If you want to remodel / renovate your house, you need to know how to budget for home renovations. Knowing how to do it will help you, not only to save money, but also to have a stress-free, organized process that will not give you nightmares.
When it comes to the renovation process, it’s better to make your life easier and prepare everything beforehand. That way, you’re in control and know what to expect.
The best way to start is to create a detailed and accurate budget for your home renovations.
The first thing you need to do is to sit down and discuss with your partner (or yourself) some key topics, like:
- Areas that need to be renovated
- What will the new place look like, so you can already have an idea of what type of materials you might need
- The available budget
- A deadline: How fast it needs to get done
The questions above are probably the first and most important you need to have figured out.
What you also need to think about, before starting, is to consider the investment you are making.
Is it to recoup the money when you decide to sell the house? Or do you just want to improve your quality of life in that space?
The answer might change some variables (especially budget wise).
Now that these questions are out of the way, it’s time to learn how to budget for home renovations.
1. Consider the value of your home
If you don’t know how to approximate a budget for your repairs, start by considering the value of your home.
Ideally, specialists say to not spend more than 10 or 15 percent of your home’s value on a single room, because if you do go over that percentage, the money you put into the renovations will not proportionally increase the value of the house.
So if you’re thinking about redoing your living room, for example, and the house is worth $200,000, your living room remodelling budget should be a maximum of $20,000-30,000.
2. Prioritize remodeling areas & Have a budget for each one
Now that you’ve decided what needs to be renovated and you know the budget, it’s time to:
- Split the renovation in several phases
- Have a budget for each phase
- Prioritize the remodeling projects
This organized way of working will help you focus on each phase, and also give you time to save money for all of it.
3. Create a Detailed Plan With Cost Estimates
Let’s say you’ve decided to renovate your master bathroom. The next logical step is to create an action plan for this particular phase.
The best answer to how to budget for home renovations is to have a spreadsheet that includes each part of the project and the estimated costs for labor and materials.
So for a bathroom, you might add all the bathroom items you need to buy, like tiles, sink, bathtub, paint, etc.. Then you have to add the labor costs for each item, or better yet, for all of it, if you can find someone who can do it all (who is specialized in bathrooms).
Don’t know how to estimate costs? Here are some tips & tricks to create cost estimates:
- List all the items you need, starting with appliances, and continuing with fixtures, paint and so on.
- Take a look online or in stores and estimate the cost for each item. If you already have a specific sink you want to buy, for example, write down the exact cost of it.
- Don’t forget to include shipping and installation costs.
- Use websites like HomeAdvisor to get an understanding on labor costs.
- Or ask for recommendations from friends and family.
- Take into consideration renovation consequences and those costs, too. For example, not having a functional bathroom or kitchen, and what you might need for that situation. Maybe a couple nights away at a hotel, or ordering food more than usual.
This spreadsheet is vital, so if you can build a detailed plan that includes your choice of finishes and fixtures, you will just need to focus on discussing with contractors the labor costs and time estimates.
4. Request Bids From Multiple Contractors
Now that you’ve built your detailed renovation plan, it’s time to start contacting contractors and asking for project costs. This is a very important part of how to budget for home renovations, because they will do all the actual work, so you need to make sure you are choosing a good team that will do quality work.
Try to get at least 3, if not 5, quotes from possible contractors.
How to choose a contractor:
- Begin by looking for local companies, it might save you a lot of money;
- Schedule a 15-30 minute call with them to see if you can work together, if they are trustworthy, and to ask about their past projects.
- If you can, check their references.
- Be honest and clear about your renovation project and the budget from the beginning. Explain everything you need to get done. They need to know if it’s a tight budget or if it’s a one of a kind type of project, so they can explain additional expenses, if necessary.
- Ask about possible time delays and unexpected expenses they’ve had in similar previous projects, and have them look at your home plan and remodelling plan. Their insights might change the budget.
- If none of the contractor estimates fit your budget, then maybe it’s time to downsize. Either split the project in even more phases, so you can prioritize and have more time to save money, or reconsider the materials and finishes.
What happens if you go over budget?
If you’re worried about going over budget and you haven’t even started it yet, then this is the perfect time to save up an additional 10-15% of the initial remodelling budget. This will serve as a cushion, in case unexpected expenses show up.
If you’ve started working on the home renovations and you’ve realized you’re already over budget, you need to start asking for an extremely detailed quote from the contractor and request budget updates every three to four days. That way, you will have all the info and then you will have time to downsize certain renovation aspects (like finishes or items), or change it altogether, if the new quotes include big changes.
That’s about it. That is how to budget for home renovations. It’s time to open an Excel spreadsheet and start putting down all you want and need!