How to Budget for Renovations After You Buy

1. Set Priorities for Renovations

Start by making a list of the improvements you’d like to make and prioritize them based on necessity and value. Focus on essential repairs, like fixing structural issues or outdated electrical and plumbing systems, before tackling cosmetic updates.

Tips for setting priorities:

• Identify repairs that affect safety, such as roofing, electrical, or plumbing issues.
• Consider updates that can increase the home’s value, like kitchen or bathroom renovations.
• Save aesthetic upgrades, like painting or landscaping, for later if they don’t impact functionality or safety.

2. Get Estimates and Research Costs

Once you’ve identified your priorities, get estimates from contractors to understand how much each project will cost. Even if you plan to tackle some renovations on your own, researching material and tool costs can give you a realistic budget.

What to consider when getting estimates:

• Ask for multiple quotes from contractors to compare prices and find the best deal.
• Research material costs and check for sales or discounts at home improvement stores.
• Remember to account for labor costs if you’re hiring professionals.

3. Set Aside a Contingency Fund for Unexpected Repairs

Homeownership often comes with surprises, and it’s wise to have a contingency fund for unexpected repairs. This fund should cover unplanned expenses that arise during renovations or issues discovered after you move in.

How much to set aside:

• Experts recommend setting aside 10% to 20% of your renovation budget as a contingency fund.
• If your home is older, consider increasing the contingency fund, as older homes are more likely to have hidden issues.
• Keep this fund separate from your primary renovation budget to avoid overspending.

4. Decide on DIY vs. Hiring Professionals

DIY projects can save money, but they may not be suitable for every renovation. Assess your skills, the tools needed, and the complexity of each project to determine if you can do it yourself or need professional help.

Questions to ask yourself:

• Do you have the skills and time to complete the project safely and correctly?
• Will DIY save money compared to hiring a professional, especially if costly mistakes could occur?
• For projects like electrical work or plumbing, hiring a licensed professional may be required for safety and code compliance.

5. Explore Financing Options for Larger Projects

If you have a major renovation in mind but don’t have the funds on hand, consider financing options that can help you cover the costs. Many homeowners use options like home equity loans, personal loans, or even credit cards for smaller projects.

Common financing options:

• Home Equity Loan: Borrow against the equity in your home, often with lower interest rates than personal loans.
• Personal Loan: Unsecured loans that don’t require home equity, ideal for smaller projects.
• Credit Card: Use with caution for minor expenses, ideally paying off balances quickly to avoid high interest.

6. Plan for Future Maintenance Costs

Beyond your initial renovations, homeownership comes with ongoing maintenance needs. Create a budget for regular upkeep, like HVAC servicing, roof repairs, and landscaping, to prevent issues from becoming costly problems in the future.

How to budget for maintenance:

• Set aside 1% to 3% of your home’s value each year for maintenance.
• Consider creating a schedule for seasonal tasks like gutter cleaning and HVAC checks.
• Address small repairs promptly to prevent them from growing into larger expenses.

Conclusion

Budgeting for renovations and unexpected repairs can help you enjoy your new home without financial stress. By setting priorities, getting accurate estimates, saving for unexpected costs, and planning for future maintenance, you’ll be prepared to handle any project that comes your way. Careful budgeting will allow you to create the home you envision while staying financially secure.