Plan Out Your Home Improvement Budget
A home improvement project takes on many shapes and sizes. Whether it’s a mechanical update or a new addition, major home renovations require a sensible and flexible budget. The key to a home renovation budget is to do the research first, create a plan, and secure the funds.
Major remodels are not cheap. In general, major upgrades like a bathroom or family room can be as much as $100-200 per square foot. To get an idea of how much you should budget for a remodel, consider the overall value of your home. As a rule of thumb, don’t spend more than 10 to 15 percent of the value of your home on a single room. If you spend more, the value of the renovation will not be proportionate to add value to your home.
As an example, if your home is worth $200,000, the maximum you should spend on a bathroom or kitchen is $30,000. If your house is worth more, the cost of a renovation could be higher.
Once you select a project, the question is can you afford it. If you plan to borrow from a lender, start with an assessment on how much money you need. For most homeowners, a home equity loan or home equity line of credit is a convenient way to secure the funds needed for the project. As a precaution, set aside 10 to 20 percent of available funds for unexpected expenses. This step is important because it is inevitable that something will come up that was not originally planned. The funds will assist to finish the project no matter what happens.
Create a home improvement budget in three easy steps:
Step 1 – Prioritize needs. Know exactly what you want. Create a list of everything you want in the project. Then separate the list into “wants” versus. “needs”. Wants are the things you don’t need but would like to have like a pool or a paved driveway. Needs are things you must have like a roof or doors. Review your project goal and determine which “wants” you can afford and which “needs” take precedence.
Step 2 – Create the plan with cost estimates. Before you call a contractor, research costs for engineers, architects, plumbers or contractors with online resources like Home Advisor. With a strong plan, you can communicate with contractors for bids on the work. Use a spreadsheet to track project estimates versus actual costs for labor and materials. Include fixtures, finishes, and appliances you want replaced. Be sure to include tax and shipping into your estimates.
Step 3 – Request bids from contractors. Labor usually accounts for 20 to 35 percent of the budget. Look for local companies with good reviews. Get quotes from at least three contractors and compare costs. Be clear with contractors about your remodel budget. If they know you have a tight budget, they are more likely to discuss and approve any additional expenses with you first. If one contractor’s bid is way below the others, toss it out. As appealing as it may be, cheap labor opens the door for errors, unexpected costs, and potential issues with workmanship. Make sure they are a licensed contractor. Licensed contractors go through proper training and legal processes to ensure quality work.
If the final estimates of the project exceed your budget, enlist your contractor for suggestions to cut costs and realign your goal. For your next remodeling project, visit Members 1st of NJ to apply for a Home Equity Loan.