Budgeting for Major Home Renovations Without Breaking the Bank
Embarking on a major home renovation can be daunting.
From material costs to labour fees and unforeseen surprises… it’s easy for projects to spiral out of control. In fact, Houzz found that 39% of homeowners went over budget on their renovation projects last year.
Fortunately, there’s plenty you can do to plan ahead.
With enough foresight and the right strategy, you can pull off major renovations without breaking the bank. Here’s everything you need to know about budgeting for that project you’ve been dreaming about.
What you’ll learn
- Why renovation budgets tend to fall short
- How to accurately calculate your budget
- Renovation costs for roofing and exterior projects
- Strategies for stretching your renovation dollar further
- Typical budgeting mistakes to avoid
Why renovation budgets fall short
Let’s start with a hard truth:
The average renovation budget fails long before shovels hit the ground.
Why?
Most homeowners undervalue the true cost of that dream project. They look up a general number online and use that as their quote. But every renovation project has dozens of variables that go into the final cost. Online calculators simply can’t take everything into account.
Some of the most common problems that lead to budgeting nightmares include:
- Unexpected damage behind walls, under floors, etc.
- Permit fees that some homeowners neglect to factor in
- Fluctuating material prices between estimate and installation
- Scarce labor leading to inflated rates from contractors
When you know what can go wrong, you’ll better prepare for your budget to balance.
How to calculate your renovation budget
Creating a realistic renovation budget is simple.
But simple doesn’t mean easy. You have to be diligent about estimating accurately and set some money aside for surprises.
Here’s how to properly prepare and calculate your renovation estimates.
First, get multiple quotes. Always compare estimates from multiple contractors before making your final decision. Pricing can vary greatly from company to company – especially with roofing companies. Getting new roof installations quoted from at least three to five contractors will give you a good range to work with.
Next, add wiggle room. It’s critical to pad your budget with a buffer for unexpected costs. I recommend at least 15-20% of your entire budget to be set aside for these surprises. Consider this money non-negotiable.
Finally, triage your repairs. Just because you got that estimate doesn’t mean everything needs to be done at once. You’ll want to divide your project into things that need to be done vs. nice-to-haves.
Identifying which renovations are mandatory and which are cosmetic will save you a lot of money. Things like your roof should always be your top priority.
Roofing and exterior projects
Roofing is one of the largest expenses for most homeowners.
And roofing for a reason. Your roof is your homes first line of defense. Once water starts seeping into your home, you’re looking at mold, structural damage, and expensive renovations down the road.
These renovations will cost you far more than your roof ever would have.
Trust me, I’ve seen it happen before.
That’s why it’s important to budget realistically for roofing repairs and know what factors into those costs.
Material and labor make up the majority of your roofing expenses. But project size, roof pitch, and geographic location all play a role as well. Asphalt roof replacements are usually your cheapest bet with homeowners spending around $11,000 on average. But complex roof shapes can cost upwards of $25,000+ to replace.
Don’t cut corners when it comes to your roof.
Ways you can stretch your renovation budget
Stretching your renovation budget doesn’t mean sacrificing quality.
In fact, you can save a lot of money by doing things the right way. Let’s walk through a few common strategies that will maximize your dollar.
Get the timing right. Believe it or not, most contractors will offer discounts during their off-seasons. Winter and fall are great times to get major exterior projects done since there’s less demand.
Do it yourself where you can. Painting, demolition, and clean-up are all things you can likely do yourself. Free up some labor costs by doing work you can handle on your own.
Mid-grade materials will serve you just fine. You’d be surprised at how little difference there is between high-end finishes and their mid-grade counterparts. Choose quality materials that fit your budget but don’t reach for the pricey stuff every time.
Bundle projects together. If you’re already having contractors out for one project, see if there’s anything else you can tackle while they’re at it. Having your roof replaced and attic insulated can often be done in the same instance.
Don’t be afraid to look into financing. Did you know there are special financing options out there for home renovations? Home equity loans and credit lines are great ways to spread out your project instead of paying all up front.
Learn how to prioritize and plan for your projects. Whatever you decide to do, never hurry into a major home renovation. Mistakes can be costly and you don’t want to start over half way through.
Budgeting mistakes to avoid
Many amateur renovators fall into traps that can make your budget disappear.
Here are the five most common renovation budget mistakes.
Budget mistake #1: Skipping the inspection.
Roofing contractors can spot additional damage to your roof decking that may affect your project cost. Performing renovations without an inspection is like playing renovation roulette.
Somebody will get hurt (your bank account, that is).
Budget mistake #2: Not comparing enough contractors.
As mentioned before, pricing can vary wildly from contractor to contractor. Don’t be afraid to reach out and gather estimates.
Budget mistake #3: Skipping permits and codes.
Don’t cheap out on your home by neglecting permits and building codes. There’s a reason contractors get paid to know these things. Unpermitted repairs can come back to haunt you when you go to sell your home.
Plan on your buyer’s inspector finding them.
Budget mistake #4: Changing your mind.
Changes during a renovation are like an open invitation for your budget to be exceeded. Map out everything you want ahead of time and commit to a final decision.
Budget mistake #5: Going cheap
You get what you pay for when it comes to home renovations. Yes, there are ways to save money, but I’ve listed those above.
Don’t be stingy on your contractor either. Paying your workers a fair wage ensures the job will be done right.
Creating your renovation timeline
Budgeting and timelines go hand in hand.
If you’re trying to rush your project, you’ll either come up short on money or sacrifice your results. Home renovations take time, so don’t try and rush mother nature.
Here’s a sample timeline you can follow to plan out your project.
Phase 1. Perform inspections and gather contractor quotes.
This phase isn’t going to happen overnight. It may take you anywhere from 2-4 weeks to complete this stage, but it’ll be well worth it.
Phase 2. Lock down your finances and material selections.
The sooner you have your ducks in a row before work begins, the better. You don’t want your contractor sitting around waiting for you to make a decision.
Phase 3. Schedule your projects wisely.
Typically speaking, exterior projects should be done when the weather is nice. Plan around things like roofing vs plumbing repairs.
Phase 4. Add buffer room. Things will always take longer than you expect.
Always build in extra time to your renovation schedule. Otherwise, you’ll never finish on time.
Final thoughts on budgeting for home renovations
Home renovations are exciting. Don’t stress yourself out by diving headfirst without a plan.
Calculate your budget from every angle and you’ll have nothing to worry about. That extra 15-20% we discussed is not paranoia, that’s just being prepared.
Hit the key takeaways below once more and you’ll be set to renovate like a pro.
- Always get multiple quotes
- Factor in repairs that need to be made vs. nice to haves
- Pad your budget for unexpected expenses
- Plan ahead for the best project prices
- Don’t sacrifice quality by going cheap
