Cost, Budget, and Value
How do you figure out what your renovation will cost? How much should it cost? How do you set an appropriate budget? What is the likely payback at resale? How can you maximize your return on investment?
This section lays out the main factors that influence the economics of your renovation.
Will Vary By…
- Type of renovation
- Materials used
- Geographic market
- Finishes used
- Resources used
- Cost of permits
- Cost of cleanup
- Move or stay/storage
- Your time invested
- Eating out or ordering in
At its simplest, cost is a function of materials, time and labor, and local market conditions.
Get multiple estimates. This will give you a good idea of what to expect. But, a good rule of thumb is this – whatever amount you’re zeroing in on – multiply it by a factor of 1.5 to cover changes, contingencies, and Murphy’s Law. Seasoned remodelers know that the unexpected always occurs. So just go ahead and plan for it.
While not explicitly for renovations, www.building-cost.net can help with cost estimates. Also, check out www.letsrenovate.com which has a handy calculator for monthly financing.
If you’re like most of us, your list of needs and wants will exceed your ability to foot the bill. While the actual cost of renovation varies tremendously, you still need to establish a budget.
If you’re renovating for yourself or your family, a bank can help you figure out how much you can afford to spend, and how much you can borrow.
Generally, 20% to 30% of the value of your home is an acceptable amount to invest. For example, if your house is appraised at $200,000, it’s reasonable to invest another $40,000 to $60,000 in improvements.
- What you may have set aside
- What you can borrow and the interest rate you can get
- What is a reasonable monthly payment?
- How long you plan to live in the home
Maximizing the Return On Your Investment
How do you know if your investment is going to pay off? You may not be planning to sell any time soon, but you want some idea if you’ll recoup your remodeling dollars.
If you are looking at resale soon, do consider renovations that give you the most bang for your buck.
What do the experts say about the best value for your renovation dollar?
Remodeling Magazine produces an annual Cost versus Value report, surveying some 60 markets across the U.S. When it comes to payback, these renovations have the highest return on investment:
- Re-siding (for curb appeal)
- Master suite additions
- Attic bedrooms.
When looking at these statistics, remember that they yield average costs and returns; the values in your local area or particular situation may differ.