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July 8, 2019 Home Loans Joshua Williams

How To Create A Home Remodeling Budget

Home improvement projects can be a great tool for increasing the value of your home. However, given the size and complexity of these projects, it is very easy for the cost to quickly spiral out of control. That’s why it’s so important to create a budget for the project before it begins and to do everything you can to adhere to that plan. Here are some constructive tips for building the best possible home improvement budget.

Know your personal budget first

No home improvement project should ever be started without first gaining an understanding of how it will impact your month-to-month finances. Ideally, you would identify a project several months in advance and create a savings account – separate from emergency, college or retirement savings – to earmark money for the job. If you are planning on financing the work either through a credit card, personal loan or home equity line of credit (HELOC), know what your monthly payments will be and how that impacts your personal monthly budget.

Be practical

It’s important when picking your home improvement projects to think about how long you will be living at the house after it’s complete. If you will be selling relatively soon, you’ll want to focus on what will be most attractive to the general population of home buyers. You may love the idea of a nook to store your 180-gallon fish tank, but to a potential future buyer that addition may make the house unappealing. Many times the improvements that will help your home sell quickly and for top dollar later are pretty unglamorous today. A new water heater or fixed roof may seem pretty mundane now, but it can make a huge difference in how secure a future buyer feels about the property. Even if you are just fixing the place up for yourself, try to always prioritize safety and efficiency over aesthetics when choosing which projects you will fund with borrowed money.

Know exactly what you want

Trying to figure out what a “kitchen remodel” will generally cost is only going to provide you with a very wide and ultimately worthless idea of what you can expect to pay. For bigger jobs like this, break them down into each item that will be replaced or refurbished. Using the kitchen example again, research what kind of countertops, flooring, cabinets, etc. you want so you can either communicate effectively with a contractor or know what you can expect to pay for materials you source on your own. Make an actual itemized list of each item and cost so that you can refer back to it during the planning stage.

Get multiple contractor quotes

To figure out if what you have estimated matches what it will actually cost, your best option is to get bids from more than one contractor who specializes in remodeling. Even if you are planning on doing the project yourself, it can be extremely educational to see what a professional estimates for materials, labor, permits, cleanup, etc. Request that the estimate be as detailed as possible. And don’t stop at just one. Not only are potential contractors competing against the possibility of you doing the project yourself, they are also competing against other professionals out there. Use this to your advantage to come up with a number that fits within your budgeted amount.

Understand overage

Know that whether you do the job yourself or hire a contractor to do the work, you are almost always going to run into some aspect of the project that pushes the cost beyond initial estimates. Count on your costs ending up anywhere from 10-25% above initial estimates. If this goes beyond what your budget has shown you can afford, it’s wise to wait until you can bulk up your earmarked amount a bit or scale back the scope of your current project.

Unearth savings

If you hire a professional to do your home improvement, that doesn’t necessarily mean you have to leave the sourcing of materials up to them. Consider hiring a contractor who will let you shop for supplies on your own. This will allow you to comparison shop more vigorously than a contractor might have time to do. It can also open up the possibility of getting high quality supplies at a deep discount. If you are going with a retail home improvement store, be sure to ask about upcoming sales. Lastly, if you are using a contractor and can wait a bit, try to do your home improvement project in winter when builders are more desperate for work and will in many cases drop their bids.

Home improvements are one of the few things you can control about the value of your home. Be sure to do just that and TAKE CONTROL of the process rather than letting it become series of money pits. As long as you create a plan ahead of time and do your best to stick with it, you can have a rewarding process and a more desirable property.

Smart Tips

Eight Ways to Avoid Home Improvement Budget Killers

  1. Don’t add “while we’re at it” jobs that weren’t a part of the original budget/plan.
  2. Stay away from cheap materials or corner-cutting measures that will just mean paying more, later.
  3. If you are doing the work yourself, learn the entire process before you start instead of using a “learn as you go” approach.
  4. Let your contractor know if you aren’t interested in the top-end, luxury versions of goods and materials.
  5. Check service ratings websites before hiring your contractor.
  6. If you are doing some home upgrades before you are planning to sell your home, give yourself plenty of time so you don’t have to pay for rush work or overtime to meet a deadline.
  7. Consider refurbishing certain items instead of tearing them out and replacing them.
  8. Communicate with your contractor. You don’t want to miss out on potential savings because you failed to communicate.
Written by or adapted from an article by BALANCE. All rights reserved.