How often do you hear of planned property renovations going over budget?
Many renovators spend more than they originally planned. This could be due to unexpected problems arising, a change of mind mid-way through the project or as a result of poor planning and not having a proper renovation budget in place.
If you don’t plan your renovation budget the process can become stressful. So, before you start envisioning your dream, estimate how much you can afford to spend and then break it down into individual sections so that you can figure out how much money needs to go into each part of the project. By doing this, you can then determine the quality of the finishes you can afford.
Creating a realistic renovation budget rests on how accurately you estimate your costs. Follow our quick tips to help you work out your renovation budget, before you break out the tools.
Decide of the size of your renovation
The size of your renovation has a big impact on the final cost. Start with a list of absolute essentials and then the ‘nice-to-haves’ and prioritise your list. Be prepared to compromise at some stage if money becomes tight during the renovation process.
Avoid over capitalising
Begin with an understanding of values in your area. A good starting place is to establish the likely sale price or valuation price after the renovation has been completed. Look for similar properties in your suburb which have already been renovated using real estate portal like homesales.com.au.
Use a budget calculator
There are some helpful renovation and building calculators out there. They’ll give you a rough estimate of costs and help you plan. The handy BMT Construction Cost Estimator could be a useful guide before you start getting quotes.
Get three quotes from tradespeople
You should always get at least three quotes from builders or tradespeople. You’ll be surprised how much they can vary from tradesperson to tradesperson.
To find quality tradespeople, look online and read individual reviews or ask friends or family for recommendations.
Plan a contingency into your budget
Add 10-20 per cent to your final budget. Overspending is very common during building projects. Unknowns equal risks. Part of determining contingency is planning for the worst. By identifying risks such as poor weather and scheduling issues, you will get a better idea where the contingency budget might go, which will give you an idea of how much you might need.
You can never do too much research
The internet has a surplus of helpful information and instruction on renovating/home improvement, budgeting and investment property renovation tips. It will become your most use and valuable resource.
To discover whether there are any depreciation-related implications to renovating an investment property, read our recent blog ‘Can you claim tax deductions when renovating an investment property.’