Building a new home or undergoing a significant remodel can be an overwhelming task, especially when managing the complexities of design, budgeting, and construction. A key consideration is whether to undertake the project all at once or phase it over time. So, the question becomes: What makes the most financial sense?

At Letter Four, one of Los Angeles’s premier design-build firms, we’ve found that phasing residential construction projects can offer flexibility, but also can create challenges and additional costs. Let’s explore the benefits, drawbacks, financial implications, and other considerations when deciding if you should phase your home build or remodel.

What Is Phasing?

Phasing refers to breaking a construction project into multiple stages rather than completing everything in one go. Each phase focuses on a portion of the work, allowing you to spread out both the workload and the financial commitment. Phasing can be beneficial if you have budget constraints, want to live in your home during construction, or need to prioritize essential improvements while leaving other elements for the future.

Phasing Pros‍

  1. Reduced Up-Front Costs
    • One of the main advantages of phasing is that it allows you to manage your budget over time. Instead of paying for the entire project up-front, you can spread the costs out, which may be easier to handle financially. For example, you might focus on the kitchen and living spaces first, leaving bedrooms or landscaping for a later phase.
  2. Live in the Home During Renovations
    • For major remodels, phasing can allow you to stay in your home while the work is being done. With this approach, you can tackle specific areas of your home, one at a time, minimizing the disruption to your daily life and saving the cost of renting alternative accommodation or having to move out entirely.
  3. Encourages Prioritizing: Needs vs. Wants
    • Phasing is perfect for when you want to address the most critical elements of your home build or remodel first. If certain parts of the home are functional and can wait, you can allocate your resources to areas that require immediate attention. For example, if your roof or HVAC system needs replacing, you can prioritize that phase before moving to aesthetic or less urgent improvements.
  4. Flexibility for Evolving Needs
    • Another significant advantage of phasing is that it allows for flexibility. As you complete each phase, you can adjust your plans for subsequent stages. This may be particularly useful if you are unsure about the final design or if your needs change during the process.
  5. Control Scope Creep
    • Tackling smaller chunks of the project at a time can help you maintain better control over the project’s scope and your budget. Phasing allows for clear financial and time boundaries for each stage, reducing the likelihood of unforeseen expenses piling up all at once.

Phasing Cons‍

  1. Higher Long-Term Costs
    • While phasing can ease immediate budget concerns, it may end up costing more in the long run. Construction costs, materials, and labor prices tend to rise over time. Additionally, contractors may charge more for multiple mobilizations. Setting up and tearing down equipment and scheduling subcontractors for each phase could increase overall project costs by 5% to 15%. Higher costs will also be determined by the project's complexity, location, and duration of time between stopping and restarting.
  2. Extended Disruption
    • Although phasing can reduce larger disruptions at any one time, it stretches out the total timeline. This means that construction-related noise, dust, and changes to your home’s functionality often last much longer than if the project were completed all at once. For example, we may be able to complete the construction of your remodel in 9 months if you are to move out, but the same scope may take 12-14 months if you remain in your home and phase your project.
  3. Design Continuity Challenges
    • Keeping the design vision cohesive across multiple phases can be tricky. You may find that your style preferences or material availability change over time, which could result in a home that feels piecemealed. Having a clear, long-term vision from the start can mitigate this risk and it's essential to plan any phasing carefully with your design-build team to ensure aesthetic consistency.
  4. Financing Complications
    • Financing a phased project can be more complex than securing a loan for a single construction effort. Lenders might require specific milestones to be met before releasing additional funds, which could slow down the project or complicate cash flow. Additionally, you may face higher interest rates on phased construction loans compared to traditional construction financing.
  5. Market Vulnerability
    • If your project involves gaps between phases, you may encounter delays due to external factors like changes in the housing market, contractor availability, or permitting processes. What was an affordable project today may become more expensive if there's a significant delay between phases.

Does Phasing Make Sense For Me?‍

  • Are You More Concerned with Initial or Long-Term Costs?
    • Phasing allows you to handle initial costs more easily, but as previously mentioned, it could result in higher total costs. Construction mobilization, inflation, and increased material costs over time are factors that could drive the total cost higher than completing the project in one phase.
  • Do You Want Financial Flexibility or a Guaranteed Interest Rate?
    • Phased construction may offer some flexibility with your financing options. Many homeowners finance each phase independently as they build equity or save additional funds. However, this can lead to unpredictable costs if interest rates rise, and you might end up paying more in the long term if you don't secure a long-term loan early on.
  • Do I Want to Deal With Contract Negotiations?
    • When phasing, it’s crucial to lock in contracts with clear terms for each phase of the project. This includes negotiating fixed prices where possible and outlining clear expectations for costs and timelines. Phasing might allow you to evaluate your contractor’s work and make adjustments, but it also introduces the possibility of disputes or changes in contractor availability mid-project.
    • Pricing and terms for each trade and material supplier included are often only set for a period of 30 days. If you phase your project and extend beyond that timeframe, it’s likely that the cost to you will increase when you have to re-bid.
  • Am I Good at Timing the Market?
    • Phasing can give you some flexibility to take advantage of market conditions. For instance, if labor or material costs are temporarily high, you could wait to execute certain phases of the project. On the other hand, delays could also mean missing out on favorable pricing.

The 5 Best Ways to Phase Your Project‍

If you’ve weighed your options and decided that phasing a construction project is right for you, then it’s time to learn how to thoughtfully go about it. Here are the five best ways to phase your project to ensure the process goes smoothly and cost-effectively:

1. Build Your ADU First

  • For clients looking to construct a main house and an accessory dwelling unit (ADU), starting with the ADU is often the most strategic choice. In this scenario, the ADU can serve as temporary housing while the main house undergoes construction. This approach allows you to stay on-site without needing to rent elsewhere, saving money on relocation costs and reducing logistical issues.
  • Once the ADU is completed, you can move in, making it easier to demolish or remodel the main house without the burden of living through the construction process. Not only does this reduce disruption to your daily life, but it also accelerates the timeline for the larger project by removing potential delays caused by having to vacate the home at various stages of construction. Additionally, this option provides immediate utility as the ADU can later serve as a rental unit, guest house, or home office once the main house is finished.

2. Prioritize Critical Systems

  • When embarking on a major remodel, it’s important to focus on the essential systems first, such as plumbing, electrical, and HVAC. By upgrading these critical components early in the process, you can ensure that the foundational elements of your home are efficient, safe, and up to code.
  • Phasing these system updates is especially important if you plan to live in the home during the remodel. Completing these upgrades in the first phase will minimize the risk of future disruptions that could occur if these essential systems break down or become outdated. Moreover, tackling them upfront helps avoid having to rip out newly completed work later on, saving both time and money in the long run.

3. Focus On Core Living Spaces First

  • If your goal is to improve or renovate your home in stages, it’s often best to start with the core living spaces—such as the kitchen, living room, and bathrooms—that you use daily. These areas typically have the highest impact on comfort and functionality, so completing them early can greatly improve your quality of life, even if the rest of the house is still under construction.
  • For instance, if your remodel includes an open-concept kitchen and living area, completing these spaces first will allow you to enjoy a functional home environment while other, less essential areas (like guest bedrooms or exterior spaces) are addressed in later phases. This phased approach lets you prioritize the spaces that matter most while allowing you to move forward with the project without waiting for the entire home to be finished.

4. Exterior Now, Interior Later

  • In some cases, it makes more sense to phase construction starting with the exterior. This approach is particularly useful for projects where the structure of the house needs to be updated or expanded. By completing the exterior first, you ensure that the home is weatherproof, structurally sound, and energy-efficient. Additionally, this allows for landscaping and other outdoor improvements to be completed early, creating curb appeal and adding value to the property.
  • Once the exterior is secure, you can move on to finishing the interior in stages. This phased strategy is also helpful if you’re working with a limited budget, as you can prioritize critical elements like the roof, windows, and exterior walls while deferring the cost of interior design and finishes until later.

5. Divide by Floor or Section

  • Another effective phasing strategy is to divide your project by floors or sections of the house. If you’re remodeling or expanding a multi-level home, consider completing one floor at a time. For example, you could renovate the lower level first and move your living arrangements there while the upper levels are under construction. This allows you to live in the home while the remodel progresses, minimizing disruption and saving on rental costs.
  • Similarly, for homes with distinct sections, such as a wing of bedrooms or a separate living and entertainment area, you can phase the project by working on one section at a time. This approach offers flexibility, especially if your family’s needs change or evolve during the construction process. By breaking the home into manageable sections, you ensure that each part of the project is completed to your standards without overwhelming your budget or timeline.
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The Design-Build Approach: Make Phasing Work for You‍

At Letter Four, we encourage our clients to consider both the financial and lifestyle implications of phasing their home build or remodel. It can make financial sense in certain situations, but careful planning is essential to ensure that each stage aligns with the overall vision and budget.

  • Comprehensive Planning begins with the creation of a detailed master plan that outlines the entire scope of the project, even if the work will be completed in phases. This approach ensures that each phase is executed with the full vision in mind, preventing unnecessary rework and minimizing disruptions. By establishing a cohesive design from the outset, we ensure that each phase seamlessly integrates with the next, both aesthetically and functionally. This method allows for smoother transitions between stages and helps avoid costly mistakes or delays that might arise from poor planning or misaligned objectives across phases.
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  • Flexibility Without Compromise: While phasing offers flexibility, it shouldn’t compromise the quality or cohesiveness of the project. We recommend setting clear goals for each phase and revisiting them regularly to ensure they still align with your vision. This point reiterates the importance of creating a master plan, something that we focus on during our Action Plan.
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  • Collaboration and Communication: Working with an experienced design-build team is crucial in phased construction. We emphasize consistent communication and provide regular budget and timeline updates to keep your project on track.

To Phase or Not To Phase: Final Thoughts‍

Ultimately, like so many aspects of the custom home construction journey, phasing your home build or remodel is a choice only you can make. It can provide financial relief and allow for flexibility in project planning, but it could also result in higher overall costs and extended construction timelines. However, when the need for flexibility outweighs the potential for long-term cost increases, it is a strategic option for anyone with specific budgetary constraints. 

If you are considering a phased approach, we recommend working closely with an experienced design-build firm like Letter Four to ensure your project is properly planned, adheres to timelines, minimizes cost increases, and maintains a cohesive design vision.

If you’d like to discuss your project and potential phasing with our team of experts, book a free call today!