Planning and Budgeting for a Home Renovation Project
Ready for a new kitchen? Eager to redo the bathroom? The easy part is knowing what you want to remodel and justifying the project in your mind. Do you know how to budget and plan for a home renovation? I hope this article will help make that road a bit smoother.
Figuring out how to renovate without breaking the bank can be tricky. How much should you invest? The general rule of thumb is to spend no more on each room than the value of that room as a percentage of your overall house value (check with your realtor or Altadena Realty Group for a current value estimate for your home).
Here’s how the percentages break down for the value of each room:
• Kitchen: 10% to 15%
• Master Bathroom Suite: 10%
• Powder Room/Bathroom: 5%
• Finished Attic or Basement: 10% to 15%
• Other Rooms: 1% to 3%
• Patio, Deck, Paths and Plantings: 2% to 5%
Planning your renovation
If you think you know what you want done, there are plenty of contractors that will give you an estimate based on your romantic narrative and their perception of your verbal blueprint. Work completed under these circumstances is almost guaranteed to take longer, cost more and include lots of headaches.
For a major renovation that includes: expanding the footprint of the house, moving, removing or adding walls along with the associated plumbing, and/or electrical and roof modifications you should use a licensed designer or architect. This will give you detailed construction drawings from which contractors can provide written cost estimates and gives you a bench mark to compare actual work completed. For smaller projects - if you feel comfortable doing so - you can generate a “scope of work” on your own.
Whichever approach you take, the more detail and specifics included, the better. You must be very specific about what you want done, and spell it out in the contract, right down to the materials you’d like used.
Getting quotes from contractors
If you have well prepared plans and use reputable contractors, you should expect estimates that are reasonable in price and time to complete. I recommend obtaining a minimum of 3 or 4 proposals and suggest that you conduct a pre-bid conference. The pre-bid conference includes all interested contractors, the designer/architect and the owner (s). The primary purpose is to review the scope of work, answer all questions, and make any corrections/clarifications to the plans, thus ensuring you are comparing apples to apples when you receive your proposals.
Upon receipt of proposals, I recommend that you meet and review the proposals with your designer/architect. Generally, I remove any very high and low proposals (+/- 20% or more) from the medium proposal. You may consider creating a spreadsheet to further aid in your analysis. In most cases, you will easily narrow it down to one or two choices in which you can then negotiate final details and terms until you are completely satisfied with the agreement.
Stick to the plan
As the renovation moves along, you might be tempted to add on another “small’ project, make a “minor” change incorporating the newest design trend. For ALL changes, insist on a written change order that requires your signature as authorization to proceed. Be mindful that even minor changes can be costly. Strive to stick to the original agreement, if possible.
Account for hidden costs
Your home may look perfect on the outside, but there could be issues lurking beneath the surface. In fact, hidden imperfections are one of the reasons renovation projects end up costing more than you anticipated.
Rather than scramble to come up with extra money after the fact, give yourself a cushion upfront. Budget a minimum of 10% to 20% (or more) of your contracted budget for unforeseen expenses, as they can and do occur. In fact, it’s rare that any renovation project is completed without encountering unexpected issues and associated costs.
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