How to budget for a home renovation

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How to budget for a home renovation

Home renovation shows are fun and inspiring to watch. It’s amazing to see how a decrepit house can turn into something modern and comfortable again.

Many of us would want to apply these ideas into our own homes, and if you’re a landlord, doing a home renovation is an excellent way to attract prospective tenants where you can recoup the expenses from your rental income. This is also a good way to increase the value of your house, which can add up to 10%.

Home renovations are not as easy as what we see on television. There are many steps to building a house and tons of things to factor in. One of them is your budget. How much exactly should you spend to renovate your bedroom or kitchen? How much should you set aside for a builder? These are just some questions commonly asked that we’ve answered below.

According to Refresh Renovations, here are the average costs to renovate a house in Australia:

  • Bathroom $25,000
  • Kitchen $35,000
  • Installing of swimming pool $35,000
  • Ventilation system $5,000
  • Exterior painting $5,000
  • Dormer window $8,000
  • Corrugated iron roof $14,000
  • Reclad exterior of house $35,000

Renovating a house is not cheap. To help you set up your renovation budget, here are the top questions to ask yourself.

How much should you spend on your home renovation?

Your home renovation budget will be different from other people. There’s no one-size-fits-all answer to this question. It’ll be different for homeowners and for landlords as well.

If you’re a homeowner, most experts recommend spending at least 5 per cent of the property value on your kitchen, and about 1 per cent in the bathroom. For instance, your property is valued at $350,000, the maximum amount you can spend on a kitchen renovation is about $35,000.

On the other hand, if you’re a landlord, some experts recommend allocating about 1 per cent for bathroom renovations, and around 3 to 4 per cent for the kitchen remodelling. Updating your rental space is one way to prepare your property for new tenants that can possibly increase your rental earnings.

What are you going to renovate?

The cost to renovate will depend on which part of your house you’re renovating. Renovating a bathroom compared to renovating a bedroom will have a huge difference in your budget. The same applies when updating just one single room or the entire house.

If you plan on renovating the whole house, you’ll want to distribute the expenses according to rooms. As an example, you need to allocate more budget in updating the kitchen than the bedroom or the living room.

Another thing to factor in is the size of the room. Obviously, the bigger the room the higher the cost to renovate. The number of raw materials per square metre will affect your home renovation budget. Have your room or house measured so you can have a more accurate idea of how much it’ll cost to renovate when it comes to obtaining quotes from builders.

What are your priorities?

If you have a limited renovation budget, it’s best to set your priorities first. If you can’t set aside money for changing the tiles in your bathroom, why not repaint the walls instead? At times, you may need to be creative to avoid compromising your set budget.

Are you hiring a builder or are you going to DIY?

Builders are professionals who can help you in the renovation of your home. They can have an impact on your overall budget. The cost of hiring a builder will depend on the complexity of the job, the size of the renovation, your location, and the work they specialise in.

Ask for detailed quotations from different builders, so you can compare their rates. Hiring the right builder for your renovation project can help you save thousands of dollars in the end.

If you’re doing a simple cosmetic renovation such as painting or hanging a bookshelf, you can save money by going the DIY route. Make sure that you have the skills for these simple projects because at times cutting out expenses can actually cost you more if you get the renovations wrong.

You can also save a few bucks on your builder’s hourly rate by completing the demolition yourself such as by removing the kitchen cabinets or ordering the fixtures.

How much can you actually afford?

Before you go around asking for quotations from different builders, find out how much you can afford. It won’t make sense to splurge $25,000 on your kitchen if you can only afford half of it.

Make sure to set a realistic budget. If your budget is limited, you may want to prioritise cosmetic changes than making structural changes because major remodelling is much more expensive.

A useful tool that can help you get a rough estimate of your renovation is a budget calculator. These online calculators specialise in home renovation budgets.

Also, don’t forget to set aside 10 to 20 per cent for contingencies. This will give you a bit of a breathing room for mistakes that may happen in the future. Take note that there are council application fees as well. Set aside an additional 15 per cent for this. You can also ask your local council for the exact amount you need to pay.

Marxa Dillan

Marxa Dillan is a Financial Writer. In her articles, you’re likely to find complex financial topics broken down into everyday language.

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