There are many reasons to renovate your home. It may be missing features you want, like a nicer kitchen or a more luxurious master bathroom. Or perhaps you need more space and would like to convert your basement into an extra guest room or home office. Particularly when housing prices or interest rates are high or rising, home renovation can be more cost-effective than selling (paying commissions and closing costs) or buying new (paying more closing costs and resetting your mortgage to a higher rate).
Whatever your reasoning, a well-planned renovation can increase the comfort and enjoyment — and the value — of your home if you set a reasonable budget one can afford and stick to it. If you don’t, you could end up in over your head with a money pit on your hands. Here are several considerations to keep in mind when planning your project.
Envision Your New Space
Start with what you want to accomplish and write out a plan for each room of the house (including the overall footprint for additions and any exterior spaces like garages, outbuildings, decks, etc.). Take your time. Sit in each area you want to remodel and visualize what you want it to look like, plus any additional features (more electrical outlets in the office or a wet bar in the family room, for example). With an outline of what you want to do, you can use an online calculator to get a first impression of your likely costs. The more you have, the better your budget will be and the more accurate the quote from your contractor.
Bear in Mind Frequently Overlooked Items
Some things that may not be included in your estimate are architect’s fees, engineering fees (if needed), building permit costs, hauling services for demolished materials and site prep for outdoor work. There’s also the potential cost of regulatory compliance in your neighborhood — for example, you may need to remove a tree to accommodate an additional room, requiring a separate permit fee.
Other things to consider include:
- Your property taxes may increase.
- The cost of your home insurance may go up.
- You may have higher water and sewage costs if your usage goes up (e.g., adding a bath/Jacuzzi/pool.
- You may have to finance the remodel, which would involve interest charges and other potential changes to the terms of your loan.
- You may need new furnishings for the remodeled areas.
With your detailed plan, find a contractor and get a more accurate quote. And always get several estimates before you make a final decision about who to go with. Add in necessary items (permits, architect) not included in the quote. This is the baseline for your budget.
Allow for Contingencies
You now have a plan and a budget, but almost no remodel goes exactly to plan — especially if you’re renovating an older home. You may also find you need additional work when you begin demolition and learn what’s really behind those walls. An undetected waterpipe leak could have caused mold to grow, or existing wiring may have deteriorated.
You may also realize after you start the project that you want to make additional alterations or add more features. Anticipate supply-chain problems with materials and furnishings, especially appliances. Recently, homeowners have been waiting six months for refrigerators and other major appliances. You may also encounter delays in getting some kinds of building materials, including drywall, tile and roof shingles.
To help cover surprises and additions, plan an additional 20% over your baseline budget.
Sometimes, spending money up front can give your wallet a break in the end. Hiring an experienced interior designer can often help you come up with ideas that will save you money over the course of time. For example, he or she may show you how the proper furnishings can enable a room to serve double duty instead of adding more square footage. And if you pay your designer a flat fee, they’re not incentivized to drive up the cost of the project the way a builder might who charges a markup on materials.
If you have a solid plan and a budget, you can make it happen. But there’s one other professional you should consider engaging. As with any large purchase, consider discussing your plans with a financial professional — before you start tearing down walls and ripping up the floors.