When you've decided it's finally time to give your home a major facelift with a renovation project, it's very exciting! However, before calling the home renovation company to start demolition, you need a solid budget in place. Renovations can easily go over budget if you're not careful. Follow these four clever tips to budget for your home renovation and avoid costly surprises down the road.

1. Research Average Costs

The first step is researching average costs for the types of renovations you want done. Search online or talk to friends who have done similar projects to get a ballpark figure. When you call the home renovation company for a quote, this gives you a benchmark to compare against. If their estimate seems too high or low, ask them to explain in detail, so you understand what's included. According to This Old House, updating a kitchen can start at around $10,000. Don't be afraid to get quotes from multiple companies.

2. Have a Contingency Plan

Once you have a general quote, we recommend adding 10% to 20% as a contingency fund. Renovations often have unexpected expenses pop up, such as code upgrades, repairs to existing infrastructure, or changes in scope. The contingency covers these surprise costs, so they don't blow your budget. It's better to have extra funds and not need them, rather than scramble to find more money mid-project.

3. Factor in Soft Costs

The direct renovation expenses are just one piece of the budget. There are many soft costs that add up, such as permits, design fees, temporary housing if you have to move out, and loss of rental income if it's an investment property. Make a detailed list of all potential soft costs, so they are accounted for in your budget.

4. Use a Home Equity Loan or Line of Credit

Very few people can afford to pay cash for a home renovation. Using financing like a home equity loan or line of credit allows you to borrow against the equity in your home. The benefit is you can get a low-interest rate and fixed monthly payments. Just be sure to only borrow what you need so you don't rack up unnecessary debt.

Budgeting for a home renovation takes work, but doing it right prevents nasty surprises down the road. Research costs, get multiple quotes, add contingencies, account for soft costs, use smart financing, and build in extra time and money. Follow these tips when making your renovation budget. Then you can confidently hire the home renovation company knowing what to expect. If you're thinking about renovating your home, reach out to us at R&O Commercial Construction, LLC for an estimate.