#002: How to Compile a Preliminary Home Renovation Budget

In today’s episode,  I’m going to walk you through how to compile a preliminary home renovation budget.  When it comes to any home improvement project, the question on everyone’s minds is, “how much will it cost”?  We begin with understanding the 5 different types of costs that need to be taken into consideration, and then you'll learn how to set up your budget spreadsheet. Once you've laid the foundation, you can get to the real work.  Grab your pen and notebook and be ready to learn the proper way to compile your home renovation project budget. You can shortcut this by hiring it out, but it’s definitely an exercise worth doing as it'll be extremely eye-opening. 

Today’s episode is brought to you by The Renovation Planner™, a physical planner with an amazing framework created to guide you through the home renovation process from start to finish. If you want to learn MORE about how you can plan and manage your home renovation project successfully, click here!

TRANSCRIPTION: Hello and welcome to episode 2 of the Behind The Renovation podcast.  Thank you so much for tuning in today. We're going to be talking about a topic that's on everyone's mind when it comes to any home improvement project, which is how much will it cost. So if you're considering a home improvement project, and this is a question you'd like an answer to, well, you're in the right place. 

Now, before we get started, if you haven't already subscribed to the show I invite you to do so. So you don't miss any of our upcoming episodes. It's totally free. And that way you'll get all new episodes sent right to your phone. We have a lot of great information and interviews to share with you in the coming weeks, so don't miss out. Now, if you listened to our introductory episode, you know, about my background in home staging and helping my clients with mini makeovers in the beginning, and then eventually now doing renovations of all different scales, as well as with HGTV.  If you missed that, I suggest that you go back and listen to it after this episode.  It really provides some context for you about my experience and my qualifications for teaching you about home renovations. 

Now, regardless of the type of project, every single one begins with a cost estimate, which is what I will walk you through on how you can do this for yourself. today. Now let's begin with understanding the five different types of costs that need to be taken into consideration. The first one is pretty self-explanatory and that's materials, material costs is all the materials that you're going to be needing for your specific project. Now, we're going to be assuming that you've already decided what your project is that you're tackling, whether it's just one room or if you're doing multiple spaces or even the entire house.  Once you have that decided you will need to assess each of these rooms and outline what you need for each of those spaces. 

So grab a notebook, you know, one that's dedicated to your home improvement project would be ideal so that you're not holding onto various scraps of paper and little post-it notes here and there. It gets too confusing. So dedicate a notebook to your project. And what you're going to do is you're going to stand at the door or the entry of the room that you're considering a renovation for and you're going to scan the room from left to right And then you gotta to write everything down because what you're going to be doing is itemizing everything that you see and that you know, that you'll need. 

So I'll give you an example. Let's just say it's a bathroom and I'll use my powder room as an example. I'm picturing the room in my mind right now, but you'll want to do this physically in your spaces. 

So the first thing that I see when I go from left to right, is that there is a vanity and then there's a sink. There is also a faucet, there's a countertop, there's a mirror, a vanity light bar. I see a towel bar, a tissue holder, toilet, and flooring. So again, then you're going to write down each of these items. Then what you're going to want to do is decide what you're going to be doing with each of these items, keep them, you're going to replace them if you're going to remove them altogether, or if you're going to refinish them. 

So in the example of my powder room, I actually did a makeover on this space a while back. So I'm going through this exercise as if I was at the very beginning stages, I was going to keep the existing vanity, but it was going to get painted. It was the original builder, basic Brown, okay. And it needed an update, okay. Countertops needed to be replaced, which also meant that the sink was going to be replaced as well as the faucet. I ended up keeping the mirror and the vanity light, but because the finishes in that bathroom was black, I was going to spray paint the vanity light so that it went with the new design. There was a towel bar to left of the sink that was not necessary, as well as there was a towel bar above the toilet, which didn't make any sense. Because again, this is a powder room and you don't need a towel bar. In fact, I'm not a fan of towel bars for any bathroom. It is totally unnecessary, but I was going to remove those and instead I was going to install a towel ring to the right of the sink. 

The tissue holder was going to be replaced. but the toilet was staying as well as the flooring. The paint, the room was fine. It was painted when I first moved in here, but the wow factor for the space was going to be the wallpaper. So I needed to source the wallpaper and then also find somebody to install it because I wasn't about to trust myself to install that wallpaper. Now, if you had more rooms than that, you would do the same thing that I just walked you through. 

For all of those rooms, you'd make a list and then decide if you're going to be keeping it, replacing it, removing it or refinishing each of those items. And I've done this hundreds of times over the last two decades. And as I mentioned in episode one, I'm all about a checklist and not reinventing the wheel. 

So I created what I call the pre-renovation assessment that makes it very easy for me to evaluate each of the rooms that I'm planning to makeover and just check off what's applicable to that space. Now, if this is something that you're interested in, it's included in The Renovation Planner, which is available at therenovationplanner.com.  Even though I've done it so many times, there's still things I could miss if I get distracted so having a form to prompt me makes it totally foolproof. 

Now I'm currently working with a prospective client. Who's building a custom home and he wants, help choosing all the finishing materials, which includes everything from the front door to the interior doors, to doorknobs flooring, paint, finishes, lighting, everything, basically what you're going to see in the home. And it's a lot. And there's no way for me to give him an answer off the top of my head, about how much everything's going to be. 

I've already spent several hours meeting with him, reviewing his architectural plans and itemizing. What I think is going to be needed in his project. It would take me many, many hours to do the research, choosing the finishes and finding material that fits the style of the property, which is actually very Mediterranean. So it's not your typical just builder basic. And also choosing finishes at the level that's fitting of a $3 million custom home. He's asked me several times, like how much do you think is going to cost and I honestly had to say, I don't know, because it would require a lot of research, which takes time. And unless he's willing to compensate for that time, I honestly can't help him. He would have to do it himself. And what he would have to do is exactly what I am sharing with you today and what I would end up doing for him should he choose to hire me to do that so we'll see what happens with that, but there's no way any legit business person is going to be able to give him a number because there are just so many variables, like what type of material are we using, what level of material, what is the quantity and then a lot of the finishes are going to be custom since they're not going to be standard sizes, the house is going to have 10 foot ceilings. So rather than having your standard seven foot high doors, we're going to be going with something taller, such as an eight foot door. That makes a difference because those are going to be special order items. They're not off the shelf. They're not readily available that way. So those are things that you should take into consideration as well. 

Okay. Moving on to the next expense, that would be labor, who is going to be doing the work, who are you hiring to make your vision come to life 

So generally speaking, we have your general contractors and your general contractors would then have subs that do all the various things that need to be done. So are you hiring a general contractor?  So besides a general contractor, are you bringing in specialty trades to be doing very specific work for you?  What I would recommend is that you interview and get bids from maybe three different general contractor teams, as well as specialty trades. If you had access to multiple trades, some of you might be living in areas where you don't have as many to choose from, but three is probably a good number. And then what you want to do is look at their bids to understand what it is that they're providing in terms of allowances, for materials. So generally speaking with general contractors, when they are putting together a bid for your project, they will give you a price for the labor, but also give you an allowance for the material. 

So you want to understand what that is and what it means. So for instance, if you are, let's say replacing hardwood floors throughout the house, they would give you a price for labor. And then also allow, for, let's say $5 per square foot for your hardwood floors. So if for some reason you didn't like the material that was available to you at that budget, the $5 per square foot, and you went over that you would pay the difference on top of whatever it is that he was providing you an allowance for - fairly straightforward. Another thing that you can do also is to just request a construction bid. So that would just be for labor plus the rough materials. So everything that they need to build and construct the home or to do the renovation, but then you would then choose all of the finishes yourself. 

So rough materials would include stuff like wood and nails and pipes, wires, drywall, all that boring stuff that kind of goes in behind the scenes, but it's obviously necessary, but you wouldn't know how to go and buy the 2x4s and the copper pipes and you wouldn't even know how much to buy. You know, and the electric wires required to do your upgrades, etc, etc. So those are things that the contractor would take care of. 

And then you could go and source and purchase all of the, let's say hardwood floors and the light fixtures and the shower fixtures and those types of things. Now, you can also hire a  designer to assist you. I know a lot of times people shy away from hiring a designer because they think it might be too expensive, but designers can assist you in many different ways and it can help you actually move forward with your project. 

I know many times I work with folks who, it's a husband and wife team, and they can't come to a decision and so projects are stalled. But, if you hired a designer on a consultative basis, they can provide you with some answers and move you along in the right direction. Even if you didn't hire them for the entire project, they can help you with material sourcing and then project management, which is very important because you need someone to oversee the entire team that's working on your project. How are you going to do that If you're working full time and you have other responsibilities, right? You can't be in the home to ensure that somebody is there and doing what they're supposed to be doing. That's one of the biggest complaints that you hear from homeowners is that I can't get my Trades to show up. 

If you don't have people showing up your project is going to be stalled. And that's a problem. You may be hiring a drafter or an architect, you know, in the very beginning phases. If you're building a home, that's going to be necessary. If you're doing a major remodel on the property, if you're doing an addition, you will definitely need to have plans drawn to submit to the city for approval or you may need a structural engineer, especially if you are opening up walls that are structural.  The structural engineer is an important component of that. They need to specify what is required so that your house doesn't fall down, right? So think about all the labor that is going to be required for your project. And then you're going to be interviewing people and getting estimates for how much it's going to cost to do your work. Now, the initial part of it, the scope of work that you were figuring out as you're walking through the different rooms is going to help you in securing your labor so that you know exactly what it is that you're bidding out.  

Enjoying what you're hearing so far?  Well, I'm interrupting my own podcast, to let you know about a tool that I created to help those of you who may be feeling overwhelmed by the thought of a home renovation. It's been on your list of things to do for months, maybe even years, but you're just not sure what to do, when, and more importantly, how long will it take. Well, The Renovation Planner was created for someone just like you.  Based on nearly two decades of working with clients, improving their properties, whether for resale or for living. I noticed that I follow a step-by-step process for each project to ensure a successful outcome in a timely manner and now I'm sharing that with you. The Renovation Planner is a physical planner created to guide you through your home improvement process from start to finish with assessments to help you get started, checklists to keep you on track through the various phases, and monthly, weekly, and daily calendar pages to help you plan your entire project from demo day to move-in day. For those of you who prefer a technical approach, there's a digital partner to maximize your overall planning experience. The Renovation Planner digital partner is an online project management tool that perfectly compliments the physical renovation planner, allowing you to share and access information while you're on the go. I promise that this is the tool that you'll need to bring your home improvement dreams to reality. Eliminate the guesswork to get your copy of the renovation planner. Just go to therenovationplanner.com. That's therenovationplanner.com and use the code BTRpodcast to receive free shipping on your copy today. That's BTRpodcast for behind the renovation podcast to receive free shipping on your copy today. Happy planning!

Okay. Moving on.  The next expense would be what I consider, miscellaneous. These are things that you may not even know you need to consider, but they are legit parts of the budget that you should include because it will impact how much you end up spending in the long run. So one of those things is going to be permits. Now, if you're hiring a licensed general contractor, they would usually include this in their bid. So you wouldn't have to be concerned about that. But if you were piecemealing things out, if you're doing partial DIY, if you're pulling a permit as a homeowner, then you want to make sure that you include a line item on your budget spreadsheet for this expense. 

Now permits vary across the board. It's amazing what a difference it would be. It could be anywhere from a few hundred dollars to a few thousand dollars, and it all varies depending on what city you're in, what state you're in and what country you're in. Now I can pull the same exact type of permit in the city of San Jose, and then do this same exact one down in the city of Fairfield. They'll come back with completely different numbers.  I don't even know how they come up, but these numbers, it's so crazy. And then some of it is based on the valuation of the project and there's ways to work around that as well. 

And then the next expense would be storage. And I consider this like your off-site storage, whether you are bringing a pod in, you know, they can deliver those to your driveway, you fill it up and they pick it up and take it all off-site, and then bring it back when you're ready, or you can actually have it stay on your driveway if it doesn't bother you and doesn't take up too much room, or you're putting things in off sites on your own. Now, if you have the luxury of space, you can also move all the stuff that you need to move out of the spaces that you're renovating into your garage, or maybe you have extra space around the house. Now, the caveat to that is you want to make sure that you're considering the cost of having that clutter in your daily life. It's going to be hectic already as it is, especially if you're living in the property, but to have to see the clutter piled up all around you. I couldn't do it. So consider what additional storage fees may be necessary to keep your life sane. 

Another one would be like meals out. So if you're doing a kitchen renovation and you no longer have a kitchen to cook in and you probably won't even have the energy to cook in after a long day of working, coming back home and having to deal with the disruption that's in your house. 

How much is the additional eating out going to ultimately impact the budget? In The Renovation Planner, I have included a checklist for putting together a temporary kitchen, which will help you immensely. Sometimes it is very overwhelming to come home to a job site. So just consider that. Build in some budget for it. You're not going to be going to five star restaurants every single night. That's just not reality. But even if you go out to get In and Out Burger for your whole family, that could be $30. Just keep that in mind. 

Then the other thing is something I have already alluded to is alternative housing, because would it make sense for you to move out during the duration of the renovation where we're going to talk about this topic a little more in depth on another episode, but I don't know if you've ever lived through a renovation. I have. It's not fun. Whether it's just one room or an entire house, I can't even imagine wanting to live there if you have the option to live elsewhere. So, you know, if you needed to rent an apartment, temporarily.  I had clients that have done that, you know, they moved out of the house and their pets to an apartment. Now that's another thing we've got to talk about at some point is, having pets in the home. It is not recommended. Your contractors don't want to be chasing your pets. If they were to escape, they don't want to be responsible for the safety of your pets. Pets get very territorial and that can be a consideration. So just understand that you may have to rent an apartment. Maybe you need to do some occasional hotel stays. If you're lucky enough to have friends and family who're willing to put you up for the time being, that's great, but just include that in your overall budget consideration. 

Now the next expense would be the contingencies. These are your just-in-case expenses. These are things that you're hoping you never have to worry about, and you don't have to spend money on, but if you don't allow for this in your budget, it's going to be a rude awakening when you find out that you have major rat infestation or a major termite infestation, and now you have to have the house tented or there's wood rot underneath all that tile that you just removed, that all the things that you want to install in the property is not supported by the existing electrical panel that you have. You need to upgrade because they have an older home. A lot of those older homes, just think about it. The amount of electricity that a household has nowadays or uses with televisions and laptops and phones and everything, all the electrical appliances that we use, we didn't have that in the 1960s. And so if you're buying a home, that's from the 60s or even the 70s, you're going to need to upgrade your electrical wiring to support your 2020. What year is it 2020 Yes, 2020 lifestyle. What if you needed a roof repair and whatever the case may be, you know, you just never know with construction is one of those things that until you open up a wall, you don't really know what's behind there. Anyway, so the recommended percentage is 15 to 20% of your overall budget should be for contingency. And if you don't have to use it, great, consider that a bonus. but if you did, at least you allowed for it and it isn't a big surprise. 

The last expense to consider is the time and opportunity costs. How much longer will it take if you were to live in the house, versus if you moved out temporarily, we talked about this, right? 

It is difficult to live in a house during a renovation. I've done it on several occasions. We did it for when I did a full gut kitchen renovation, and I had, my daughter was very young at the time. It was awful. Luckily the bedrooms were on a different level, but it was hard. And I'm one of those people that I like a nice clean dust-free home. Well, that's not possible when you're doing renovations. I, not too long ago, did a master bathroom renovation and I had to move out of the master bathroom and use a bathroom that I never used. Luckily we have another bathroom with a shower, but it's one of those like only guests use that. I never use it. And it was very strange and because the master bathroom and the master bedroom are connected, I was living in the bedroom with my daughter. And even though that was a very short project, it went fairly quickly. I could not wait till it was over. So just keep that in mind that it's going to take longer if you live in the house during a renovation, because the contractors also have to work around your schedule. You know, they can't start as early as they would like, because they’ve got to make sure that you guys are gone for the day before they get started. They need to be finished by the time you guys get home and then working around your existing, let's say furnishings and whatnot. If it's not an empty house, they've got to work around things. There's a lot more prep. a lot more, a lot more considerations. Let's just put it that way. So if you're able to move out temporarily and especially if you're able to live somewhere where there isn't an additional expense to you and they're able to work faster, that makes it worth it. 

Now, if you're also trying to DIY part of the project, you’ve got to consider like how long, how much longer and how much more are you really saving doing it yourself versus hiring the professionals, right? Because if you're managing a full-time job and being a parent and all those other things, do you really have the time to devote to your bathroom renovation So things to consider, these are time and opportunity costs, for sure. 

So now that you know what costs you need to take into consideration, what we're now going to do is take all of that information that you've compiled, and we're going to plug it into a spreadsheet. You can use the spreadsheet program of your choice. I like to use Google sheets because then I can access that while I'm on the go if I ever need to look information up, it's readily available. But to give you a general idea of how you want to set up this budget spreadsheet, I would have a section for each room that you're working on. So if I'm working on the entire house, I would break it down by the exterior, as well as the interior spaces and under each room, you're going to list all the items that you wrote down and then, you know, for, so for example, that powder room that we talked about earlier under powder room, you'll create a row for vanity sink, countertop, faucet, etc. Then you're going to have columns for the quantity of each item that you don't need, what the estimated cost is, what the actual cost is, who the vendor is. And then you may want to track when you order the item or when you're expecting to receive it. And I also like to include a notes column, because then you can make notes to yourself and include maybe a url from where you ordered the item. 

I have an establishing a budget section in The Renovation Planner that shows an example of what the spreadsheet looks like.  We also have spreadsheet templates available for purchase at therenovationplanner.com. Now you can do this on your own, but if you just want a done for you solution, it's available to you. There's no need to reinvent the wheel, just download the template after you purchase it and just start plugging in your numbers and see what those real costs are. So that you're realistic about what budget is actually needed to complete your project. Is it going to be more than you expected then at least you'll know how much more you'll need to save up before he gets started and not stress about scrambling to pull together the funds. Now, did it turn out to be less than you though?  Well, awesome. Now you can tackle another project. 

So you've set up the foundation and then the work begins, right? You'll want to do research on how much all of those items on your list costs. So in my example, with the powder room, how much is it to paint the vanity? I know I only need one gallon. I mean, it's not a very big vanity. You can easily find out how much one gallon of semi-gloss interior paint is by going to something like homedepot.com. And it looks like maybe it's about $32 plus tax. So you're talking about $35. Now, remember, this is an estimate, so it doesn't have to be exact. If you want to round up to 40 great, it gives you a little more cushion, but you want to add that to the estimated cost in the paint line item of your spreadsheet, then you move on to the sink. You'll look up sinks at Home Depot or Amazon, or if you have a specific online retailer that you're interested in, you look it up and then you log that estimated cost and a great way for you to have easy reference to what you were pricing out, copy that url into the notes column. You're going to do this for every single item. And then you're going to do the same for the labor. When you get the quotes and your review, their bids, it gives you an opportunity to weigh the allowances that they give you. So for example, if they say that they're going to tile your bathroom floor for X number of dollars, and they're giving you a materials allowance of $5 per square foot, while you're looking through the websites or shopping in the stores, you're going to see what $5 per square foot options are available and then you may be totally okay with it or you can be like, Oh hell no, everything I like is closer to $15 per square foot. Then you're going to know that you're going to be paying the difference of $10 per square foot above what the quote provides. So you'll have to plug that into your spreadsheet as well. Usually, where you can get into trouble is with say a backsplash tile. You don't want to be simple. You've been compromising and keeping everything kind of low key on all the other things that you've been sourcing so far. So let's get fancy. Then all of a sudden the reality check is that that fancy tile that you're looking at is $35 per square foot, or it's $50 per square foot, you know what, relax it's okay. Yes, it's pricey. But you also have to remember that you may not need that much of it, so it may be worth it to splurge a little. 

So try not to get too caught up on those individual numbers. You want to look at the overall budget then if it's way above what you thought it would be, then you'll want to pair down on some of those splurges. 

Okay So let's recap the five different types of expenses you want to consider when putting together your cost.  First there’s materials and there's labor. Then there were those miscellaneous costs, we have to build in those contingencies, and then you have to weigh those time and opportunity costs as well. This is the proper way to get to a true budget. You can shortcut it by hiring it out, but I think it's definitely an exercise worth doing because it's truly eye opening. A lot of times, people just balk at a number that someone throws at them, but they don't understand what it all entails and what that includes. So when you do this exercise for yourself, you'll just know.

Anyway, did you enjoy today's episode? I sure hope so. If so, be sure to subscribe. I honestly do not want you to miss any of the new episodes that are out. There's a lot of great upcoming content in interviews that I want to share with you. And I'd also love to know what you've thought of this episode and to share your thoughts, make sure you leave a review, because reviews really help other people find us and help us be able to bring new episodes to you every single week. Thank you so much again for listening. I look forward to talking with you again in the next episode, here's to your soon to be new and improved home! 

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LINKS MENTIONED IN THIS EPISODE

>>The Renovation Planner™ 

>>The Renovation Planner™ Budget Templates

>>Powder Room Makeover

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