Are you thinking of renovating your home? You might be thinking of remodeling because of a damaged or outdated structure. Whatever your reason for renovating, it’s exciting. You’ll be improving the comfort, enjoyment, style, and value of your home.
Cost-wise, people rather renovate their homes than buy a condominium as a replacement. However, even if it’s more cost-effective, it’s still important to make sure that your renovation fits within the limit of your available funds. Once you’ve assessed how much you’re allowed to spend, then you can set aside 15 – 20% of your total savings for any sudden expenses in the future.
But how do we exactly budget for the renovation? Here are the things you can do to financially prepare yourself for a renovation…
Determine the value of your home
Right now you’re confused. How much should you really splurge on your home renovation? Well, it depends.
Let’s get to the big picture. Are you renovating because you want to resell your home? Or are you renovating because you want to live in that home for many years (probably decades). If that’s the case, then it’s understandable to dedicate your money creating your dream house.
But if you’re planning on reselling your home, consider your home’s resale value after the renovation. Some remodeling can add more value to your home more than others. But always remember to manage your cost.
Be clear with the goal of your renovation
Now that you’re done looking at the overall picture, let’s try to zoom in a little.
Clearly state the goal of your renovation. Is it just to fix old and worn-out rooms? Or is it to make your room more spacious and brighter? Do you want it to have an occurring theme, whether that’s vintage or modern? Are you thinking of any design inspirations?
Whatever your goal for the renovation is, be clear about it. Try and list down the works you want and need to be completed. Assess which of the steps or tasks in your list you want to be done by a professional, or you want to be done yourself.
Then communicate it well with your contractor. Only then can they estimate more accurately the amount of money needed to make it happen.
Decide on the minute details you want for the remodeling
So you’ve been clear about the purpose of your remodeling. This time, think about your material preferences. Do you want to use ceramic or porcelain tiles for your floor? Do you prefer wood or carpet? What material do you want to use for your walls or windows? Drilling down to the minute details help contractors give you a better estimate for the budget needed.
Explore your financing options
It’s now time to think about the money needed to make it happen. Some homeowners save up and pay in cash. But if you don’t have that option, some of the things you can consider are home equity loans, personal loans and mortgage refinance.
Settle your building permits
One of the things you should consider while budgeting is the cost of permits.
Permits are serious requirements when remodeling your home or rental property. This is because the state and local authorities want to ensure that you’ll be complying with building code safety. The cost of permits varies from city to city. It can be as high as $7500 to as small as $100. Meanwhile, the national average cost of a building permit is roughly $1,155.
Budget for the building materials and home decorations
One of the most obvious things to spend on is building materials and home decorations.
Some of the places in which you can look for cheap materials are craigslist, Facebook marketplaces, online auction houses, building reuse centers, demolition listings, yard sales and many more. But, be careful not to risk the quality of your homes buying cheaper materials. Always consult your contractor regarding things like this. Quality is always important.
Discuss the labor cost and put everything in writing
Keep in mind the labor cost. But, remember to never choose your contractors based on cost estimates alone. Take note of the contractor’s years of experience. Take a look at their contracting license, certificate of insurance, and references.
Once you get that down, everything should be in writing. The contract should include all expectations, scope of work, a detailed schedule of the project stages, payment schedules, list of suppliers, contact information, consequences for missing deadlines and the like. But even then, look for any hidden fees, or things outside the contract.
One of the biggest mistakes most homeowners make during renovations is underestimating cost. Most of the time, projects take longer than you expect. You can’t expect everything to go exactly as planned, so make sure you set aside 15 – 20% in cash to accommodate surprises.