Creating a budget for a renovation project can be a complex task, but it is essential to ensure that your project is completed on time and within your financial means. We all hear of the horror stories of people’s experiences about overspends, high variations, cost blowouts, time delays and more. Building is not a perfect science with many moving parts to be considered along the way, therefore much time and considering should be invested in the planning stage and particularly with planning your project budget.
The following are some tips to help you create a budget for your renovation project and for when you are choosing the right builder to work with.
Determine your renovation goals: Before you can create a budget, you need to have a clear idea of what you want to accomplish with your renovation. This may mean clarifying what are critical must have inclusions and what may remain on the wish list if it doesn’t fit within the budget or scope. By getting clear on the most important non-negotiables you have, you will identify the scope of the project and determine the potential costs associated with it.
It is often a good idea to confirm your financial position at this early stage also. Whether it be savings or a bank loan, understanding your comfort zone, available funds or potential ceiling limit will assist with the next step
Research and select a builder: With so much information available today, it can be easy to do your research about project budgets, common challenges and even to find the right professionals. BE aware that often there is very contradicting information also and that the some information online may be from other states or outdated, etc.
Finding and selecting a qualified, licensed and experienced builder is key to your projects success. Word of mouth referrals are still the strongest way to be introduced to a potential Builder. Other strong ways to find your team is by seeing whom is working (a lot you’re your area, whom is being recommended on social media, etc. The one important thing to remember is that not all Builders were created Equal. If you are recommended to a great Building team, it is strongly recommended that you still check and confirm that they also specialize in doing the type of project you are planning. Example- A well-known new home builder, may not be geared up for success doing renovations, etc.Always speak to a few options to understand whom you are comfortable with, request references and check their portfolio, read reviews and ask for cost estimates.
Create a detailed list of materials and labor costs: This detailed list should be very clear as to what is within the scope of the project and what is excluded. Once you have selected a builder and identified the project objectives, you can work with the builder to create a detailed list of all the materials and labor costs associated with your project. This may also include making selections of all fixtures, fittings and finishes, etc to allow pricing to become fixed and transparent. This will help you understand where your money is going and help you identify any potential cost savings.Don’t be scared to ask your Builder to offer you alternative material options or suppliers to help with savings.
Contingency Costs: The question of a Contingency figure get asked a lot and depending on the project type may or may not be so relevant. For smaller projects such as Bathrooms, Kitchens, internal renovations; if the correct focus has been giving on design, sectional and inclusion these should not require too much (or at all) of thought. However as the project size grows, so does the need to consider a Contingency. For example if the project is an extension of an old, home, then the large nature multiplies small issues quickly. This also means it is more likely to encounter issues with the old house or where the new and old join, etc. (sub floors, damage, stumps, things out of level). While it would be great if all Builders had a crystal ball, sometime these problems are not uncovered until once the project starts.Larger renovation & extension projects often encounter unexpected problems/ costs, such as structural issues or unforeseen complications. It’s important to set aside a contingency fund to cover these costs. We suggest a 3-5% figure is reasonable if you Builder is also working with you to mitigate the same issues.
Review and revise your budget: After you have created your budget, be sure to review it carefully and make any necessary considerations to it. Often after receiving more specific feedback, quotes or information from your builder or industry, there may be a need to increase your budget, simplify your design/ inclusions or even stage the project. No matter what step is required, just be very clear with your expectations. This will set you up for success.At this stage you may consider project managing own project and therefore your budget may remain fluid at this stage. If that is the case, I suggest you review it regularly and keep an up to date tally of all expenditure and further costs to come.Or you may formally engage a Builder under a Building Contract and if that is the case, ensure the contract is fixed and includes all items discussed to date. Any additional costs to be paid must be done via a signed Variation with your Builder.
Track your expenses: As you begin your renovation project, it’s important to track your expenses to make sure that you are staying on budget. There are many new Apps that will allow this tracking or a simple spreadsheet would also do well.
By shopping around your purchases to different suppliers, you should be able to find savings across many areas. Ensure you keep receipts and invoices and compare them to original quotes and your budget regularly.
If working under a contract with your builder, note that any changes made at this point may have significant costs involved. Under a contract the Builder will invoice you fixed amount at milestone stage throughout the project. Any additional items (Variations) must be quoted to you and signed off in writing by you.
By following these steps, you can create certainty and be confident when planning your next renovation project. This will ensure that your project is completed within your financial means while working with your preferred team or a professional builder.
