Creating a budget for your home renovation will help you determine the scope and timing of your project, but starting one can be a project in and of itself. When it comes to a home renovation, building a reasonable budget is critical and requires plenty of research and a detailed plan. The average cost of renovating a house that is less than 1000 sq. ft. is around $18,000, and homes between three and four thousand square feet can easily be twice that. With sums of money this large creating a budget is imperative, so we’ve compiled a list of steps to guide you through the process.
How much should you spend?
A good rule of thumb when determining your budget is to keep the value of your home in mind. You don’t want to spend more than 15% of your home’s value on a single room; if you spend too much more, the value of the renovation might not add as much value to your home as you spent renovating. For example, a good budget for a kitchen or bathroom renovation in a home worth $100,000 would not run much higher than $13,000. If you have no idea where to start, a design build contractor can help you discuss your needs and priorities to help you design a project to fit that budget.
Before starting a budget, you should first determine how you plan on financing the renovation. Whether it be through a loan, a line of credit, or cash, the budget of your renovation needs to fit within the limits determined by your available funds. Once you know how much you can spend, put aside as much as 20% of those funds for surprise expenses. Rarely does every aspect of a renovation go off without a hitch; inevitably, some obstacle will present itself and the project can end up being more expensive than originally estimated. Setting aside a financial buffer will ensure that you will have the funds to finish the renovation you wanted. If you want to be extra cautious, hiring a contractor to do some exploratory demolition or investigative work early on will help you plan and could even forewarn you of impending obstacles.
Creating the budget
Step 1 – Prioritize your needs
The best way to make sure you get the most bang for your buck is to prioritize what you need from the renovation. Creating a list of priorities will ensure that you do not overspend on less vital parts of the renovation. Make a list of everything you want to have done during the renovation process, and then separate it into ‘wants’ and ‘needs.’ Ask yourself questions such as, “What do I want this project to change in my house?”, “What details need to be hit to make those changes?”, “What can I compromise on, and where should I splurge?”. Think about the proper project order as well; it makes no sense to purchase countertops when you need to replace the cabinetry first. Prioritizing your needs will ensure that you are spending your money as effectively as possible.
Step 2 - Create a detailed plan
After setting the goal of your renovation, you need to do some research into expected costs in labor and materials. This will help make sure your budget is reasonable and will help you communicate exactly what your plan is with contractors. Build a spreadsheet that includes every part of your project, and has a column for estimated materials, cost, and the required time for every step, as well as any other parameters you feel are important to your project, such as estimated ROI if you’re renovating to resell, and then begin to fill in the blanks.
Use resources like HomeAdvisor to estimate labor costs for engineers, architects, plumbers, and other contractors. Create a catalog of fixture and finish selections, and calculate what you will spend on acquiring them; include every little detail in your fixture selections such as paint, knobs, faucets, flooring, and anything else you will need, including shipping and taxes. If you plan on including appliances in your renovation, make sure to leave room in the budget for them, and include costs for installation and delivery, as well as the removal of the existing appliance. Consider whether you will be vacating or occupying your home while renovating, and budget your living costs based on the sacrifices you may make; if you’re renovating your kitchen, make sure you budget for at least a few weeks of eating at restaurants. If you create a highly detailed plan for materials, then you can focus purely on labor and time estimates when meeting with contractors.
Step 3 – Request bids from multiple sources
By this point, you’ve come as far as you can by yourself, and now you need to find contractors that can meet your budget without cutting corners. Find local companies with good reviews and request an estimate for your job. It’s a good idea to get at least three job bids so you can better understand what renovations cost in your local market. If a contractor bids far below the other offers, keep in mind that you get what you pay for and that contractor almost certainly will run into errors that can cost more money in the future.
When choosing a contractor, make sure you interview each company and check their references. You may even consider checking the Better Business Bureau for any outstanding complaints or lawsuits against them. Be very clear and explicit when discussing your project and budget; a contractor that knows you’re sticking to a tight budget will be more likely to talk through additional expenses, time delays, and project changes. Make sure the contactor understands your vision and has a clear idea of your priorities and plan for the project. It’s best to share the information you have compiled about your project materials and schedule up front, so the contractors are aware of what you expect from the project.
If none of the estimates you get fit your budget, cut down your scope until you’re comfortable with the cost. Use the priority list you made earlier to remove non-vital parts of the project in order of importance. Once you’ve selected a contractor, have them look over your project plan and budget to see if there are any costs or work that you may have neglected to account for. Use the contractor’s estimates, advice, and feedback on your budgeting plans to make a final update to your plan before beginning work.
Final tips and advice
Congratulations, by following the steps detailed above you should now have an accurate project budget and should be well on your way to starting a successful renovation project. If you’re looking to save money on your home renovation project there are a few things that you can do:
If you’re removing cabinets, pulling up tile, or any other demolition as part of your renovation, consider doing it yourself. If it requires no expertise and you have the time, you can save yourself a few dollars of labor costs and gain the added benefit of relieving some stress.
Order Your Own Materials
While your contractor will probably be more than happy to order the fixtures and materials you want for you, they will also probably charge an hourly fee to shop for you and may even add a markup. Be clear about your plans and save on the fees by shopping for your project yourself. Be sure to have the contractor provide the measurements and specifics prior to purchasing.
Do Your Own Painting
Having a room professionally painted can cost hundreds of dollars in labor costs. Plan to paint your rooms yourself and you can cut that cost from your budget entirely.
Instead of purchasing everything brand new, consider purchasing used or refurbished items wherever practical. This can reduce your costs on appliances and finish items, but make sure you are not risking later costs by purchasing items out of warranty, especially items that would need some work to replace, such as plumbing fixtures.