Got a question from a listener recently about how to budget for a remodel project. Ashley and I both answer it briefly in an upcoming Q&A episode of the
Your Home Story podcast, but I realized I have a lot more to add and wanted to go in-depth here on the blog, with a few examples from the
Stanley 90's Reno and honestly, several other houses we didn't buy.
This is beefy post! Lots of elements to the budget question and I share some real talk on process and dollars.
The question is:
Q: I’m wondering about how you go about making your budget for a remodel. I know there are a lot of ‘what ifs’ in this question... but for example benefit vs. value/equity gained, how you’ve chosen to allocate money, pitfalls and surprise expenses, and how you come up with a realistic budget in advance?
I think this is a great question. It's really more like 4-5 questions...
- How to make a budget
- Cost/benefit analysis for how much to spend on a home project so you don't over-improve a home and can profit if/when you sell it
- What to spend the most money on
- How to budget for surprise expenses/how to set a realistic budget
Ashley's perspective on this is different than mine, since she's lived in her home for 5 years and is slowly renovating. Her home is 3,800 SF and in a neighborhood of other large, nice homes, so potentially over-improving is less of an issue for her than it was for us in
our last home, which was a bit more than a standard starter home but still nothing big or fancy. Ashley's projects tend to have a bigger budget, and be done over more time, than ours at the
Stanley 90's Reno which we
accidentally flipped.
Okay, so for my answer to this question, broken down:
- Making a budget. Yes! So important. I love spreadsheets. I'll share more in my tips below because I've done it different ways... so ready on for 3 ways we budget for reno projects.
- Cost/benefit: I'm not sure what the listener's goals are, but in our last house and in our next house, we want to do projects and make the home worth more than it was when we bought it. We don't know where we want to live for the next 10-15 years, so we're looking for a 2-5 year house we can be secure in. So we did a few things when shopping for our last home... we found it worked well to set sights a little higher and be willing to spend a little more than we wanted, but still get a good deal. We found a 4-bedroom slightly above our price range and offered $10k less, and it worked. The house appraised for $20k more than we paid right away. Also, a very similar home across the street that was in cleaner, but not fancier, condition, had just sold for $30k more than we paid. Look at other recent home sales in your area. If you don't think you could get back enough of your $40k kitchen reno, you might need to scale it back.
- What to spend on: You hear different tips about when to splurge and when to save. I've heard splurge on cabinet hardware, for example, but in our last home I was dirt-cheap with that in the kitchen and it still looked great and was appropriate for the basic home we were in. I say listen to your house on this one and don't put a fancy marble floor and designer freestanding bathtub in a small starter home in a plain neighborhood, for example. As for what makes the most difference, I think it's paint (neutral colors), flooring (I like a consistent look and only 1-2 main types of flooring in a space, but even some of the cheaper laminates look great... the big expense is the installation), and light fixtures (but you can definitely do well with $50 ones from Amazon!!). So... for me, always on a tight budget, I'd say spend the most money on the BIG things that make a difference, but you can still be budget-conscious within those.
- Surprise expenses. This is a tough one. If you're using the spreadsheet method (see more below), I recommend adding 8-15% contingency. Plan to set that extra aside and don't spend it unless you have to! And if you don't need it, well, maybe treat yourself to something nice at the end of the project, or put it toward another one.
Now, I do want to go more into the first part of the question... how we budget!!
3 ways we budget for reno projects
I'm a very budget-conscious person in everything I do, so reigning in spending comes naturally to me--but I also love designing and creating new spaces in my homes so definitely spend money on items that are important to me. We did very well financially on
our last home, due to factors including the market but also my anxiety about spending too much money. I don't recommend anxiety as a way to keep your projects within budget!
Instead, here are three ways we kept things in check and still got the results we wanted.
1. Budget for each item individually.
I don't often have a total budget in mind for a room like a
bathroom makeover, but I think a lot about the biggest ticket item. For our
master bathroom, for example, I realized I would need to spend about $1,000 for the vanity pretty much bare minimum. I thought about a few designs that might get a little lower than that, but ended up being able to get exactly what we wanted with a coupon for a little extra discount. (See total budget for this room
here.)
