Understand the scope of Building a Custom Home Vs Remodelling


Seema Mittal


Rob: Hey, everyone. Thanks for joining us. Looks like we're starting to have some folks trickle in. I'll give everybody just a couple more minutes here and then we'll get started. Everybody is grabbing their lunch hopefully and sitting back in front of their computers here in a second. All right. Seema, can you see my screen okay?

Seema: I can.

Rob: Awesome. Okay, hopefully, everybody else can as well. I'll just give everybody maybe one more minute here and then we'll jump into it. Seema, thank you again for taking the time to help us out today. Looking forward to having you here.

Seema: You're welcome. Thank you for asking me. It's always fine.

Rob: Good, good. Well, yeah, just to kick it off. First of all, thank you everybody for joining us. Today's topic in our webinar series is understanding the scope of building a custom home versus remodeling. I think it's something that a lot of homeowners and maybe people who are just getting into maybe looking at acquiring a property are debating. And hopefully, this webinar, while it's brief, will help give everybody a good overview of some of the factors that go into making that decision. As straightforward as possible, I guess, in any decision that can be and probably the biggest investment you'll ever make in your life. So, kind of a challenging one there but hopefully, this makes it a bit more straightforward and helps with that decision making process. And we're really lucky to have with us Seema, who I'll introduce here in a second who is really an expert on this topic, and can I think shed a lot of light and offer a lot of guidance. So, thank you, again, Seema.

Seema: You're welcome. My pleasure.

Rob: We'll start just by, well, I'll introduce us Livio just quickly to give everybody a quick overview of what we do. Seema, at that point, I'll hand the mic over to you. You can have a five minutes or so to chat, introduce yourself. I was going to talk a little bit about the designer partner program that we have that Seema is a member of also just so if anybody is joining, maybe interested in that, that can provide a little bit of an overview for that program. I was then going to go into just a broad overview of the differences between what is a remodel and what is a new construction and where is the line kind of drawn? Seema, at that point, I'll probably be asking you some questions about what are some of the decisions or some of the factors that weigh into some of your clients making that decision one way or the other? Talk about the city process. We'll talk about the aesthetic and kind of the function factors in both of those decisions when making that consideration. And then lastly, get into costs. And then hopefully leave some time here at the end for Q&A, for any questions that might come up.

Just as a reminder for everybody, you have the option to ask questions in two ways. One thing is if any questions come up during the presentation, there's the Q&A bar up at the top that you can simply type any sort of question that you might have. And I can get to all of those during the last 10 minutes or so that we'll leave at the end. Or you can also raise your hand. Typically, we'll leave those questions again towards the last 10 minutes. But if you'd like to raise your hand virtually, I can call on you and you can ask your question in live time to either Seema or myself.

Without further ado, we're Aron Developers and Livio. We're both a general contractor and real estate developer. We really specialize in building custom single-family homes. We do that by partnering with some of the best and most renowned partners throughout the Bay Area, whether it's on the architect side of the business or whether it's on the subcontractor side of the business. But ultimately, our objective is to build beautiful single-family homes for our clients. And we do that in kind of a unique way. We have a distributed team. Part of our team is in India, part of our team is here in the US, which allows us to have a really unique approach to how we deliver projects and offer clients with what we feel is a superior level of service as a result. Gives us the opportunity to really vertically integrate and look at the design from top to bottom in a way that we're really proud of. And we hope that from working with us or hopefully exploring the opportunity to work with us, you will be too.

Our leadership team, myself, Navneet, Manju, Jason, all of which whom you may have already had some sort of conversation with. And ultimately, it wouldn't happen without the great team that we have everywhere where we're able to really take a project all the way from the very beginning, complete all of the modelling, all the class coordination before we even start construction, which is really a critical piece of making sure that a project is successful right off the bat. With that said, Seema, handing the mic off to you. If you wouldn't mind introducing yourself and letting everybody know about your thriving business.

Seema: Okay. Thank you, Rob. Thank you so much for the kind words. My name is Seema Mittal, and I'm the founder and principal of Perspectives Design. We're really a very small boutique firm and we've been around for 23 years, believe it or not as a residential practice in the Bay Area. We focus on very boutique projects. It's not a very large-scale kind of a commercialized firm. But we're small and we're very, very focused on delivering a beautiful home to our clients with a fabulous process. To us, designing homes is like writing stories. The entire process as we go through the design, be it a small project or a large project, every project is really important. And there are so many aspects to it, so many technical aspects. But mostly, it's a very emotional aspect to it. It is about your home and how your home is going to impact every single day of how you live as a family, as a couple, in unition, coexist together, bond together. And believe it or not, every little detail in the home actually emphasizes and brings out a particular family's lifestyle.

So, that's kind of the story. And we've been working now with Livio or Aaron builders and Navneet and Rob. And it's been an amazing process and it's actually helped upgrade the quality of delivery that I'm able to provide to my clients. Because as a partner, I'm able to get so much upfront help, which gives us a better design as well as save so many problems that we face during construction. And all this is going to come out as part of this webinar. Other than that, my work speaks for itself. We have websites and everyone can see the projects and so forth. I think that's all I have to say about myself and our practice.

Rob: Of course, I was muted there. As far as where you work or areas of specialties, is it all throughout the Bay Area?

Seema: Yeah, good point. Most of the work is focused from starting the Mid-Peninsula to the South Bay, up to the East Bay up to Ruby Hill. That's kind of my zone. It's like a crescent around the bay. I have not really had a chance to work in the city as such, but pretty much south of the airport, downwards. That's the geography that we serve and it's just convenient because we like to go to the site often and getting to the cities and so forth. So, that's kind of the region that we serve.

Rob: Got it. Got it. You mentioned it really briefly, but our design partner program. I think you were the early adopter of the program, so thanks for taking the leap. But at a high-level overview, I can say maybe from my perspective for Seema, and then feel free to chime in. But ultimately, the goal of the partner program is to partner with designers, architects early on in the process. Maybe it's conceptual design, when clients are just thinking about and trying to make decisions as to, maybe the decision is, do I remodel or maybe it's do I rebuild? That's one potential question. The other one might be, I'm really sold on wanting to do a new construction, however, I have some questions about, maybe it's cost, maybe it's insights into the entitlement process as to which having come from a developer background, we kind of have a perspective and the ability to shed some light not just on the contracting side of the business, but also helping through the city process as well and what would be the best course forward. So, ultimately partnering early on in the process instead of having completed a design all the way through, handing it to a contractor, and then having to possibly backtrack. We try to overlap those as much as we can by way of this partner program. Anyways, that's an overview, but Seema, it'll be great if you could add any details since you've actually been a participant.

Seema: Yeah. I'm going to tell you having done a lot of projects without partnering, and then having done the last few with partnering, I can tell you what the huge benefits were for me and my clients. The first is, having a knowledgeable builder join the team during early schematics is so helpful because they have expertise in cost. They have a team and cost estimation and I'm constantly bouncing structural concepts etc. ahead of time and saying, "Hey, I'm not designing a Ferrari here when we're supposed to kind of not be at a Ferrari level." And too late in the game you find out, hey, we're over budget, it's not viable. So, I get early inputs. The second huge benefit that I find during conceptual design is, Aaron is able to offer 3D services at a very, very nominal price. And that is so helpful as we design because the client can see the 3D visualization very quickly and make a lot of decisions. Earlier, we would wait for the design to be almost over, then hire a 3D design firm at a very, very high premium. And then we would come back and say, hey, we don't like this, we don't like that, this is not working.

So, having 3D services, huge benefit for both the client and for the architect from a design perspective, cost perspective, early structural inputs, like are we going to go with wood or are we going to now...? You know, Aaron is pioneering the LGS, which is the light gauge steel construction. Given the price of wood these days, hey, that's something I want the homeowners to think about from day one. Would they be interested in some input and decisions along those lines? I get help from Aaron on consultants. They know all the consultants, civil engineers, structural engineers, and they connect me with good professionals. Sometimes there's scarcity of our time, lack of time on some of the consultants and Aaron is able to help me be in touch with a good set of consultants as well.

The other big benefit is interior designers. They have a really good team of interior designers. And we get involved with the interior as a team well ahead of time, which I couldn't do before. And their staffing help that you know, I need staffing help, I need sometimes younger architects to jump in and help me draw. And that has been one of the biggest bonus that I get from you. And then last is product research. I'm always trying to find more innovative latest and greatest products. And having limited time and limited resources, I find that Aaron or Livio, as we call, they really, really helped me find good window manufacturers or a good door vendor, a really cool product. I could go on and on but that's kind of the gist of the partner help that I've had thus far.

Rob: Well, I'm glad to hear you found it to be beneficial and hopefully coming through with some good results which I'm glad to glad to hear of. Maybe just to start, we'll talk at a high level about kind of the overview. Seema, I'm just curious from the business that is currently coming to you right now, which it seems like everybody's spending way more time at home these days than maybe they otherwise would have. But how much of your business right now is new construction versus remodeling?

Seema: I would say 50/50.

Rob: Okay. Do you ever have clients who maybe come to you starting with one idea and maybe flip flop one way or the other? And how might that happen? We'll get into a lot of the other topics, but I'm just kind of curious if that does ever happen?

Seema: Do you mean brand new versus that or just generally?

Rob: Yeah, maybe starting with one concept of, "Hey, I'm going to remodel," and then ultimately, as you go down the line and looking at some of the constraints, "Hey, actually, maybe it makes more sense to rebuild," or maybe vice versa? I'm just curious.

Seema: I've got actually two clients that I'm talking to as we speak or in the last couple of weeks who have been toggling between those decisions, where they have either purchased or live in an older home. And they're saying, well, either I can tear it down and build something brand new or can I have significant savings and make it work and have a home that's just as beautiful. But I want to keep a lot of the existing because of expense. And usually, the driving factor is expense. I will always go through a process where I have to explain to them the aesthetic point of view where keeping something existing means you do have to live with, let's say, the placement of your building somewhere on the site. So, if the house exists on a particular part of the site, you kind of have to keep it there. And it may not be the best spot given your land. So, that's one of the first thing and also the flow, the building perimeters, etc.

So, we toggle back and forth. In some projects, we end up rebuilding and of course, the clients are very happy. And a lot of the projects we did not and we kept what we had. I have to admit that I can't tell you how many times during the construction process, the client came back and said, "Hey Seema, I wish we had started from scratch because everything you open up became a can of worms." But then anyway, I have to respect their decision. I can apprise them of cost factors, aesthetic factors, but in the end, I have to respect their decision. And in the end, it's not like it's a really bad product even if it was redesigned, but it's still not the same. They end up spending almost the same amount. In your listing, it's built in 2021 and the other listing says built in 1957, no matter what you did to it.

Rob: Right. That's a good point. And as far as like how you define, Seema, or maybe it's more of a city, and it might vary jurisdiction to jurisdiction, but what dictates, is it keeping the foundation? Is it keeping the framing? Generally speaking, kind of what's that tipping point between what's considered new construction versus what's considered a remodel?

Seema: A city has its own definition. They will define how many percentages of exterior wall etc. But I would say, from my end, if you're going to do an additional remodel, there's small, medium, large. Small addition is, hey, I want to add a toilet, hey, I want to get my kitchen redo it, maybe add a bedroom, you know, literally stick it on and make an access to it, that's a small addition. When I get to medium, it's like, well, maybe there's a couple additions around the perimeter and maybe a couple of remodels or maybe remove one wall in the middle. But a lot of people in today's pandemic world, they're looking at significantly transforming the home and we call it a transformation. It's not new, it's a transformation. Which means they're going to keep some parts of the house, but they want to add to it, they want to remodel, they want to remove structural walls, they want to blow away the roof, they want to add an upper storey. And by the time I started drawing it and when I show them the dark line is the new portion and the light grey line is the existing, when you see all dark on the sheet, it's a very abstract concept. It is basically a new house and you are just confining yourself.

Some houses we strip down to the foundation and floor framing. And even in that we find, hey, I have to add more foundation. It isn't strong enough for two stories or I need piers now based on the current geological kind of expertise. And so, the decision says, okay, well you saved 50,000 maybe or 100,000 maybe, but you spent so much more trying to strengthen the foundation, strengthen the floor framing etc. So, as soon as you get to the large or the transformation project, that's when I try to say, hey, just rebuild it. Get the high ceilings, get the latest products, get a good solid foundation. Let's not try to tell the city that, hey, this is a remodel because it's not and you will not save on taxes. A lot of people feel they will save on taxes and that's a myth.

Rob: Got it. Okay, so it's kind of that that large remodel where it starts to creep up into maybe that transformation space where that consideration is made. Okay, that's really helpful. Jumping into kind of the first particular topic, you talked a little bit about kind of the city's consideration of whether they would consider it a remodel or new. But I've got a couple images just kind of help facilitate a conversation. I guess one topic, maybe to start is the historical piece of it, which becomes a little bit of challenging. And that could be a reason as to why somebody either may want to keep, maybe because of character or maybe they're being forced into keeping as a result of the city forcing them to do so. I'm just curious, can you speak a little bit to that and kind of how you've dealt with projects in similar circumstances?

Seema: Yeah. If your home falls under a historic category in that particular city, a whole new code triggers in at that point. And you are not allowed to change, obviously, the look and feel, you're not allowed to change, usually the front facade. So, we have to keep everything. And the rest of the house like at the back where you can make changes, also have to abide by kind of the rules that get set by the aesthetic too. For example, the example you have in front, there are certain plate heights, certain slopes to the roof and you're going to have to keep them. The rest of the house has to kind of maintain the low eave heights, if you will, which is constraining or the style of small windows. So, a lot of people love to have a lot of glass. But if you are in a historic zone, the city will not allow you to break away from that vocabulary of historic homes. So, basically, it's a whole different project. Once you're in a historic district, you have to follow a lot of these existing kind of regulations that kick in, as you can see in this house.

Rob: Got it. One other instance where we've seen clients come to us or setbacks related in that process, can you speak a little bit to how setbacks might weigh into that decision process?

Seema: Yeah. So, if your home is old and it's historic, it has some existing setbacks that no longer work, for example, if you were allowed to build your facade five feet from your property line on the side, today, that setback maybe 10 feet. But they will allow you to grandfather in the five-foot setback and even extend along it for a certain dimension, which is a huge benefit maybe for you as you remodel or transform your home. And sometimes that becomes a good enough reason to do an addition or an alteration and not completely got the home.

Rob: Got it. You talked a little bit about this, but I am grouping kind of building inspection as a part of the city process as well. But as it pertains to, hey by doing this upgrade to the house, upgrading other portions that may not have been directly affected by the process, but the city says hey, by doing this scope of work, you now have to do this. Can you speak a little bit to some of those instances and where a city you might ask for that?

Seema: Yeah. So, those changes get triggered a lot by the city. For example, if you're doing a significant enough addition even, your utilities are going to get upgraded. Like you need to have gas lines, sewer lines, electric, you need to do underground things. Even if it is a small enough addition, a lot of times that gets triggered. You know, just the fact that there is no insulation in the home, there is no sprinkler in the home, now, you know, the sprinkler laws are different. Very small additions and alterations will trigger a fire sprinkler and you've got to go in and retrofit your house. The Title 24 will not work, the energy code without the insulation in the roof, in the walls, and the floor. So, you have to backtrack and do that. There's obviously things like plumbing electric which may be triggered by the city inspector, but it'll be just a good process on your own side to not leave 60-year-old pipes in there, when you're spending so much on your home. I don't know if that's a good enough example.

There was one big example recently in Palo Alto, where we decided to do a transformation or a remodel was because they had an attached garage. And if they were going to build a brand-new house because five houses on the left and five houses on the right had detached garages at the back of the home. They were not allowing us to build or retain the old attached garage in the front. And so, if we tore down the house, we would have to put it at the back. And that particular family was like, “No, we have young kids, we need an attached garage." So, we did a remodel transformation. From a planning perspective, if we get 50% of the exterior walls, we were allowed to keep it so we did.

Rob: Got it. And when it comes to maybe jumping into maybe more of the planning process and just the building approval cycle, because I think a lot of people don't realize just how big of a chunk of time that is maybe. In their head they're like, "Oh, I understand the construction taking a long time." But there's all this build up and the approval cycle that takes a long time as well. If a client comes to you and ask you, hey, which would be faster, a transformation or a new construction? Is there a difference between the two when it comes to the approval process? Or is it pretty similar?

Seema: There is no time savings in a... Oops, sorry about that. Can you hear me?

Rob: Yeah, yeah. I can hear you fine.

Seema: So, there is a zero time savings between the two processes. If you were doing a brand-new house versus a transformation, it would take the same amount of time at the city. You would not save time by just doing an addition remodel. You will not.

Rob: Got it. Okay. Before I move on to the next topic, Seema, was there anything that I missed in the city process side of things that that you wanted to shed some light on?

Seema: Well, I mean, just broadly speaking, I just want everyone to be aware if you aren't already that, I can't tell you how many people come, they're so excited, they know kind of what they want and they want to start construction. And I have to really dampen their passion and energy by telling them wait, it's going to be nine months. By the time you get a permit, if we're lucky, especially if it's a two-storey home and depending on which city, I mean, is it Los Gatos, is it Saratoga, we may go through Planning Commission, there's neighbors, there's all kinds of processes. So, there's the planning process, the planning approval, followed by the building permit, which gets into the more technical processes. And it's very common to say that it's seven, eight months minimum to get a permit if not nine months. And if you run into any delays because of relative decision-making between the city and us, it can be one year.

Rob: Yeah. I definitely, I get it. The lot of that is also kind of out of out of the control of no matter how hard you push sometimes that is inevitable. So, it definitely good to have those expectations low going into it and hopefully--

Seema: But it is worth the wait. Yeah.

Rob: Yeah, absolutely. And having somebody experienced on your side like perspective designs and hopefully Livio partnering with you early on, definitely, that helps facilitate a much more smooth process with the city. Otherwise, you could be spinning your wheels for not nine months, but we're talking years. So yeah, no doubt there. I definitely agree with you. When it comes to aesthetics, and maybe some of the tradeoffs that may need to happen as a result of choosing to go a remodel route versus new construction in some of those that might be there. I have a few images on the screen, but Seema, one thing, and maybe I can start with the biggest one which is something you already spoke about in the last image on the city process side of things when we were looking at that older Victorian and the plate heights. But that's obviously a large dictating factor when going the remodel route. Can you kind of speak to how that might play into your architectural design process?

Seema: Yeah. So, absolutely, most of the older homes, they used to be built at eight feet plate height. And by plate height we mean the springing point of the roof or the ceiling. There were smaller homes, they were cosy, they were a lot of time track development and standard height studs were purchased and built. Sometimes folks built it themselves, you know, do it yourself. But as the trend is now is we all live here in a beautiful area with beautiful views, with a lot of sunlight and we want passive energy in our house. Like bring in natural heat as opposed to use heat. With the eight-foot plate, we are very limited on the height of the windows and the feeling of spaciousness and openness. Everyone wants kind of an open airy house. And one of the biggest limitations is the heights, the top height of the window, the top height of the doors and the ceiling. We are all limited by that eight-foot number. And unless we blow away the roof and raise the height of the walls, we cannot change that. And that's what triggers a lot of the brand new rebuilds. It's like, I don't want to live, I don't want to put in so much money and still have a house that is limited in volume, in the amount of light it can let in. And you can see in the images on the screen that you can see the old doors used to be six foot eight, and now we can have eight feet. We can have 10 feet. We can have upper windows. It just opens up the palette, the palette that we use to create the aesthetic outside and the function of air flow, natural light and ventilation, volume, openness,

Rob: Just kind of a general question, on an eight-foot plate height, you mentioned, can you put an eight-foot door?

Seema: No. So, because of the header requirement, we have to put up, the highest we can go is six feet eight inches. So, as you can see that door, the lower door, that's probably a six-foot eight-inch door on your lineup of doors. And that's short.

Rob: Yeah. No, definitely. I think that's a big consideration. Kind of the misconception of, well, I have an eight-foot play height, that means I can put in an eight-foot door. That's not necessarily the case. When it comes to, I mean, we talked maybe some of the major components that are there. The framing is one aspect but also aesthetics as it pertains to different floor levels. I don't know how often you've come across this. When it comes to sacrifices on elevations of existing floors versus maybe older additions and trying to stitch everything together, can you kind of speak to kind of your design philosophy in how you go about trying, I guess to the best of your ability anyway, piece everything together and make it look like it's one whole structure and not just like something that was slapped on?

Seema: Right. When we do additions, the goal is always for the homeowner as well as for the designer, is that the home at a floor level flows. There used to be a faction many years ago of split-level homes, where there would be three steps and then a sunken living room. And while I respect that aesthetic, if somebody still loves it, nowadays, we consider it more of a tripping hazard. We want the spaces and the finishes to just unite together as though it is seamless. And what I run into a lot is these sunken areas or there's a topography in the site where as you're extending, part of the old house has a slab on grid, and you really want to add on a crawl space and how do we bring or make everything, fuse it together in a seamless fashion?

And it is the amount of cost that happens in trying to make that happen. And in some cases, we just cannot, and we put in all these kind of ugly spacers between the two different kind of levels and putting slippers and trying to raise sunken areas. As you can see in the detail in the left image there, we end up cutting existing foundations and things like that. Bring patios up to grade and stuff. So, I don't know if that explains your question, but it is a big challenge to make sure that everything flows seamlessly without bumps and ups and downs as you traverse the home if we try to keep it seamless.

Rob: What about like an aesthetic challenge of maybe changing architectural styles all together? Like if, let's say for example, the existing home is maybe Spanish style but the new architecture that's desired is maybe more modern? Can you talk through, how do you handle those circumstances? And I'm sure that's something that comes to you every once in a while?

Seema: Yes. Well, it comes to me every single time when we do additions. And so, I mean, you named two styles, but I have a project on the board, which is, the existing home is really an old ranch, typical eight-foot plate, simple pitched roofs. And the client actually loves Mediterranean homes. And we're doing about 1,011 square feet of new, and it has been such a challenge to try and make that work because now we want pillars and arches. They love the detail and the trims, and I've got like half the house, which looks like it's part of a different house. And because of the budget limitations, I really can't touch it. And I'm feeling not true to the architecture as a designer and saying, it's easy to say, "Well, it’s at the back. Never mind." And occasionally I do go ahead and agree, but it's very challenging.

And then sometimes we've given birth to something called eclecticism. So, architects have given... under the banner of eclectic, we will do a fusion home, which is, let's say a ranch plus a modern. We'll use a fusion style of roofs. And there's a little bit of disorder in it because it's not entirely consistent, but we still try to make it work by using materials or matching the windows. And because sometimes I'm not at liberty to raise the plates of the entire house, but maybe parts of it. Some of the homeowners, they love it. They still love it. Sometimes I say, "Well, maybe your home is like a city. A city is organic." It grows and 40 years ago there was a stylist or a [inaudible 00:37:45] and then there's something right next to it like in Paris, you have the louvres. Maybe we can think of your home in that way and still make order and disorder. I don't know if that sounds abstract, but that's how we do it.

Rob: Got it. Yeah, I could definitely see. I'm thankful I'm not on the design process. It sounds like it's quite a challenge. So that we can keep moving through, I know we talked about maybe some of these already, but an important in there, it's similar to aesthetics in some regards, but function being an obviously an important piece of making sure that ultimately not just from an aesthetic standpoint, but from a functionality standpoint, the family moving into the home, it serves their needs and their purposes. So, can you kind of talk about, as it pertains to remodeling versus new construction, some of the considerations that might be made there and I'm happy to… I have some images here, but certainly we can talk through any others that might be on your mind.

Seema: Oh, mostly are you saying…? Oh, the function. Okay. So, I'm just looking at the images and saying, when we do the, let's call it transformation again, the HVAC, it becomes a big problem because the old systems don't work. They're old, they're not smart. They're not energy efficient. And now we've got the pandemic on top of that, where we're talking about having more air changes per hour for air conditioning, not re-circulating as much for the air, more passive design, passive heating and passive cooling. And the old house, there's only so much you can do.

Rob: Seema, when you say passive heating and cooling, can you explain what's the difference for somebody who might not know?

Seema: It is so important and makes such a difference in the end product of the home. So, it's about orienting your house and where you put the glass. So, if you have sun exposure where a lot of sun can come in, the way we design it is we give a lot of glass. So, for winter, the sunlight comes in and we have absorbent surfaces on the interior walls in terms of color or texture and it absorbs it and retains the warmth, so you don't end up using as much heating energy. Now what happens in summer? Are we going to be baking? Well, no. Well, there's a couple of ways. Either we provide deep overhangs, so the angle of the sun gets cut off. And in addition to that, we have amazing blinds, amazing solar shades that can help you cut off extra solar gain during the summer months, along with the overhangs. And you've still got the light, but you've got a house that's not baking. So, that's kind of one aspect of passive and solar heating and things that sometimes in existing homes, I just can't do it. I just can't because of the orientation, because there's not enough opportunity to make larger windows because the sheer walls are existing. And every time I cut a sheer wall, it goes ka-ching, which is the dollar sign for the homeowner. And I'm like, "Okay, well, I'm going to use some restraint." So, it's just a constant sort of struggle.

Rob: You mentioned the structural constraints that might be there that might inhibit the function for a passive design. But what about as it pertains to maybe floor plans and achieving the desired layout that a family might desire for their needs? What considerations need to be made when considering remodeling versus new construction?

Seema: Right. Well, new construction's easy, right? It's like an easel. It's like an artist's easel. I mean, you have constraints from city setbacks and what the homeowner wants, but I can paint a beautiful picture. Just absolutely the way the homeowner wants it. When it comes to remodel, I cannot. I have to work with the existing, it's almost like there's already a painting there and I can remove or lighten parts of the painting and add to it. I don't know if it's the perfect analogy, but it's…

Rob: I haven’t heard that one, but I like it. That’s a good way to put it.

Seema: It's like, I can improve the picture a little up to a certain extent, but I cannot completely change it. So, I will be constrained by where the entry is, where the driveway is. I can't completely reverse where the bedrooms are or where the great room is situated. Does it relate to the backyard? Older homes used to have a front facing kitchen in so many homes. And when I go in there now, it's like you want your great room, your family room, to be overlooking your yard. You want a nice patio. You want to open your indoor or outdoor spaces, enjoy the California weather. Sometimes in remodels, those options don't exist. I mean, we can try to do the best we can, but because of the way the structure is and where the foundation is, where the little bearing walls are, we can only do a few moves. Maybe remove a wall here and there and keep it within the confines of a remodel. And it will never take on the spirit of a new home. There's no doubt.

Rob: Yeah. It's definitely a challenge working on a… it's almost like an artist saying, "Hey, you have to work on a grid system of some sort." From our perspective as well certainly the warranty piece is something that's important for our process as a general contractor and making sure that we can pass through and provide our clients with of course the best warranties and care as possible, even after construction. Certainly, from our perspective when it comes to a new home and being able to guarantee the work, knowing that we've put everything in new, it's much easier for us to do that. And certainly, there's law that protects consumers as well as a result of that. So, that was one thing that I also wanted to add in here that’s an important piece of it. Is, kind of maybe the peace of mind that one might get from going the new construction route as well due to those warranties.

The last topic before jumping into Q&A is probably a big one and the one where most people make that consideration. And it's probably the starting factor for most folks when making that decision. But Seema, can you, I'm sure it comes to you all the time. And when a client comes to you, and I intentionally put it at the end so we can go through all of the factors that might weigh into that decision, but ultimately, at a high level, when a client comes to you, how do you handle that conversation about costs associated with a remodel versus a new construction and what sort of general direction are you able to provide to them?

Seema: Okay, well, I address it in a very rudimentary fashion and now I try to get help from partnering builders to help me with that. But on my own, when a client comes in and we're budgeting and we're saying, okay, we're going to add a thousand square feet and we're going to remodel a thousand square feet, let's say. I would say let's work with a per square foot construction costs. So, I can only offer some rules. I don't have cost estimation avenues and the per square foot can, depending on, is it a hillside, is it flat and has it got high walls and ceilings, the new part of it, it can range. And I hate giving out that number because I tell people, "Don't hold me down to it." Because you may underestimate the cost of your project and then come back and say, "Hey, Seema, you design me a project that I'm not able to build."

So, I tell them to go back to builders but I’ll say, budget 350 to $500 a square foot for new construction. I used to say that for the addition you can budget a little bit less because we're going to keep the structure. Maybe you can budget 250. I've changed that. Now I'm saying at least start with a flat rate of 350, at least, even for remodel for new because I know how much, how labor intensive the retrofits are. For the remodels, it feels like all the structure's already there, but we're always strengthening something or the other, taking off load-bearing walls, changing the flooring, changing the electrical, changing the lighting. I mean there's no end, it's almost like a new space. So, many contractors have come back and said you must be smoking something if you're thinking it's less than new construction costs.

I have to qualify that a little bit. And everyone wants to put in good finishes. I know some people make some tradeoffs and they say, "Well, I'll just go for the space. I'll get the space, but I'll use kind of the lower end in terms of finishes." And those, I call them famous last words because when we are in construction and I go to visit the construction site, I mean, it's like the whole nine yards is happening and there's a struggle against costs versus, or estimated costs are not enough contingency.

Rob: And contingency, you bring up certainly a big portion of the remodeling side of things, is this unforeseen sort of costs that might weigh into driving and elevating that budget. Can you explain to everybody what is a contingency? And I know we already talked about maybe some of the cost factors that might creep up the budget, but for those of consumers who may not be aware of it, can you explain it to them?

Seema: Well, contingency is a number that is probably one of the most important parts of your budget. Your budget includes not only your construction dollars, but your soft costs, which are like the significant expenses that you spend ahead, before you even get your permit, which is hiring an architect, hiring the engineers, the city fees, the utility upgrades, et cetera. But the contingency is something even if it's brand-new construction you're going to find that you might change your mind about some things. Like one example that Rob knows about is let's say we place the furnace in the garage, very standard. You have a platform, you have a couple of furnaces of water, heater and spaces, everything all laid out in the plans. And then when you get into construction, you say, "Hey, wait a minute. I want to use my garage as a playroom. I don't want to see this equipment. I want to put it in my crawlspace.

Now that's a cost that was not anticipated by the builder or in your own construction budget. And now you go ahead and make that change. Well, if you did not put money into your contingency, you're not going to have the money to do that. Because obviously it results in a change order. The builder has to go back under the ground and dig a hole, but buy the right kind of unit, change the distribution plan, et cetera. So, having a contingency and I used to say, "Oh, keep at 10%." Nowadays I'm telling everyone 20%. Keep a contingency 20% so you don't have stress in your lives. It's not worth being stressed because you're going to scream at your kids, forget it. Have the money and be happy, set aside.

Rob: Right. Definitely. And I mean, there are certain things that are maybe more like design-related that are contingencies as well. But there's also of course the circumstances that we talked about earlier, which would be more driven by maybe structural upgrades that aren't necessarily driven by design decision, but actually like a life safety or a structural code which can certainly also creep up. When it comes to a contingency of 20%, is that typically, would you provide the same sort of contingency in a remodel or versus a new construction? Or how do those, when considering those two factors, how would that differ?

Seema: I think for a remodel it's definitely 20% recommended. With a new construction you could get away with less, if you didn't change your mind too much about things and there were no some coordination issues or something that triggers, which happens in every project. No matter how perfect the architect would love their drawings to be and how perfect the builder kind of anticipates everything. There's still a few things that come up. It's just the nature of the discipline. We can try to minimize it, but I would be lying if I said that it's a huge, perfect world and in a brand-new house, maybe you need zero contingency because nothing's going to happen, but that's not true.

Rob: Yeah. No, absolutely. And I think one of the advantages of that design partner program we spoke about earlier is hopefully by modeling all of the systems together early on, we can hopefully work to flush out a lot of those coordination issues early on in the life cycle as to not delay the project once it actually moves into construction. Was there anything else on the cost side of things Seema that I might've missed before we jump into the Q&A?

Seema: Well, one thing as we were talking about contingency that I want homeowners to know also is, because the process is so long from the time you actually start construction. Construction itself can take a year or year and a half. Sometimes the contingency gets used for the prices of products going up. obviously, when you sign a contract with your builder, you’re signing it, and then let's say nine months later, you go to buy Sheetrock. And by then the price of sheet rock has tripled because of the pandemic or something. I mean, you're going to have to face the fact that things are costing more. So, you would use your contingency for that as well. And that applies to both remodels and new construction as well. It's just preparedness.

Rob: Yeah. That's a really good point. So, we already have some questions queued up but for those of you who don't have or can’t find the location for it, it's right there at the top. You can type your questions. Otherwise, you can always raise your hand as well, and I can call on you and you can speak live to either Seema, myself or both, depending upon the question. So, I'll leave this up just for now so that you can jot down Seema’s information if there's something that comes to you after, or feel free to reach out to us directly at Livio as well. I'm going to minimize my screen a little bit here so I can see some of these questions that have come up.

So, Seema, the first one, cost-related. When it comes to the return on investment of a remodel versus construction, that's something that actually we didn't bring up and I'm glad somebody did, but the resale value, and I know neither of us are real estate brokers, right? So, this one might be a little bit tough for us to tackle. So, I'd encourage any of you to go ahead and speak to your local realtor as well. But when it comes to the resale value, you mentioned, I think earlier on in the presentation you mentioned, I think it was, use an example of built in 2021 versus built in 1957 in the real estate listing. But can you speak to how that might weigh into maybe the return on investment, if a person were to go and sell?

Seema: Well obviously if it's a brand-new house it's going to sell for much more if you put it up on the market, no matter how. Because it's going to be state of the art and everything. But let's say if you did a transformation or a major addition or remodel, there's smart ways. So, if you have a great curb appeal, number one, if you have a great, great room, which is your kitchen, family room or dining, along with a good landscape and an inside-outside field and a great master bedroom suite and a number of bedrooms, this is the bay area, you can still get a pretty good return on investment. But it'll never be the same. Like, I mean, there'll be a big factor of difference, even though it may have cost you almost the same, because you will have some compromised areas in the house, some lower ceilings, some smaller windows or some oddly laid out rooms. I can't put a number to it, but these are some things to keep in mind if you think about return on investment, is focus your dollars in your remodel or your transformation in these areas.

Rob: Got it. That's a great point. Yeah, certainly, the areas where you can make where the family is spending the most time, no doubt. I could definitely see that adding the most value and if you're able to do it in a remodel without sacrificing some of the items that we brought up, certainly that'd be a great way to spend those dollars. Seema, one other cost related and I'll stay on this topic for a little bit, but one other topic that came up and again, neither of us are either a tax consultants either, but when it comes to property taxes and assessments, can you speak to…? You'd mentioned very briefly at the beginning of the presentation, but do you have any knowledge based on just your client conversations about the difference between maybe potential tax benefits that might be there between remodeling versus new construction?

Seema: I have not in my experience with the homeowners that have worked with, and which is a lot. A lot of people have done brand new homes and transformations. We are finding that in the end, the city will submit a set of plans to the county to assess for taxes. And what they do is, they look at the plans and they have their own way. They will look at the end product and they will look at what you had before. So, there may only be a very small delta between your property tax for a brand-new home versus an addition remodel. They tabulate the number of bedrooms, bathrooms you had. They tabulate the square footage of before and after. And I don't know about you. I keep living in the same home and my taxes go up every year and I haven't touched the home. So, I don't really know how to say, but there might be a slight delta, but most probably they will not be because the city plans or the city will classify it as a rebuilt very quickly. And then you just get dinged with basically very high taxes.

Rob: Yeah. I think I'll preface by saying that I'm not an expert either in this topic, but from what we've seen anyway, it's exactly the processing that you laid out that the improvements get sent to the assessors and the assessor essentially at that point is responsible for coming up with that new value. Now, I guess the only instance where we didn't discuss why that wouldn't be the case is if, of course you did this, any work unpermitted, which is something that we didn't discuss at all, which is a route that definitely you don't want to go down. But any route where you essentially have a set of plans, go through the permitting process, ultimately it will go to the assessor's office. So, hopefully that answers generally your question. I know certainly talking to your probably local county might be a good way to talk about some of those as well. Seema, another question that came in that maybe it would be great if you could speak to is, and we spoke about it really briefly, but typical timeframes from your experience in order to go from conceptual to building approved plans. The question wasn't specific to remodel versus new construction, but maybe if you can just walk somebody generally through the steps in order to get building permits, that would be great.

Seema: Right. So, there are many. We go through all the phases from the day you decide that you're going to start design to the day you get your permit. And there are some wildcards in between such as the city. But usually, I say whether it's a remodel, addition or a brand new rebuild, I usually assign at least three months for just design. Basically, in that process, we go back and forth with the homeowner and the architect, and we get inputs from city planner, from a builder, from a geotechnical perspective, etc. But I usually assign three months. And my experience has shown that even for small additions, actually three months fly by very quickly. Because it's such an iterative process. I have designed homes where we have had 27 iterations.

Rob: I believe it.

Seema: And it's like, I don't mind, I want it to be perfect. So, we will keep going back and forth. We want to get every closet. It's your wallet that you're putting on line and you're trying to have the optimal home. So, it's really, if someone says, just slap it up, it's not going to happen. But anyway, so as an average, I'll assign three months. It could be two months if it's a very small addition and it can go to six months if it's very iterative, it's a huge home and there was an ADU and off that about 50% of the time goes in just designing the floor plan and the site planning. And then another 50% on the elevations and the three-dimensional drawings, so you can understand the house you're getting.

After that, let's call it average three months, then we go to the planning department. So, if it's a two-story home, definitely you have to make a full submission to the planning department. If it is just a single story, sometimes it's an over-the-counter discussion and we don't have to make a full submission. So again, it varies from city to city, but I would, again give another minimum three to five months with planning if it's a planning commission process, because you first submit it to them. They come back with comments. It includes grading and drainage design, landscape design, and sometimes things happen sequentially. So, if we finished architecture in three months, it took another month to do landscape, then another month to do grading design. So, by the time we submitted to the city, it's five months, then the city took three months for planning.

When we finished planning and we get approval, then we go into structural engineering and Title 24. And that can take at least four weeks, three to four weeks. All the engineers are busy, it can take longer as well. And then we submit to the building department and they take two to three months sometimes, sometimes six weeks. So, when you go to these ranges, that's when I start saying, if it's a brand-new house if we get a permit in nine months, depending on the city and depending on if it's two-storey. If it's Palo Alto, Saratoga, Los Gatos, all very picky, very lengthy red taped processes, and they're real total wildcards. So, I don't know if that… It's still vague because it's so specific to each project, but that's kind of the range of time that it would take.

Rob: Yeah. Definitely. I think that definitely, I think that helped summarize all the different steps that might be there in the process of going through, all the way from conceptual design all the way through building permits. Another question, there's a few more questions that came in. We're just now out of time, but what I will say is feel free to follow up with us directly or if your question is closer to and more pertain to anything architectural related, certainly, we can't recommend Seema enough for any questions that might come on the architecture side of things. And Seema, I want to thank you again for taking your lunch hour here to join us. And hopefully it was informative and helpful to all those that were able to attend.

Seema: Thank you Rob. Sorry if I couldn't stop talking.

Rob: No, it was perfect. That’s why you were invited, to chat as much of your expertise over to us as possible. So, thank you for that.

Seema: Thank you so much.

Rob: All right. Thanks everybody for attending and I look forward to next week. All right. Take care.