Renovation Budgets- How to Create One and Then How to Stick to it!

Renovating a home is an exciting time, however you need to not let your emotions run the show.
Home renovations can cost as little as a couple of hundred dollars to up over one million dollars!
So, it is wise to first start out with a budget. Then secondly stick to your budget to prevent financial woes! 

BEFORE

BEFORE

AFTER

AFTER

How to calculate your Home Renovation Budget
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​Firstly, in order to not over capitalise on your homes value, the best FIRST step would be to speak to local real estate agents in your area and advise them of what renovations you are “hoping to do”. Get an estimate of what your homes value could be worth should you complete those renovations.
 
Now, get this figure and minus 5% for a buffer to be conservative.  Then take that figure away from the current value of your home and you are left with what should be your absolute maximum budget.
 
If, however you are not worried about over capitalising on your home ignore the above and go with the below:
 
The next step once you have the above figure to work with is….
 
Speak to a renovation builder and ask them what a rough ballpark figure will be to do the renovations you are hoping to do on your home. Most reputable builders will be happy to provide you with these rough figures initially to help you with your decision-making process.
 

Funding the Budget for your Home Renovations
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​Now you know how much your house will be worth after the renovations from the local agents, you have a rough ballpark figure for these renovations from a reputable builder, the next step is to find the funding for your home renovations.

Option one: You need to see how you can pull together the above amount of money whether it be from your savings, offset accounts or the bank of mum and dad or other family members or friends  if you are lucky enough.

Option two: If you do not have a lot of cash on hand.  Which let’s face it, you are not alone. In fact this is very much the norm.  Then you need to speak to your bank or mortgage broker. You need to assess how much usable equity you have in your home or evaluate how much money you can borrow against the homes future value given the potential renovations.

Refining the Budget for your Home Renovations 
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Once you have the ball park figure, you have got your funding ready to go or you are aware of what you can borrow, it is then up to you to decide what your budget will be.
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If you want a more higher end renovation you need to add some more wriggle room to the builders rough ball park figure if you are happy with making some sacrifices and reducing the budget to get lower end specifications you may be able to reduce the amount suggested by your builder. However be mindful of the end value from the real estate agent and if over capitalising is an issue you may need to go back to your builder and ask for a different renovation scenario, i.e. taking out one of the bathrooms or reducing the size of the extension etc.  If you are lucky enough not to be near the over capitalising mark you could consider a more higher end renovation or adding more space if you like!
 
Overcapitalising is an issue when you plan to sell your home in the short to medium term.  If it is a longer-term investment or your forever home, you may be happy to not consider this as an issue and just build your dream home! 

How to Stick to You Renovation Budget
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Now that you have decided on your budget you need to ensure that you stick to it!
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The best way to stick to your budget is to get your builder on side as early as possible and disclose to the builder what that budget is, you can leave out 10% or so as a buffer if you are worried and in any case you should always have a 10% buffer for any renovation job as you never know what surprises may come up throughout that build.
Once you have disclosed your budget to your builder, that builder can then note this and be mindful of this throughout the whole design and quoting processes.

At Distinct Renovations we are advocates of making sure you work with your builder and designer at that same time, this is basically the sole reason for that!

Having your builder hold your hand throughout the design process will enable you to stick to your budget. A designer can design amazing things but at the end of the day the builder will be the one billing you for that build. The builder can step in at each design stage and suggest ways to help you reduce cost. Thus, stick to your budget!
Designing first and then speaking to a builder about budget is one of the main reasons 70% of drafted constructed plans never go forward.

So be wise and get your builder on side straight out of the gate.
 

Another way to help sticking to your home renovation budget is to write out a list of “Nice to haves” and “Must haves”. These will include items that you would like to have as part of your home renovation and items that MUST have as part of your home renovations.

As an example, a list may look like this for your kitchen/living and master suite home extension:

Must Haves:

• Scullery
• Free standing bath
• Skylight windows
• Double basin vanity
• Stone Bench tops

Nice to Have

• Bi fold Doors
• Polished concrete floors
• Stone Splash back
• Double Shower
• Waterfall edges to island bench

By having this list, when you are working on price with the builder you can explain to him/her your must haves and he/she will explain to you how you can have those items by possibly taking out other elements of your home renovations to get the price right where you need it.  That way you stick to your budget and you get the things you really want in your home renovations.

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Conclusion

Setting a budget and sticking to a home renovation budget can be quite tricky but is super important.  However if you follow the simple steps of refining your budget by talking to local real estate agents and a builder and then refining the final budget figure yourself, you will find that setting the budget is actually not so hard.

Sticking to a home renovation budget can be hard, as renovating can get very emotional.
It is your home after all!

However, getting your builder on side early throughout the design process and making sure you and your builder are both aware of your must haves and nice to haves  for your renovation will ensure you can come to a final price that is comfortable for all involved.
 
At Distinct Renovations we practice what we preach and we are happy to provide initial rough ballpark figures over the phone to ensure you know what you may be in for when it comes to pricing your home renovations.
 
If you are planning a renovation and you live around Perth Western Australia do not hesitate to contact Distinct Renovations for an obligation free assessment of your home renovations.