Whether you’re renovating your own home or planning a flip investment, going over budget on renovations is a real danger. The consequences of doing so can leave you living in a construction site until you can afford to finish the job – or trying to sell a home that’s poorly finished.
However, with careful planning and attention to detail, the chances of going over budget can be reduced. Check out our top eight ways to prevent your renovations from becoming a nightmare:
1. Consult the Pros
No matter how good you are at DIY, it’s always worth getting a second or third opinion when it comes to renovations. For flippers, finding a good team that knows the local area is essential. Also, consult with contractors, realtors and designers to be sure you’re on the right track so you don’t price your home out of the local market or offer features that people don’t want.
When working on your own home, be sure to consider a contractor carefully and give yourself options. Interview at least three, and don’t be tempted to go for the lowest quote. Instead, try to find someone you feel comfortable working with. A great contractor can help provide options when it comes to the quality of materials and finishing touches, as well as give advice on more major renovations.
2. Break Down Your Budget Fully
The cost of renovations includes more than just materials and contractor fees. To create a realistic budget, you need to consider each and every element. Think about the costs for any necessary permits, each and every piece of furniture, decor, and appliances, as well as things like cleaning costs and shipping fees.
3. Leave Leeway
When you have your budget worked out, add an extra 10-15% to it. This will help cover unexpected costs that can arise from delays and potential problems discovered during renovations – such as asbestos, shoddy wiring or plumbing problems. If no such problems arise, you can either save it or use it to make an upgrade.
4. Don’t Overdo It
Another key point for flippers – but also useful for owner-occupants – is to make sure not to overdo your renovations! Consult with local realtors to find out what is desirable in your neighborhood, who the market consists of, what they’re willing to pay and what they’re looking for. There’s no point in fitting a gourmet kitchen in a mid-range neighborhood if it will make your home too expensive to sell. It’s far too easy to go all out on a kitchen or bathroom, only to find that you have very little cash left for the rest of the home.
5. Don’t Ignore Structural & Mechanical Problems
Renovations need to be more than skin deep. While it can be tempting to skim over larger, more expensive problems in the short term, they will nearly always come back to haunt you. Your home might look amazing, but if a home inspector reveals major underlying structural or mechanical issues that you neglected to address, it will be extremely difficult to sell. Even if you’re not planning to sell, these issues will only get worse. It’s far better to fix the bones of the building before making it look pretty; if you can’t afford to do that, then perhaps it’s worth looking at another home.
6. Make a Solid Plan & Stick to It
Careful planning is the best way to avoid expensive problems further down the line. A good contractor will take the time to sit down with you and discuss the entire project, creating a step-by-step plan. During the planning stage, it’s a good idea to make all the decisions regarding materials and finishes you want; this will prevent the need to make last-minute decisions when you’re stressed and rushed for time. In this way, you can anticipate each potential problem before it becomes a real issue.
Once the plan is complete, stick to it! It’s easy to get sidetracked and think about doing other little jobs while the home is being worked on, but these things all add up and can soon blow your budget.
7. Obtain Decent Financing
With a good plan in place and a realistic budget, you’ll probably want to think about how you’ll finance your renovations. For flippers, it’s worth looking into hard money loans, while current homeowners have numerous options, including a home renovation loan, a cash-out refinance, a home equity loan, or a home equity line of credit (HELOC). Do your research, and discuss each option with a lender to see which will work best for you.
8. Don’t Rush
The most expensive mistakes normally arise from rushing into renovations or making last-minute decisions. Take your time and consider every possibility before getting fixated on a particular idea. A good contractor will help you see your options – and plan in advance.