It is easy to come up with areas of your home that you would like to change and remodel. We all dream! The hard part is determining what changes you can actually afford to make. Here are tips to set up a budget for a remodeling project.
Have an idea of how much the project will cost.
Prices vary drastically depending on the task. For example, according to HomeAdvisor, the average cost of renovating a home that is less than 1,000 square feet is $18,347. For homes in the 3,000 to 4,000 square foot range, the average price climbs to $36,121. Renovations made to an older home tend to cost more than a newer one, especially if the wiring, plumbing, and other features aren’t up to code. Typically, you can expect to spend at least $100 to $200 per square foot on any renovation.
When you’re deciding on your home renovation budget, it can be easier and more affordable to prioritize projects by room and build a budget around the cost of each individual project.
Average cost to renovate:
Kitchen $12,000 – $33,000
Bathroom $6,000 – $14,000
Basement $10,000 – $27,000
Source: HomeAdvisor
How Much Should I Spend on a Home Renovation?
To get an approximate idea of what your remodeling budget should be, consider the value of your home as a whole. You don’t want to spend more than 10 to 15 percent of your home’s value on a single room. If you spend more, the value of the renovation will not proportionally add to the value of your home.
For example, if your home is worth $100,000, the maximum you should spend on a kitchen or bathroom renovation is $15,000. If your house is worth more, the spend on a renovation could be higher.
“Most of the time, it’s really hard for a homeowner to know where to start. I recommend bringing in a design-build contractor early on in the process. In their initial consultation, they can talk about your needs and priorities and help guide you through a project that is realistic for your budget.” Danny Niemela | ArDan LLC
After determining the remodel’s cost, you have to figure out if you have the money to make that change. If you have the cash, then you are set to go for this step. But if you need a loan, you have to know the amount the bank will loan you.
Paying off the loan will need to be added to your monthly fees to verify whether or not you can afford the remodeling project. Two typical loans are the home-equity loans and the home-equity lines of credit. The benefit of the home-equity loans is that there is no closing cost, the interest is fixed (making it easier to budget), and they are tax-deductible. The disadvantage is that the interest may be higher than most loans.
A home equity line of credit is similar to a credit card. There is a maximum amount you can spend, but you can spend the money at different times, depending on where you are at in the project. The interest rate will vary and potentially change over time.
Find a contractor.
Now you know what you need, what you want, and what you can afford to pay for each item. It’s time to find a contractor that can complete your project within your budget.
Have your friends and families recommend contractors they have previously used for projects. You will want to research the contractors by looking at their work, checking out their references, and reading any reviews.
Find local companies with good reviews and ask them to create a bid for your project. Get offers from at least three companies to accurately compare the costs.
Provide a couple of your favorite contractors with the project you want to be done, including any specific materials you want in the project, and ask them for a bid. Select your favorite, but include an estimated 20% of the cost for any unexpected problems.
If one contractor’s bid is well below the others, toss it out. Cheap labor sounds appealing but opens the door to errors which can cost you more money later. Use competing bids to negotiate with your preferred contractor.
Tips for Saving on Home Renovation Costs
When creating your remodeling budget, use these tips to reduce your costs further:
Complete demolition yourself: If you’re removing cabinets pulling up tile as part of your renovation, consider doing the work yourself. As long as there is no expertise required, this is an excellent way to reduce labor costs and save a few dollars.
Order fixtures and finishes yourself: Your contractor will probably charge you an hourly fee to do your shopping for you and may even charge a markup. Be clear about your plans, so your contractor knows you’re taking on that responsibility yourself.
Be your own project manager: If you need to hire additional subcontractors for your project, interview and select them yourself instead of having your general contractor do it.
Having a room painted by a professional can cost $300 or more. Plan to complete any required painting yourself, and you can remove that cost from your remodeling budget.
Shop used: Instead of purchasing everything brand-new, pick up used or refurbished items when possible. This can significantly reduce your spending on appliances and finishes.
