of furniture. And as I said this is a complex topic so this episode is actually going to be part one of two in this series because it’s important to discuss both the why and the how of budgeting in their own dedicated episodes. 

So with that, let’s get into it.

To start, I just want to say that renovations and interior updates are not necessarily an everyday activity for your average person so the numbers tied to all the various components can be surprising when there isn’t anything to compare it too, especially if you are used to seeing retail prices. Target does not provide contractor services - at least not yet. If you’ve renovated before, that is a great frame of reference, but any given point in time can produce wildly different construction costs, and I’ll touch back in with that in a minute. You might also have some sense of the economy of renovation if you’re really into some of the more technical residential make over shows, but a lot of these shows leave out the dollars and cents details - they might talk about overall numbers, but they don’t always break down what particular items are driving the budget and why. And I get it - the show isn’t going to obsess over numbers because it’s all about allowing the fantasy, escape, and entertainment to really be center stage. Which is totally okay, I love getting lost in a TV show, but this does contribute to a collective misunderstanding around money and spend.

I’ve worked with lots of different clients from single women here in New York looking to freshen up their apartments to billion dollar corporations that are building innovative global headquarters, and every imaginable project in-between. It turns out, money is a concern for pretty much everyone no matter how many figures are in their bottom line.

So that being said -money is relative right? What is affordable or expensive is an opinion, for the most part, that hinges on access to money. Now according to Home Advisor dot com, the current home renovation can range anywhere between $3,500 - $150,000 ha, I hope that narrows it down for you -but most projects fall between $18k - $76k. These numbers are way too broad for comfort, so let’s take a closer look and what is generating these numbers.

There are so many factors that create this larger range, one of largest being location. The same way that property value varies by location, construction and renovation costs vary by location as well. This can be as simple as the factors that determine cost of living in an area, whether it’s local tax percentages, local requirements for certain types of insurance, cost of permitting, and then there is the labor. Labor is a word that is used to summarize the people who do the actual work on project, so that’s installers, artisans, equipment specialists, union workers - people who use their brains and their physical bodies to calculate and execute all kinds of things from welding to installing drywall, painting, and making sure the wires in your walls work and meet local electric codes. This is no small portion of the construction process. I think it can be very easy to forget that renovation requires a team of humans to make it happen, and you as the client, and responsible to compensating a whole team. 

Because the labor aspect of a job is usually such a large part of the price, it’s tempting and maybe not unfair to scrutinize the work being done. There are definitely things that may not seem fair like, certain workers come for an hour but you have to pay a full day rate to them - sure - I get that seems a little whacky. But what is important to understand in terms of the value you’re receiving - is this persons years of knowledge and experience that in someways really can’t be given an hourly rate. 

But the bottom line is we are working with other human beings to achieve big goals for our homes, and when it comes to cost, it’s easy to loose site of that. The work being done doesn’t typically happen in a factory with automated machines, these are custom solutions tailored for your space and implemented by real people.

I remember - this is a bit of a tagent but when I got married I was balking at every cost and the catering was particular a high number but I knew I wanted the food to be great so I ponied up and just went for it. And on the actual day of my wedding I saw that we had a team of hard working, smiling, wait staff - that yes I had seen as a line item on our quote, but I hadn’t really even thought about - I mean we were doing buffet style food so I didn’t think that would require a lot of staff, but they were busy setting up and clearing dishes making sure the buffet was running smoothly and they did a great job, and it really shifted my feelings on what I was paying for because prior to that I was thinking I was just paying for a bunch of food. But I also got this great team that made it so that I didn’t have to do to anything really - and neither did my friends and family for the most part. And that was a really good investment. Renovations are the same scenario, it’s easy to think we are just paying for new marble counter tops but we are also paying for the expertise to select, install, and finish that counter - make sure the edges are fully honed and the seams are minimally visible, get the cut out for the sink placed correctly, and all the little details that make your counter actually work.

Okay, so we’re still looking at what composes the cost of renovations and the next item on the list is the current economy - and whatever that looks like can actually be changing on a day to day basis. A lot of us think about the economy as effecting things like annual inflation or the price of certain groceries or gas, but the economy has a super organic and fluid influence on the world of construction as well.

Firstly, and probably most obviously - there is just the concept of supply and demand. If everyone is renovating and building at one particular time, like at the time I’m recording this, there isn’t a lot of activity in the world of office design because everyone is working for home and corporations are gleefully shedding their real estate footprints to reduce overhead, but - with everyone at home almost all of 2020 - the residential market is pretty active. And you may have noticed this if you went to Home Depot to buy any type of lumber in the last 12 months. Since mid-April of 2020, lumber prices have risen by 130% due to all the home renovations and DIY projects that staying at home for over a year has inspired- that’s basic supply and demand. This also means contractors and installers are busier, so the prices they are giving new clients to take on new jobs are higher because many of them are already at their capacity for projects. On the other hand when the economy is stagnant, and no one is building like back in 2009, you will get a lot more quote competitive prices for labor  & materials, meaning less expensive - but it’s less likely that you’ll be building in that scenario because the economy isn’t so great and upgrading your home might not be where you want to put your money at that time.

Secondly, we have the complexity of the cost of raw materials. This includes things like I mentioned lumber before but also steel, concrete, stone, glass, gypsum mineral, the list goes on. This is just like the flour, sugar, butter, & eggs of baking. These materials are sourced from all over the world and although many companies focus on American produced raw materials, there are some items that need to be imported from other countries. Importing can often be a great way to take advantage of current exchange rates, but it also leaves vulnerabilities to geopolitical events. 

Tariffs are one thing that can be implemented fairly suddenly and have a huge impact not just not the cost but on the actual availability of materials, sometimes trading between two countries gets new restrictions and raw materials have to be completely redirected from another resource. For instance, between November 2015 and the following year, steel prices fluctuated between $380 and $640 per short ton. Can you imagine getting a quote for a renovation in 2015 and deciding to wait, and getting a revised estimate the next year? I personally would have a lot of questions

And there are other elements that can effect the availability of raw materials - natural disasters, political and civil uprisings, the strength of the US dollar vs other global economies  - all of this can affect how readily available, and therefore how costly raw materials can be. Just think about that giant cargo ship that got stuck in the Suez Canal a few months back - it got caught in some strong winds and a sandstorm and couldn’t move for days with tons of cargo on board. That was definitely news worthy because of the aerial footage, but set backs like that happen under the radar all the time too. That particular ship didn’t have any building materials on it, I don’t think - I think it was all like sheep and crude oil, which just makes my heart weep for so many reasons, but it easily could have been bags of cement that were supposed to be in the concrete for the footing in your new home’s foundation - you know?

All this to say, because the essence of what makes up building a wall or a cabinet can fluctuate so much based on so many variables, it can be hard for an architect or designer to truly pin point what a project will cost. They can base an estimate on recent projects, but even that can feel like a fools errand because prices are constantly shifting and changing.

So I think I’ve made my point right? - building materials don’t grow on trees, they aren’t in our backyards and that makes them fickle to the world’s misfortunes, but what about if the project is more of a light touch? What if you’re just implementing a few cosmetic upgrades and getting new furniture?

What can I say about furniture? It’s easy to find pieces that are readily available and inexpensive, especially online. But if you happen to be working with a designer, they have access to a whole other world of trade-only and custom pieces that come with price tag that you would not see inside of West Elm. And look - not everything that is more money is better quality, that is a fact. But part of what makes designer furniture cost more is the thorough construction methods and rigorous standards to which these pieces are held. Something I’ve wanted to do for a long time, like I think it would make a cool video - is to buy sofas from different retail stores like Crate and Barrel, Ikea, maybe even Walmart, and take a chainsaw to them and cut them right down the middle. Why? Well, other than the fact that it would be horrible for the environment and huge waste of resources, it would let us know exactly what the inner construction of your typically retail sofa is - and most of them, are cardboard. It sounds crazy, but cardboard can be relatively strong when used vertically and it’s a heck of a lot cheaper than using kiln dried hardwood. But over time, you will start to see sagging and bowing and dipping and you’ll wonder why you hate your sofa so much. Designer pieces are generally made with craftsman level construction, and with these trade-only companies, you can always ask about their process, they might even offer to give you a tour of the factory! Of course there are plenty of furniture companies that are only posing as high end and won’t deliver the quality you’d expect - and if you can’t tell if you’re dealing with a true blue craftsman or a snake oil salesmen. That’s another great reason why you hire a designer, if not for a quick consultation call. 

One thing I always get asked is if I get a designer discount. The answer is usually yes, but it isn’t what you would expect. Retail stores will often give designers a 10% discount which can end up feeling fairly insignificant - I don’t want to sound ungrateful about that, but think about it, that puts at 2000 sofa at 1800 dollars. Great yes, that is a savings. Is it a steal? Is it going to make you feel like you really worked the system to your advantage? For me not so much. To-the trade companies often offer deeper discounting, but because these are more complicated custom pieces that require time and thought from the designer, a lot of times the designer will not pass the full discount on to their client and take that as part of their compensation. That varies a lot by situation, but it usually looks like a 40% discount, the interior takes 20% for their handling fee, and passes the other 20% savings on to you. 

But regardless of the discounting, because the prices we are used to seeing in stores and websites are based on these more corner cutting methods, seeing the real price of quality made items, can be shocking. I would say as a bench mark you could say oh I can get a sectional sofa down the street at Al’s home furniture for $2k. Great. If you’re looking at working with a custom design from a quality manufacturer, that will push into five figure territory. And trust me, the 10,000 dollar sofa will hold up better over time, but that might not be a priority for you - so as we will get into next week, determining budgets is all about understanding what’s important to you - time, quality, and cost. I can’t wait to chat next week because now that you understand the background of the dollars and cents in a budget, we are going to dive into how to you can craft a budget for your own project, how to work with a shoestring budget, and how to identify the smartest spend and get the biggest bang for you buck. Until then, I hope you are taking excellent care of yourself, stay grounded, and I’ll talk to you in the next episode.