How to Plan a Budget for Your Home Renovation

Getting a home renovation can be a tiring and costly process. Whether you want to renovate a home that you recently bought before you move in, or you’re looking to improve your property to develop it into prime real estate and sell it for greater value, or you’re just simply looking to improve your living space, home renovation, no matter how minor, will demand your time, effort, and money.

Renovating a home isn’t as seamless as TV shows play it out to be, and it’s not uncommon for homeowners to encounter obstacles along the way which might even cost them more money than they plan on spending for a home renovation.

To avoid these pitfalls, it’s paramount to budget effectively before you start the process of renovating your home. Budgeting for a home renovation isn’t as simple as allocating a portion of money for each need and letting people you hire take care of everything else.

Planning a budget for your home renovation is a process in itself, and it’s important to keep the following things in mind when budgeting for your home renovation in order to ensure that things will flow as smoothly as possible.

Know Where You’ll Get Financing

The first thing you should figure out when you’re planning to renovate your home is how you’re going to pay for it. Although perhaps the most convenient and trouble-free way of paying for a home renovation is through cash, the amount you need might be outside of your available funds.

If you don’t have enough cash, you can opt for getting a loan and financing your renovation through options such as a home equity line of credit, a home equity loan or a rehab loan in case you need the money for a renovation right away. However, if renovations can wait, it’s highly advisable to just save up the cash for it instead of going into debt for a home renovation.

Paying in cash is much more advantageous because it leaves you with nothing much to worry about in terms of finances, and you’ll be much more satisfied and happier that you got a renovation. Getting a home renovation that’s beyond your means can spell disaster financially and you might even end up regretting making the decision too early.

Set Your Priorities

Know which parts of your home you’d want to have the most improvements in, and see if there are parts that you’d be happy to keep the same. If your project involves just one part of your home, consider the parts or aspects where you won’t need to have the most exclusive or valuable materials.

While it may be ideal for most homeowners to get the best possible materials and the best possible services for a renovation, not everyone has the financial capacity to do so. Realistically, there will definitely be compromises to be made to make sure that everything falls within budget.

When determining which areas or items to allocate more of your budget to, one thing that is a must to consider is the value that it adds in relation to its cost. A home renovation may be looked at as an investment, and you want to make sure that the money you spend will have a return in value. However, the value added by renovations isn’t always quantifiable. Another thing to consider, especially for homeowners who intend to stay in their renovated home, is the enjoyment that their additions bring.

Reserve a Contingency Fund

A home renovation is more often than not bound to encounter some bumps along the way. Once everything is torn down at your home, you may realize that there are things beyond your home’s aesthetic value that need remodeling or fixing.

For instance, you might find faulty wiring in your house after you tear down the walls. If you’re unaware of this fact before you set a budget and you failed to reserve a contingency fund, you might have to make adjustments that could disrupt the plans that you have and the vision that you already have set in mind for your home renovation.

Most experts advise that you set aside at least 20% of your budget as a contingency fund. This way, you can use the remaining 80% to lay out your goals while at the same time being secure that you can pay for unexpected expenses. Plus, in case you don’t get to spend your contingency fund, you can use it to splurge on upgrades you’ve been holding back on.

Gather Information from Others Who’ve Done the Same

As with most things, it’s incredibly valuable to learn from others who have tread the same path as you, even when it comes to things such as renovating a kitchen. Asking other homeowners for advice and knowing about the steps they’ve taken can guide you in your efforts to accomplish what they have already done before, and can give you advice on how to budget for your renovation and which materials to get.

Apart from receiving general advice from people who have completed renovations such as the one you’re planning, you may even get referrals to people such as contractors. This way, you can build a network of connections that already have a proven track record of being reliable, and you might even score some discounts.

Furthermore, people who have gone through the process of getting a similar renovation can tell you about the potential pitfalls to avoid so that you can have a hopefully smoother process of having a home renovation.

Collect and Compare Bids from Contractors

Enlisting the services of a contractor is one aspect of the home renovation process where you definitely have to get your money’s worth. It’s commonplace for contractors to have varying amounts of bids, so you’d want to collect bids from different contractors. A good rule of thumb would be to contact at least three contractors and see how much they would bid.

When deciding which contractor to go for, consider not just the amount of their bid, but also what they were able to accomplish in the past. Moreover, cheaper is not always better when getting the services of a contractor. If you find that one contractor’s bid is immensely lower than the others, it could be a bad sign that the contractor cuts corners and may not give you high-quality service.

It’s important to be as transparent as possible when communicating with contractors, as this will help you know if they’re well-equipped for what you have planned which will help you in the selection process as well.

See Where You Can Cut Costs

Once you’ve come up with a rough estimate of how much to spend for your home renovation, try to see where you can trim your costs. You could either look at some areas where you can be comfortable with cheaper materials or you could look at some tasks that you can do by yourself.

For instance, you can reduce your costs for labor if you choose to do things such as demolishing or painting by yourself, instead of having to pay money that you could have spent for something else to have someone else do it.

Another way to help you cut costs is to shop for the materials yourself instead of relying on the contractor. This way, you can have a clearer look at your options and you may even find that there are more affordable materials that can nonetheless help you achieve your vision.

This article was written by Big Block Realty for Kevin VItali. Big Block Realty is a real estate brokerage in California.

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