Essential factors to consider when budgeting for home renovation projects
Residential
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To create an authentic picture of the financial, time and labour costs of these projects, think through some considerations to make it as accurate as possible. Thorough planning will result in smooth project deadlines and happy wallets.
Everything associated with the cost and labour of a project relies on knowing its specifications. Homeowners will save time and resources if they thoroughly consider the extent of the renovation before spending money. These guiding questions will get anyone started on the right path:
● Is this a minor or major overhaul of one or multiple places?
● Would the renovation require hiring a professional, or is it possible to do it yourself?
● Is this important to current buyers on the market?
● How much do other homeowners spend on similar projects?
These questions may yield multiple tasks with different objectives to prioritise. One project may attempt to raise the home’s value by adding functionality, while another may be purely aesthetic. Knowing the outcome of the goal will help justify - or prevent - spending.
Start a gradual savings plan now to allocate funds incrementally to offset nationwide average cost increases. In New Zealand, construction expenses cost 1.1% more in the third quarter of 2024, signaling small yet mighty price increases.
Materials and labour are the primary expenses of a renovation. Market research and patience are critical at this stage. Knowing the average cost of materials will inform decisions and help you determine if you need to make any compromises. For example, the market rate for different types of wood may tell you whether it is better to manually stain or get darker wood. Material costs are determined by several factors, such as online marketplaces, local retailers’ prices and industry reporting.
Second, request multiple quotes from various contractors for the same job. Prices vary drastically, as many set individual rates. For example, nixing the contractor to paint the basement could open more funds for the kitchen upgrades if homeowners did it themselves.
For these expenses, consider setting aside an additional 10%-20% to accommodate unexpected fees, more materials or extra labour in the event of a mistake. Examples of unexpected fees include notaries, extra cans of paint or expert consultations. Then, nothing will catch renovators by surprise or detract from high-priority projects.
Numerous sneaky costs accumulate when renovating. Many homeowners don’t discover them until they undergo the process. A different permit may be required to do foundational edits versus landscaping - it depends on the nature of the job. Some projects that require permits could include but are not limited to:
● Fencing
● Decks
● Fireplaces
● Doors
● Windows
Either budget for a consultation with a building consultant to understand modern codes and regulatory needs or do extensive research. These experts will likely recommend contacting a local building authority to request the permits and legal fees required for the renovation.
Home renovations can be messy and surprising, so you should set aside money for unanticipated costs. Something as small as an extra hour here and there for various contractors adds up over time. An electrician might find outdated wiring, or the plumbing professionals could need to dig up rusted piping in the front yard. An unexpected equipment rental or worker injury might lead to downtime, which the homeowner is responsible for anticipating.
Receiving a home audit early in the process might reveal unknowns, but these may not include everything. Some government programs offer tax credits for energy and home audits.
Reach out to regulatory agencies for guidance on what is available to save some cash. The New Zealand government offers assistance with modifications like adding ramps, converting bathrooms and more, especially for older generations and people with disabilities.
If saving liquid cash is not feasible for the time frame a homeowner wants, research financing. Despite the money coming from an outside source, this strategy requires as much budget planning and consideration as any other. Home equity or personal loans may be the best options based on interest rates.
When going this route, the best budget tip is to choose a short-term option to avoid accumulating interest. Don’t be enticed by an offer of more than needed. Long-term financial wellness requires homeowners to take out only what they need to accomplish renovations smartly.
The culmination of these efforts will give homeowners insight into how the home will perform compared to similar homes near them. Visualising the big picture is crucial for smart short-term renovation investments. Homeowners must stick to their plans, acknowledge their financial limitations, ask for help and pivot financial assets when necessary to accommodate the unexpected. These considerations will make the budget as informed as possible so homeowners can break ground with anticipation.
About the Author: Evelyn Long is the Editor-in-Chief of Renovated Magazine and a writer passionate about sharing real estate tips with aspiring homeowners around the world. She regularly contributes to sites like the National Association of Realtors and Allioo.
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