So, you’re thinking about remodeling your home and are wondering where to start? There’s no one-size-fits all answer for calculating home renovation costs, but according to Home Advisor, the national average is somewhere around $46,847, with most homes falling between $18,401 and $75,991. Even two identical houses sitting side by side will have different renovation costs, however, as there are many factors and variations that contribute to your bottom line. Here are 5 things to consider to help you determine the cost of your remodel.
1. The Scope of Work – Minor rehabbing of a bathroom or kitchen that you complete over a weekend could run you $500, however a large addition from the floor up could cost you as much as $500,000. You’re going to have to allot more funds if you plan to knock down walls, rearrange a layout or add on square footage. Your first step in estimating home renovation costs is to outline exactly what the extent of the job is. Larger jobs and jobs that include rooms like kitchens and master baths are always going to warrant higher budgets. Structural changes and mechanical system changes cost more, while cosmetic changes tend to cost less. If you’re planning to renovate, keep in mind that any updates or additions should be based on your expected return on investment.
The more DIY projects you can do around the house, the more you’ll save. One area that’s easy to start with is painting. You’d be surprised what a fresh coat of paint and new hardware can do to spruce up old cabinets! Build your proficiency over time as you complete more projects and look for additional rehabbing work that you can take over yourself.
2. Quality of Materials – Obviously, lower cost materials reduce your total cost to remodel a house. You’re going to want to be careful, however, as potential buyers often judge the entire property based on a single bad impression if they notice cheap materials. While you should always use quality materials, pay particular attention to the most visible finishes. Buyers pay more for a house with stone countertops than one with cheap laminate. Another thing to consider is that labor costs take up a large majority of your overall renovation cost, so if you’re already paying top dollar for labor and the materials for higher-end finishes are only a small percentage more than cheap finishes, don’t skimp and run the risk of losing out on your ROI.
A better way to save money on materials is to look for ways to reuse what you’ve already got. Can you salvage your existing cabinets by painting them and updating the hardware? Can you refinish the tub rather than replacing it? If the tiles in the shower are an outdated color, can you re-coat them in white for a cleaner look?
3. Quality of the Contractor & Labor – Across the board, labor is almost always going to be your biggest price factor. According to Home Advisor in a bathroom renovation, for example, it accounts for as much as 65% of what you spend. Unless you do the entire home renovation yourself, you’re going to incur labor costs from contractors. Remodeling costs even vary by region, as labor costs can be double or even triple in high-demand, low-supply markets.
One option, to help reduce labor and overall costs is to hire and oversee specialist contractors yourself, rather than hiring a general contractor and giving them license to hire and oversee specialists on your behalf. For example, if you’re renovating a bathroom, you can hire a plumber for any required plumbing work, and an experienced handyman to install new tile flooring and shower tiles. Some of the easier work you could even do yourself, such as replacing a faucet or cabinet.
Before going into a renovation project, make sure you do your due diligence on any prospective contractors, and know your options for how to deal with a bad contractor. It may sound obvious, but the fastest way to lose money on a house flip is to use a bad contractor. You end up paying for the work twice when you have to send in a reliable contractor to redo the bad one’s work. Invest the time to screen contractors carefully and only hire reputable, verifiable contractors for large renovation projects.
4. Soft Costs – Soft costs include all costs other than labor and materials. For example, for many remodeling projects you will need a permit. You can file permits yourself, or you can pay your contractors to file them for you. But when you do renovations requiring permits, you will need to use licensed contractors, so plan accordingly. Other examples of soft costs include closing costs, loan interest, utilities, and every other expense of buying, owning, and selling a piece of real estate. One additional step you may want to take is to get an overall inspection of your house before you start your rehab project. According to The Spokesman-Review in Spokane, Washington, “while hiring a home inspector might cost several hundred dollars, it could be a worthwhile expenditure if you purchased the house years ago and haven’t had any inspections since then.” Last, but certainly not least, don’t forget the wiggle room! You’ll want to add on about 20% for incidental costs and overages to any remodeling budget.
5. Your Timeline – The soft costs that are associated with home ownership are one of the reasons it’s important to accurately plan your timeline and how long the renovations will take to complete. Every month that goes by in a house renovation project, you pay additional costs ranging from interest on your hard money loan, gas and electric bills, etc. The sooner you complete your house renovation projects, the fewer soft costs you’ll incur, and the greater your profit margin. Remember though, the larger the project, the longer time it will take to complete. For instance, if your remodel requires a permit, your “municipality could charge 1% of the total construction costs to issue the permit and it may take up to six weeks to complete the required inspections,” according to Investopedia.
It’s extremely difficult to estimate rehab costs with the naked eye. Depending on the job, there could be a number of factors beneath the home’s surface that could impact time and cost. Relying on trusted vendors for thorough and accurate estimates is key. Try and get at least three price quotes prior to making a decision and consider asking for references so you can look at the quality of work your chosen vendor provides. Taking these tips into account and doing your due diligence before getting started will make for an enjoyable and profitable home renovation.