Key Takeaways
- Match accuracy to decision: ±50% screening, ±20% underwriting, ±5% budgeting.
- Cost/SF: Cosmetic $20-$50, Moderate $50-$100, Gut $100-$200, New $150-$350.
- Total budget = Construction + Contingency (10-20%) + Soft costs + Financing.
- Verify material pricing within 30 days and adjust for labor market conditions.
This lesson consolidates core estimating concepts from Track 1.
Core Concepts Recap
The accuracy funnel matches precision to decision stage. Unit costs build estimates. Cost/SF benchmarks screen. Total budgets add 25-40% above construction estimates. Material and labor volatility require current pricing verification.
Why it matters: Understanding this concept is essential for making informed investment decisions.
Key Takeaways
- ✓Match accuracy to decision: ±50% screening, ±20% underwriting, ±5% budgeting.
- ✓Cost/SF: Cosmetic $20-$50, Moderate $50-$100, Gut $100-$200, New $150-$350.
- ✓Total budget = Construction + Contingency (10-20%) + Soft costs + Financing.
- ✓Verify material pricing within 30 days and adjust for labor market conditions.
Sources
- RSMeans/Gordian Cost Data Online(2025-01-15)
- NAHB Construction Cost Survey(2025-01-15)
- BLS Producer Price Index — Construction Materials(2025-01-15)
Common Mistakes to Avoid
Treating the accuracy funnel as theoretical rather than applying it to every deal evaluation
Consequence: Using the wrong precision level leads to either wasted effort or inadequate analysis
Correction: Consciously match accuracy to decision stage for every property evaluated
Not verifying material and labor costs against current market conditions
Consequence: Estimates based on outdated data lead to budget surprises when bids come in higher than expected
Correction: Update cost references quarterly and verify key materials within 30 days of any estimate
Test Your Knowledge
1.What accuracy is appropriate for acquisition underwriting?
2.How much does total budget exceed construction estimate?
3.What percentage of renovation cost is labor?