Home improvement can be tricky. The idea of getting that new kitchen or redoing your bathroom can be all too exciting you could forget about the most essential part of any home renovation project: budget.
Whether you're making room for a new family member, a home office, or just giving your place a facelift to increase its value - make sure you're equipped with tips to renovate without breaking the bank.
Below are 5 key steps to keeping your home renovation project within budget according to Zillow and houselogic.com:
1. Project the costs
Begin by getting an approximate value of your home. Once you have done that, just follow the general rule of thumb and not spend more than the room's percentage value in relation to the value of the entire house.
For instance, if the kitchen accounts for 10 to 15 percent of the property value, make sure you do not spend more than that on your renovation. In figures, a house that values $200,000 should stick to a $30,000 budget or less for kitchen renovations to stay within the value limit.
Nice to know: An analysis from best-selling book ZillowTalk: The New Rules for Real Estate says that kitchen renovations generate the lowest return of investment. Your house value only increases by half than what you actually spent on the renovation. So where can you get the highest return of investment? You would want to do a mid-range bathroom remodel.
2. Borrowing money? Know the different loan options and which works best for you
Unless you're paying cash for your home renovation, then you might want to consider loan options. What do you need to know?
There are three basic types:
- Cash-out refinance
- Home equity loan
- Home equity line of credit (HELOC)
The home equity loan is perfect for one-time projects, while HELOC works best if you have ongoing renovation expenses that require you to access money from time to time.
3. Have contractors quote your project
Knowing exactly what you want, the specific materials to be used, and any special considerations are essential to getting the most accurate if not the exact quote. This way, contractors can provide prices that are in line with your needs.
To find the right contractor, seek recommendations for at least three contractors from friends, neighbors, or your trusted tradesmen. Give them your project description, product lists, and have them provide you an itemized bid. Also, you may check out their recent work, references, or peer reviews on online sites for contractors.
4. Avoid plan changes
It is easy to get tempted by a recent new design trend and consider injecting one to the original plan. But any change in plan, no matter how small, could change the order and affect your budget. Work on sticking to the original plan, if possible.
5. Anticipate hidden costs
Account a 20 percent cushion for nasty surprises. Every project deals with unforeseen problems and changes; rarely does a project finish smoothly. If the total after adding the contingency fund is still within your ability to pay, get the project started. If not, you may want to reconsider your plans.
