Calculating a Renovation Budget

Calculating a Renovation Budget

The time has come: that dingy vanity in the bathroom, the rusty shower head that is all but a relic of a bygone bathing era, and the salmon pink bathroom tiles that are teetering on the edge of uncouth style – they all need to get the kick! Time for a renovation.

You then start to flick through Pinterest for inspo on the latest bathroom trends – why not have an oversized polished concrete bathtub in your 1 bedroom apartment? Go for it! And what about the solid marble basin that’ll set you back a trip to Europe? Tick.

Hold up! These treats add up and the bank account probably won’t allow, especially if it’s your first renovation. The question of how to budget effectively for the renovation you need is not a head-throbbingly difficult task, but at the same, budgeting shouldn’t be a second thought. It’s easy enough to know what you’d like in a room or a home entirely, but knowing what you should spend and sticking to it – that’s the tricky part.

To start things off, how much do you have to spend? As much as checking your savings account hurts, you’ll need to weigh up whether you want to spend what you’ve built up over time or if you’re prepared to borrow additional amounts to fund the renovation of your dreams. You may want to look into options such as securing a line of credit from a range of banking providers, or even applying for a home equity loan or construction loan based on the current or updated value of your dwelling. Speaking to a financial advisor about what would work best given your personal finance situation is a great idea.

Next on the hit list of questions is, why am I renovating? Understanding the purpose behind your decision to tear up tiles, throw a sledgehammer through a wall or rip up mysteriously-stained carpet will be part of a bigger lifestyle vision for you, your family or your friends. Identifying what you want to achieve out of a potential renovation will direct your spending appropriately. Updating a room for the purpose of selling a home generally doesn’t need as big a price tag as a renovation that makes your home more liveable for everyone in it. Consulting your local real estate agent on the value a potential renovation will add to your final selling price in the current market can often reveal that buyers won’t account for the full cost of the work you’ve done into their buying price. In other words, giving an older home a simple, clean renovation in key areas such as the kitchen and bathroom will give you better bang for buck once the auctioneer’s hammer falls.

There are typically two broad churches of home renovation: a cosmetic update and a structural renovation. Cosmetic updates are just that – they include replacing flooring, changing the carpet, repainting, as well as changing fixtures and fittings. A structural renovation is more involved and might have your builders knocking down walls, erecting new ones, and extending the physical dwelling. Costs, of course, differ greatly for these two types of renovation and are harder to predict the more involved and structural they become.

Ok, so you’ve knuckled down the purpose of your renovation and how much money you have to play around with. What next?

To help frame your budgeting, you’ll next need to consider the following:

  • The floor size of the space(s) you’re planning to renovate.
  • The age of the property, its fixtures and fittings, which will influence building costs.

When mapping out your budget plans, you’ll need to put on your project management hat to effectively track your spending before, during and after the job is done. A renovation budget set up in a spreadsheet is a good way to go; listing out all categories of expenses including cabinets, appliances, furniture, electrical, plumbing and many more. Things to track during the course of your renovation could include:

  • Estimated costs of labour.
  • Estimated costs of materials.
  • Actual costs.
  • Currently paid amount.
  • Remaining amounts due.

Taking it one step further, it’s advisable to add a buffer to your estimated costs. Industry experts will recommend a 10-20% buffer on the costs predicted, though if you are a first-timer you may look at 30% to ensure there is a sufficient contingency in place for undisciplined or unplanned spending. Older homes attracting careful or sensitive repairs have a higher chance of unexpected costs – first home buyers conducting a renovation on such a property are advised to speak to a builder and obtain a building report before beginning any attempt at estimating costs.

Which builder do I deal with? The golden rule of threes still applies – get three quotes before settling on the final builder for your renovation (I’m assuming you’re not ready to put on a safety hat yourself and get dirty just yet…). You might be surprised by how much each quote differs across multiple contractors. In this day and age, there are a range of online marketplaces and community-powered recommendation platforms for labourers and builders in your area for you to review. Make the most of these as other homeowners who have tackled renovations previously are in the best position to give advice on who to use, and indeed who to steer clear of.

Reaching out to your own network of fellow renovators (a.k.a. your friends) is a worthy exercise in understanding the process they undertook to deliver a wow-ing finish to their home. They’ll have already gone through the pain of devising a budget, researching styles, speaking to suppliers, deciding on builders and cleaning up afterwards. Why not speak to them and ask for their advice? Best of all, it’s free 🙂

With Australians being unafraid of a home reno, you might be interested in knowing how we as a nation of house-flippers compare to the rest of the world. The 2017 Houzz and Home Renovation Trends Study highlights that recently crowned Australian home-owners are nearly twice as likely to conduct a renovation than their international counterparts at 15% and 8% respectively. What areas of the home are we renovating the most? Kitchen projects take the number one spot for Australians getting ready to add value and make their homes more enjoyable, followed by living rooms and thirdly, bathrooms.

Stepping outside, the most popular exterior feature updates in the Houzz 2017 Report were, in order, exterior paint jobs; gutters; and verandahs/decks.

Take this as an insider’s heads up on what buyers are looking to see as the most important areas of a home to be liveable and stylish for them to whip out their chequebook.

In a further nod to the importance of your network of friends and renovation specialists to guide your reno ahead, Houzz in its 2017 report indicated that whilst 22% of home renovation professionals made labour hiring decisions based on price, over 69% of us turned to the power of recommendations when getting picky between the right plumber or electrician. First home buyers are the most likely to discriminate between sparkies and their pals on cost of a job, not for their quality of service. When considering a renovation, whether you are a veteran of the real estate world or stepping foot into this wild arena for the first time, you want the job to last. Deciding solely on cost won’t yield the best result, yet budgets are simultaneously crucial to maintaining a level-head during this process.

What are others spending typically? Acknowledging that whilst we all aren’t doing the same renovation, it is handy nevertheless to have an idea of what others are spending on average in order to help guide your budgeting. Take a look at the below spending habits of our fellow renovators in 2016.

Average spend on interior room renovations and size of renovated rooms in 2015-16 (2017 Houzz and Home Renovation Trends Study).

Area

Smaller Room Average Spend ($)

Larger Room Average Spend ($)

Kitchen

14,600

22,600

Bathroom

10,300

13,300

Living room

3,800

6,500

For property owners looking to renovate to ready their home for renting out a short stay guest, considerations towards energy efficiency are a smart move. Welcoming your next Airbnb guest shouldn’t cause stress over how much power and water will stack up during their stay – leaving you to foot the bill. That’s where energy efficiency comes into play, and though the use of energy efficient materials and designs may attract a heftier initial cost, the long-term savings are worth it. Efficiencies can be achieved a number of ways: in spatial design to reduce heating and cooling requirements; in wall materials used to insulate your home; and in the appliances bought for your new space including washing machines, dishwashers, and fridges.

There you have it – everything you need to know before embarking on the most stress-free renovation of your life… not quite. Whilst this article offers some handy pointers in the way of renovation budgeting, there really isn’t enough advice you can look at before making a decision. For those of you yet to count a home renovation under your belt, fear not. Check in with your mates or parents for ideas on how to tackle that ugly bathroom, and enjoy the self-learning ahead in your own stead. And finally, good luck!

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