How to Budget and Plan for a Home Renovation

It’s easy and exciting to talk about starting a loft conversion, home renovation, or building a home addition to raise your home’s value, but the reality often involves bringing together different elements― design and planning, construction materials, project costs, securing permits, hiring contractors―all of which can be stressful to manage. In fact, if you don’t take the time to plan and work with the right team, you could end up having a traumatic experience.

Homeowners can navigate their home improvement projects smoothly with the right processes. The truth is that a home renovation is an investment and can be one of the most exciting and rewarding projects you ever undertake. However, this can only be possible if you get it right in your budgeting and planning. Read on, and you’ll learn how to effectively budget and plan for your next major renovation.

Planning a Home Renovation in 5 Steps

To get your home improvement project moving, you must take the time to create a detailed plan and budget without rushing things. Use the following tips and steps to plan your next home remodel and take control of your budget. 

Develop Your Vision 

First of all, know exactly what your needs are and have a clear goal for your renovation project. You never start a project without knowing what the end goal is. Start by developing a blueprint (or vision) of how your finished project will look and then outline what needs to be done to get there.

Now, you may know the renovation project to undertake but feel stuck when it comes to selecting the design or style and bringing it all together. This is where you draw inspiration from what others have already done― and then develop your vision. Some of the places you can find home renovation inspiration include Pinterest, home renovation shows, magazines, and family and friends.

Create a Detailed Renovation Budget

Now that you have a picture and blueprint of what your completed project will look like, the next step is to figure out how much it will cost you to get there. Keep in mind that home renovation projects tend to take longer and cost more than most homeowners think. Therefore, it’s crucial that you create a detailed budget, considering every possible cost you’re likely to incur, to avoid any issues down the road. Chances are you already have a figure in mind but, without a budget, you’re likely to overspend or have a little less for the project. Here’s a five-step plan with tips on how to create a realistic budget.

Prioritize Renovation Needs

If you’re not sure which project to undertake, start by making a wish list of every renovation project you might be considering. Obviously, there are projects on this list that you must accomplish for one reason or the other. So, prioritize those without getting side-tracked with other ‘unnecessary’ or ‘non-essential’ projects that can wait. Carefully look at your long-term goals and the functionality and aesthetics of your home when prioritizing your renovation needs.

Determine Costs Estimates for Your Project

Once you’ve made up your mind on which project to undertake, the next step is to get a rough idea of your renovation costs. Take the time to find a realistic estimate for all the factors of your renovation including labor costs and expenditures for permits, decorations, and building materials. Compare these cost estimates with the figure you have in mind to see if you can afford the renovation right away or you’ll need to save up for a little longer. If you need to get the exact cost of your project, consider reaching out to contractors (see the next point).

Get Quotes and Bids from Contractors

You already have a rough idea of how much the project will cost. Now, it’s time to collect bids from contractors. As a general rule of thumb, collect bids from at least three reputable contractors in your locality and compare their pricing. Consider getting recommendations from friends, family, and other tradesmen you trust. Overcome the temptation to take shortcuts or go for the lowest bid when hiring a contractor. Remember to check references, request for their most recent work, and listen to your gut when interviewing and meeting contractors.

Scale Down Your Renovation Project to Fit the Budget

Allow yourself a 15 percent to 20 percent buffer on top of the winning contractor’s bid for unexpected costs and unforeseen changes that may occur. If you have or can get enough money to accommodate the total figure, you’re ready to proceed with your renovation plan. 

If not, consider making the project smaller, choosing low-cost alternatives for fixtures, buying building materials yourself, or keeping appliances and fixtures that are still in good working condition. The idea is to scale down the project with the view of cutting costs. 

Consider Renovation Financing Options

If you’ve been saving up for your home remodel, then financing the project is going to be pretty straightforward. However, if you’re like most homeowners, you may need to finance your renovation using a home equity loan, a cash-out refinance, credit card, or home equity line of credit (HELOC). Seniors with majority ownership of their home can take out a reverse mortgage—be sure to check out reverse mortgage rates if this is an option you’re considering. 

Remember the Team Dynamic 

The truth is that you can’t manage your renovation by yourself― unless you’re handling a small DIY project. Depending on the kind of project you’re undertaking, you may need to bring together a team of specialty designers, plumbers, subcontractors, a general contractor, architects, electricians, etc. Make sure you only hire certified, licensed, and insured contractors with years of relevant experience. Remember to discuss and agree on payment terms and other expectations before the work begins. Have everything that you discuss outlined in the contract document to avoid any issues down the road. 

Create a Realistic Timeline for the Project

With a detailed budget and competent team in place, the next step is to set a realistic timeline and schedule for your remodel. Let all the contractors or professional teams that are part of the project provide you with an estimate of how long they’re likely to take to complete each portion of the project. 

You want to create a realistic timeline that stays within your budget and the contractors are okay with. Allow yourself a 15 to 20 percent buffer on top of the estimated completion timeline, for unexpected issues that may cause delays in the schedule. 

Anticipate and Prepare for the Unexpected 

No one disputes the fact that you’ve taken the time to create a perfect plan for your renovation. You’ve done your best to make sure everything runs smoothly to this point. However, failing to give yourself some breathing room might leave you with a traumatic experience.

Anticipate the unexpected and try to keep everything in perspective throughout the renovation process. Some of the things to expect and prepare for include surprises to your budget, construction noise, delays in your project schedule, and added stress at home. 

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