Home remodeling projects are often expensive, but are they more expensive than they need to be? A new movement in the home construction industry reveals that taking a different approach to projects can reduce real estate project costs by 10-30% while also cutting down on the time needed for completion.
“When you take the traditional approach of hiring a general contractor who then hires subcontractors, managing costs is extremely challenging,” says Christopher Duffy, Founder and CEO of Hummingbird Development. “As I experienced first-hand in the early days of my business, that approach causes a lot of confusion. The pricing you’re presented with seems arbitrary, making it difficult to establish a fair value for the work being done. And ascertaining why one contractor’s bid is higher than another’s is just as confusing. For homeowners who are trying to get quality work at a fair price, the process is very frustrating.”
Duffy is a residential real estate developer based in Northern California, focused specifically on residential construction, real estate investment, and remodeling costs and trends. Hummingbird strives to build homes filled with character, love, and the unique essence of each family it works with. It provides services including house remodeling, design-and-build, room additions, and kitchen and bathroom projects.
Duffy and other pioneering residential real estate developers are reining in the costs that traditional models contribute to construction by adopting an approach that involves vertical integration. Essentially, the approach brings the bulk of development services under one roof, so efficiency can be optimized on a number of fronts.
“Vertical integration empowers comprehensive project management that includes transparent pricing, efficient timelines, and quality workmanship,” Duffy explains. “Not only does it result in better outcomes, but it also removes 10-30% of typical real estate project costs.”
How Vertical Integration Drives Successful Real Estate Projects
When the average homeowner contemplates a home renovation, it is easy to get caught up in the finishing touches. After all, it is the features on the surface — cabinets, paint colors, and decor — that will take center stage when the project is complete.
But professionals know a successful home design project requires much more than just selecting the right finishes. As Duffy explains it, real estate development depends on building a strong foundation. He refers to the core pillars as “math and concrete.”
“To ensure every project provides the best outcome for our clients, my team and I spend hours working on math and concrete,” Duffy says. “We utilize proprietary spreadsheets that factor in the key elements involved in real estate value, such as commute patterns, employment trends, and price-per-square-foot sales data, to provide the foundation that the entire project is built upon.”
Vertical integration ensures all elements of a project are aligned with the foundation of math and concrete. It allows for full project management based on informed and integrated insights, covering everything from design and permitting through to finance, construction, and completion. By keeping all aspects of the project with one company, nothing is lost in translation or derailed by conflicting commitments.
Vertical Integration Avoids the Delays That Lead to Homeowner Horror Stories
Those with an intimate understanding of the construction industry know that each trade that contributes to a project is intertwined with the others. Completing a job requires moving through a sequence of tasks, each of which depends on the completion of the one before it.
“Electricians must wait to do their work until the framer is done completing walls and other structural elements,” Duffy explains. “Those responsible for insulation can’t proceed until the electrician is done. And drywall must wait on insulation.”
If one trade falls behind, it triggers a chain reaction that delays all the trades that follow. When a trade can’t comply with the new schedule due to a prior commitment, it sets the project back even further. It’s those types of delays that cause the horror stories homeowners share about remodel delays.
“Vertical integration does away with the headaches homeowners and developers often experience when engaging in a renovation,” Duffy says. “It eliminates the frustration of waiting on third-party vendors, along with the need to pay their markups. It also allows you to make quick decisions about the best way to meet project goals and stay on schedule throughout the entire scope of the project. It’s the engine behind cost-efficient construction that keeps projects on a timeline everyone is happy about.”
With construction costs at all-time highs, both developers and homeowners are looking for ways to increase efficiencies on real estate projects. Vertical integration is one way to achieve that increase, providing an approach that reduces costs without reducing the quality of the final result.
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