Budgeting tips for a remodeling project
Major home remodeling projects require a lot of time and preparation, but most of all, they require a significant investment. Collecting the funds needed for your project and organizing a budget can take several months. As a result, many homeowners take out loans to supplement the expenses of home remodeling.
No matter which route you take to finance your home improvement project, consider the following tips for budgeting effectively:
1. Determine whether your home is a keeper or a seller. Before making any major renovations, decide the level of commitment you have to your home. This can have a major impact on how you should budget for your project.
For example, if you intend to stay in your home for five years or more, it’s easier to justify spending money on a swimming pool or Jacuzzi tub. If you plan to sell your house in the near future, it would make more sense to spend the money on a kitchen or bathroom renovation because those are the areas of the home potential buyers are most interested in.
2. Consider all costs. Remember, you will have to pay for the materials needed in the renovation, the time the contractor spends completing the project and the amount of work required to finalize the project.
Nick Falkoff, owner of the highly rated Auburndale Builders in Auburndale, Mass., says many problems can be avoided if the remodeling company clearly explains all aspects of the budget with the client.
“A lot of people don’t provide their clients with a detailed breakdown. We try to give a lot of information up front and break down each step so they can see where the money is in their budget, and we can explain some of the options if they want to save money, or where we can control costs.”
The Boston-area remodeling contractor says the biggest items in the budget are usually the “utility costs like plumbing and HVAC. You’re paying for all the specialty trades. Remodeling is very labor-intensive.”
3. Calculate monthly bills. Add up all of the bills you have to pay each month: mortgage, car loans, credit cards, phone bills, etc. Once you have calculated this total, subtract it from your gross monthly income to determine what's left over. Based on this new total, you can determine how much you have available for your home improvement project and compare it with the estimates you have collected.
4. Prepare for the unexpected. Sometimes a contractor can give you an estimate, but find a more costly problem while working on your home. For example, your contractor may be laying shingles on your roof and see that some of the wood beneath is decaying and requires replacement. To avoid these potential problems, some remodelers suggest setting aside an extra emergency fund to pay for additional work.
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