Which are More Expensive? Hard costs typically make up a larger portion of the budget. Construction is inherently the biggest line item. Soft costs are an important part of the project and they typically make up a larger portion than clients realize. What is the Difference? Hard costs include all the work that is actually being done in the field. This includes tradesmen and the physical construction of the building. Soft Costs Soft costs are often less obvious than hard costs, because they are often not visible.
Soft construction costs are fees incurred in the construction of a building that are not directly related to labor and physical building materials. Typical soft costs include architecture, engineering, inspection and accounting fees. Permits, taxes and legal fees also fall into the category of soft costs. Unlike hard costs, soft costs can also include expenses that continue even after a project is completed.
This can include building and property maintenance, insurance, security among other ongoing fees related to the upkeep of an asset. Fundrise lets you become a real estate investor in a matter of minutes. Get started here. Some builders separate this item from building a structure, for accountability process, but it also includes all additional expenses related to the construction of the project. Insurance costs are normally not included as hard costs and the owner might ask you to submit those as separate line items.
These are the costs associated with doing business, like the staff, management, temp facilities, utilities, tools and safety and security costs. It is important to understand that all permits and insurance costs are also considered as hard costs.
How to Estimate Hard Costs Now that you know that hard costs can be estimated or quantifiable, it's now time to understand the process of estimating these costs. The first step in the project planning is to provide a conceptual estimate. The second stage of the estimating process is when the preliminary budget is developed, providing a range of accuracy between 15 and 30 percent.
Once the project is being designed, the estimator will review the information received and a definitive hard cost estimate will be developed.
Video Blog Hard Costs vs. Soft Costs in Construction When preparing for a real estate project, there are many costs to build into your budget. Senior Project Manager Ryan Alligood discusses the two main budget categories: What are Hard Costs? All labor and materials required for construction are included in hard costs. In terms of the building site, all utilities, life safety systems and equipment, HVAC systems, paving, grading, etc.