Why Matching your Renovation Design to your Budget is the Most Important Step

Brad Freeman, Builder

For a long time, we followed the standard ‘process’ for the building industry whereby a potential client would approach us to talk about their potential renovation – often with a clear list of what they would like included in the final product. They would be very excited about the potential of their home and often have conducted extensive research on exactly what they want (we love a customer with a clear vision!). 

I would then meet them at their home and give them a ballpark ‘guide’ on how much the potential renovation would be. 

It was only at this point that the renovation budget would finally be discussed – often with it becoming clear that the design well and truly exceeded the renovation budget. 

This is why being very clear about your renovation budget first, and then building your home’s design around this budget is so important. We now focus our building process around making sure we have got the budget for the design and the design for the budget.

We now focus our building process around making sure we have got the budget for the design and the design for the budget.

I also know that it can be VERY tricky to know exactly where you would like your budget to sit – especially in renovations – as every home and every design is very different.

So below I’ll like to give you my best budget/design-deciding tips that I’ve learnt after 15 years in the industry:

Ask yourself the question: ‘What am I comfortable with spending on my home?’

You may not know exactly how much you are capable of spending on your renovation yet but it is always worth thinking about how much you are actually comfortable spending first. What you can spend and what you are comfortable spending are often two different things. Be clear on this first before you dig deeper into your capacity.

Decide on how much of your own money you are comfortable spending 

We find that many clients that approach us are either partially or fully self-funded which does make deciding a budget clear for them from the beginning. If you have the cash, deciding how much of that you are comfortable spending and whether you will be comfortable topping this up with bank finance can make it much easier when it comes to selecting the design elements you HAVE TO have.

Am I planning to stay in my home long-term or do we plan to move in a couple of years?

We often get people that are concerned about over-capitalising in their renovations. Over-capitalising is when you have invested more in your home than it’s actual current value. This becomes more of an issue if you plan to move within a few years of renovating. If this is the case, we always suggest that you keep a close eye on your budget and build the budget around the value of the home now and within the next couple of years. But if you are planning to stay in your home for many years and your main purpose is to enjoy your home now and into the long-term, we suggest you weigh-up if you would prefer to focus on budget or design. This often comes back to the point above – what am I comfortable spending on my home?

Be aware of how much ‘equity’ you have in your home currently

Equity in your home is the difference between how much you owe the bank and how much the home is worth in the current market. For example:

Your home is worth $350,000

You owe $200,000

You could have $150,000 worth of equity in your home.

There are a few different ways that you can get a gauge on how much you have sitting there that you could potentially borrow against for renovations but by far the best way is to talk to a mortgage broker as they deal with these valuations every day of the week. 

We recommend speaking to either George or Andrew at Aussie Bundaberg – you can find their website here: https://www.aussie.com.au/find-store/qld/bundaberg.html

You can also ask a local real estate agent or even compare home real estate listings in your area. Be aware though, that the real estate value and the current bank valuation is often different so use these price guides with caution.

Decide on two budgets – the budget we would like, and the absolute top budget we will tolerate (this is one is very important!)

There is always a spectrum in both a clients’ budget and their design ideas. As part of our renovation process, we will help you decide on what priority you give to each of your design ideas but then we need to match that to your budget.

By knowing the spectrum of your budget, we can give you various options that match different price points and you can decide what you feel comfortable with moving forward. 

Remember, renovations always need a contingency budget!

There is the old rule that you always budget a 10% ‘contingency’ for renovations and this still holds pretty true. It’s the nature of the beast that when you start taking your home apart, there is a chance you will find issues that you couldn’t see before. A big one is often a plumbing leak or some old dodgy electrical wiring that needs replacing. By having that 10% extra tucked away, these issues don’t become BIG financial hassles for you, and you don’t have to change your design aspirations to accommodate the $$ needed to fix the annoying problems that may pop up.

Hopefully this helps! 

We also have design templates that help our clients decide their “Must haves” and “Wants” lists. 

Let us know if you want a copy!! Get in touch here: https://bundabergrenovations.com.au/get-in-touch/