The Commonwealth Blog

Monday, March 5, 2018

How to Plan a Budget for Home Renovations

Budgeting for a home renovation project can be a tricky business. You have a vision in mind—a beautiful new bathroom or kitchen, for instance--but how do you determine what it’s going to cost? It’s important to consider all the included expenses and factor in a cushion for unexpected costs so that you don’t run out of money before the end of the project. By starting off with the right numbers, you can anticipate your expenses and ensure the renovation will be a good return on investment.

Step #1: Estimate Your Costs

What kind of renovation do you want? Different projects and rooms in your home will give you different returns on investment (ROIs). Kitchens and bathrooms are the most frequently used rooms in most homes and can be a good start toward remodeling. Sit down with an architect, contractor, or interior designer and determine the basic costs for the project. Get multiple bids for the project to ensure you’re getting a fair price. While most contactors’ fees will include some materials, you’ll need to choose your fixtures and finishes. Do some research on what items will cost and fill those costs in as you purchase them.

Step #2: Extra Expenses Like Taxes and Shipping

It’s easy to forget about important fees that come along with building materials. Taxes on your purchases can be as high as 10% in some areas. Large items like cabinets, countertops, and bathroom hardware come with expensive shipping or delivery fees. Maintain consistency and avoid surprises by budgeting for these items in your initial budget.

Step #3: Add a Cushion

Something will go wrong on the project. It might be an incorrect order, damage to your home’s structure, or some other unforeseen cost. Build in 10-15% extra for any eventualities that may occur, including delays. Depending on the scope of the project, the initial projection may be pushed back if there are delays on materials or construction problems. Understand that renovations are unpredictable, and you can’t control everything, but a cushion can help account for that.

Step #4: Stay the Course

It’s tempting to upgrade to the best of everything when renovating or tack on another “small project” because you’ve already started. Every time you change the plan, you’re adding additional lead time, costs, and complexity. Develop a plan with your architect or contractor and stick to it. Keeping it simple will help you stay focused and help the project run smoothly.

Don’t rush blindly into your next renovation. Whether you’re improving your home to sell it or planning your dream remodel, create a budget that can absorb any surprises. Your Realtor may be able to help you find experienced professionals in your area and direct you toward securing a home equity line of credit.

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