How to work out your renovation budget

June 04, 2016

You’ve decided to undertake some renovations for your home and the sky’s the limit! Actually, that’s not true. Your budget is the limit.

It is very important to work out up front what your budget is going to be. No one wants to live in a half finished house because they ran out of money half way through the renovations. Having a budget and a plan in place will stop that from happening. Here are some tips on how to work out that budget:

  1. Separate the must-haves from the nice-to-haves

Every renovation could probably take on a life of it’s own if allowed. What you really want to do though is work out what is an absolute must in comparison to what is a nice-to-have. Try writing out a wish list of every single thing you would want in a home. Go crazy, list it all. And then when you’re done go through with a highlighter and mark the ones that you absolutely must have. For example, you may need a minimum of four bedrooms, but a separate study isn’t necessary. It will be hard to cross out some of the items on the wish list, but you do need to prioritise what’s important to you.

  1. Use an online calculator

If you’ve never done a renovation before, you might have zero idea of what budget you should be aiming for. And that’s fine. But before you go down the track of having plans drawn up and getting your hopes high, it’s a good idea to plug some plans into an online budget calculator to get just a ballpark of what kind of money you are talking about. The best part about these kinds of calculators is you can just add or subtract rooms and bathrooms and get an instant revised cost. It takes a lot less time and hassle than constantly revising plans and sending them through to a builder for quotes. Getting an indication of costs this way will also allow you to really decide for sure what should be on the ‘must have’ list compared to the ‘nice-to-have’ as you can see what difference it makes to the bottom line.

  1. Don’t forget the extras

Sometimes renovations involve more than just the house. You need to factor in external costs as well, such as skip bin hire, rent if you need to move out and any landscaping costs if you are demolishing or excavating. These are the costs that can easily be forgotten but quickly add up.

  1. Get the plans drawn up

Now that you know what you’d like included in your renovations, it is time to have some plans drawn up. You can either let the draftsperson know a rough idea of budget, or if you still haven’t decided on that you could give them your wish list for the house and see what they come up with. You can then send the plans out for quotes. Remember to always get at least three quotes as the costs you will get back will vary.

  1. Talk to a real estate agent

Once you have your plans drawn up and the quotes have come in, ask your local real estate agent over for a chat. Most real estate agents will be happy to take a look at your house and at your plans and let you know if what you are planning on investing is going to overcapitalise. If your plans are worth $300k but the estate agent thinks it will only add $100k value to your home, then that’s something you need to decide is worth doing or not.

  1. Add a ‘buffer’ to the final price

Once you have had your plans quoted and you are ready to settle on a final budget, add another 10 – 20% to it. Sounds crazy, but overspends are completely normal as there will always be unexpected costs once building is underway. If you have the buffer in your budget you won’t have to scratch around to find extra cash halfway through your renos. And if you don’t end up using all of the buffer, then that’s a great bonus for you!

Sticking to budget

No matter how good you are at working out your renovation budget, it can be hard to stick to it once you get started. To make sure you don’t go over the budget, create a budget spreadsheet. Break the entire renovation down into chunks, such as: kitchen, painting, flooring etc. When you are choosing the materials for each section add the final costs into the spreadsheet so you can keep an eye on whether or not you are going over – and if so, you will see at a glance in which area you are over spending in.

Another tip is to give yourself plenty of time to go around choosing all of the materials and appliances. That way you have time to cost compare between companies and also wait for sales. Some places may also have specials at different stages of the year that are worth waiting for.