How to Plan a home renovation project? Congrats! Having the opportunity to remodel your home so it’s more beautiful and functional for your needs is always a fortunate thing.
One of the first steps to take for any successful remodel is the project budget. Deciding how much to spend and how to fund it is part of the process, but project management and design also play key roles.
I’ll cover this and more in the post, so read on to learn practical ideas to successfully budget and manage your home remodeling project.
Budget
A budget is a must if you want to keep your remodel/design project under control. Decide up front what you can spend on your project. Prioritize your expenditures into “must haves,” “nice to haves,” and “not a priority.” Then pencil out how much all of those items will cost start to finish before the contractor shows up with a sledgehammer.
I start off by creating a spreadsheet where I input line items for each and every element of a project. Any fixed costs go in like materials along with cost estimates (labor and some materials) that are replaced by hard numbers once I have them.
Once you’ve set your budget, stick to it. Don’t be tempted to deviate from your budget mid-project with “Oh it sure would be nice if (insert expensive upgrade). This is how budgets get blown. Unless you can really and truly afford it, don’t do it. (And re-read the bullet point above for a compelling reason you don’t want to do this.)
Remodel return on investment (ROI)
Formulating an ROI (return on investment) for your project is important. Even if you are fortunate enough to not be super budget-conscious, you should always estimate the value you expect to get out of a project and how it will affect the overall value of your home.
Even if you think “I’ll never sell this home,” from a financial perspective, you should always have a Plan B exit strategy just in case Plan A falls apart. (And many I know would argue you should also have a Plan C.)
You never know what life may throw at you, (Hello 2020!) so you need to have a financially sound exit strategy whenever possible. Even if you think you’re in your “forever home” and don’t consider it to be an investment per se.
How will you pay for your remodel/design project?
If you’re embarking on a large remodel, how do you plan to fund it? There are many different strategies including cash, home equity associated loans or lines of credit, refinancing, or taking out a personal loan. Cash on hand or home equity loans/lines of credit can be among the most fiscally sound strategies, depending on your situation.
Cash: Cash carries low risk so long as you have sufficient funds to see your project through. Ideally, you will be doing a carefully planned project that adds greater value to your home than cash invested.
Home equity loans & HELOCs:
Home equity loans and home equity lines of credit, aka HELOCs, are two different products – one is a loan and one is a line of credit, both backed by home equity, but both can have the advantage of their interest being tax deductible within certain parameters.
Even if you have cash in hand, borrowing money at a low interest rate may be smarter than using cash if you instead took that cash and invested it where it generates a higher rate of return over time than the loan interest rate, such as a down payment for a cash-flowing rental property. If you instead spend your 50k cash in Vegas and Nordstroms, wellll, then use the cash for your remodel or design project.
- If you’re getting a loan, factor in costs like interest rate, loan origination fees and the loan duration. Also, find out when you’ll get the funding from your loan. You’ll need to make deposits with your contractors, and you might need to pay for some materials up front.
Controlling remodel costs: Finding quality work for a reasonable price
So you’ve figured out the financing end of the project and now it’s time to find the people with the skills to make it happen. Where to look?
- Brainstorm a list of friends who have had construction work done and ask them for referrals.
- Trade referrals – if a plumber comes over to fix your sink, ask who they recommend for carpentry, electric, or tiling etc. Tradespeople are a treasure-trove of hands-on experience and information with other tradespeople. Even if they’re not fixing your sink, call and ask.
- Community boards like Next Door can be a great source for finding quality construction related work. When you see a post asking for a tile layer and 6 people are chiming in on how they love the tile work done by a particular person or company, this is likely a go. Reach out to those people who made recommendations and ask them questions. Most people are happy to let you know about their experiences, good or bad.
- When considering someone for work, ask for references. Get on the phone and ask questions.
Get 3 bids
for any work that needs to be done. You’d be surprised at the variation in cost sometimes, but of course, this also needs to be closely compared to your assessment of the quality of the work and project management skills for the job at hand.
- All 3 are important – a great price isn’t a great price if the work is shoddy or the contractor only shows up every 3 days or so while he’s fitting it into other jobs, dragging out your project timeline.
Working with budget constraints
OK back to design budgeting. Do not feel daunted by the idea of making and sticking to a budget. A budget keeps you and your project in check. You don’t want to plan a grandiose redesign in your head, only to realize later that it just isn’t realistic budget-wise and have your dreams dashed and have to go back to the drawing board, or worse, overspend.
Contrary to what many think, I actually believe having budgetary constraints can make a project better. It makes your design process more efficient because you make decisions early on knowing how much you have to spend. This keeps your decisions realistic and you don’t waste time exploring “pie in the sky” options. (And get your heart set on them only to be disappointed later.)
What a budget does do is force you to get creative and make lemonade out of what you might initially perceive as lemons.
Renovation Budgeting Conclusion
So there you have it – tips and guidelines on how to create a budget for your home design or construction project and scenarios for funding a remodel. When the dust settles, I hope you tackle your home project head on – your beautiful results will make it worth all the work! Even if you decide to go with pre-fabbed cabinets rather than custom, the overall effect of your white cabinet kitchen is very similar, and you’ve maintained your budget.
Plus, with the replacement of some cabinets with the vintage china hutch piece, IMHO – this will create a more interesting and unique kitchen anyway (read – it won’t look cookie-cutter) for less money. Win-Win!
