What do you charge…

Architectural visualization is a difficult concept for most folks to understand, much less understand the value of. I have found the most success working with commercial real estate, meaning real estate developers of commercial and residential properties for sale or lease. This also means developing designs that 3rd party structural architects then make happen technically.

Broadly, their sales fall into 3 categories:

1. Sale of properties
2. Leasing of properties
3. Development of properties the client moves into

Yes, there is a 4th, but it is always loosely tied to one of the above. That is the development of views, perspectives and animations primarily for use in convincing municipalities of a project’s impact on the environment and/or aesthetics. Included are zoning boards, town counsels, fire marshals, print and video media-all things/people/entities that developers need to have on their side. You just can’t say no to an actual 3d render-it stops all arguments.

The rate I charge is based on what kind of opportunity it was/is that I am working on, but I always keep it fixed price. So lets take the easiest first: outright sale. I charge 1% of the gross value of the transaction, payable net 30 based on date of sale/closing. Thats it, simple. This is a known quantity to the client right up front, and ensures that we both have skin in the game-as all partners should. But there are other, more subtle, motivators.

For one thing, it is more profitable to work on larger ticket opportunities for both client and customer. Why? Think about it. The amount of effort for me to draw and visualize a large, complex project does not go up in a linear fashion against the sale price. In fact, when dealing with commercial properties, there are often large, open spaces that require no detail. This isn’t the case in a commercial lease deal when you want to put a generic business into the space to help the prospect see themselves there.

The client makes out because they make a higher % margin on a higher ticket real estate sale. Doing so reduces the impact of my static rate, making the margin larger in the end. So this is why I suggest that my clients only use me on the larger deals, or those with significant political concerns (as mentioned above).

Easy enough, but what about leasing? This is harder to deal with, as the client will not get the total $ for/of the lease up front. The rate is still the same, simple 1%. But it needs to be based on the total fee for the lease. Take the monthly rate and multiply it by the total months of the contract. But then to be fair to the client, my 1% of that amount is broken up across the first 24 months of the lease, paid on the usual terms mentioned above.

That was actually not bad, but what about when the client is acquiring a property that they are moving into? What about a structure that they buy outright, lease out the first floor, and occupy the second floor with their own offices, sub-leasing out to other professionals in a communal office style setting? That sounds complicated! Well, to be perfectly honest with you, I do these for free. Why? Because a good client is harder to find than money, but they are worth more. I only keep good clients. What is a good client? A good client is one I’ll do business with 2 or more times.

I am as valuable to a client as a good client is to me, but I probably make out in the deal. Why? Because a good client will happily give you referrals without asking. And referrals in this line of work will get you the work without bid. Face it, have you ever bought a book on Amazon after reading a slew of bad reviews about it? Of course not. This is a good demonstration of the value of recommendations.

Good clients are a better value, too. Why? Because although my rate is constant, the amount of effort might not be. A lack of respect can end up in countless, pointless updates and changes that drag your margin down to zero. This situation also leads to a degradation in referral quality. “Yeah, they were good, but it took hundreds of changes and all of my time to keep them on task.” You don’t need a client bad enough to risk this kind of a referral.

Another thing about good clients that can’t be discounted. Good clients will let you design. By design I mean just that-influence and create the final product. This is a true partnership. For example, a current client on a current job said they wanted a particular artistic feature a specific way. I said that I would render it for their consideration (I never say no), but that it would not have the impact they assumed it would from the street level where it would be viewed. When they saw the results of both what I had suggested, and what they had asked for, they conceded that I was right. Another feather in the architectural visualization cap. It serves to settle conceptual arguments with hard data. It also keeps design decisions from being personal or subjective, keeping everyone friendly and focused on the objective: making money. I don’t expect my bank to understand why I missed a car payment simply because I lost the client, but was right.

I know what you’re thinking: Why charge the same for design work? That is valuable! You’re right, it is. But there is something else to consider with working with real estate: I work on what sells, and what doesn’t, but it is the best quality of work to do. I also don’t control what a property sells for. Let that sink in for a second. What this means is that (in my opinion) it is better to do enjoyable and challenging work for great clients consistently. It is best if this is work that is growing your account base through referrals. Any hour of the day I’m making money instead of marketing/advertising myself is preferable. I guess it is a good business decision as much as it is a quality of work objective.

Another reason to have good clients is that they will handle delays due to 3rd parties better, keeping them their problem instead of making them yours.

Finally, where I am my services are taxable. That means my client has to pay sales tax on what I do. Where I am, this is 6%. So a $1,000,000 USD deal nets me $10,000 USD (1%), and I have to then charge $600 USD (6%) for a total of $10,600 USD. I, then, report those taxes to the government and pay income taxes on the remainder. Due to expenses, I typically figure I’ll end up with about about 1/3 of that amount, of $3000 USD for what is typically many weeks’ work. Luckily, I can work on more than one engagement simultaneously, as there are always delays with folks getting back to you, etc.

So this is how I determine/set my rate. How do you set yours? What do you charge? It probably makes a difference what kind of architectural visualization you are involved in.

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