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Attack of the Mailbag

We get lots of questions through this website, but few get right to the point like this one...

I am thinking of renovating a house how much should i look to spend at the most.

- Jeanna

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Jeanna, the simplest answer is probably something like "twice the amount that you expected."

While there's a grain of truth to that answer (it certainly touches a cord with us!), it's probably not what you're looking for.

For very general averages, it can help to look at national cost averages, which are often organized by room. These reports often show the resale value of those improvements, which is nice to know if building home equity is one of your priorities. A good example of this type of data is the 2004 Cost vs. Value Report by Remodeling Online.

You can easily use that data to price your own renovation by adding up the renovation costs of the various rooms that will need work.

For better accuracy, you also need to factor in regional variations. In general, urban areas (especially unionized ones) have a labor premium. That said, certain specialty trades (like plaster repair) can be hard to come by (and thus expensive) in some other areas.

Whenever possible, these back-of-the-envelope estimates are best supplemented by actual estimates. Get a contractor or two to stop by and give you an estimate during the budgeting process. Many will be happy to establish the relationship now even if the work isn't going to start immediately.

Or, check with trusted neighbors about their work with different contractors. Know that every project is very different depending on the condition your house, location of certain elements, size of the space, materials used, etc. So, any estimate other than the one specific to YOUR project will just be a "ballpark figure."

Finally, if you're still in the buying process we can't say enough about the value of a great home inspector. While you may balk at the cost, they really do offer a valuable service. First, they can give you a realistic perspective on the amount of work that will be required. Second, good inspectors will give you a fairly detailed report of that work. In our case this was definitely a key component of building our renovation budget.

So, there's no easy answer to your question. The magnitude of work required definitely should correspond to the amount of preparation you put into budgeting. A "good enough" house can probably be done with less planning and as your cashflow allows, but a "back from the brink" house really does require a well planned financial strategy.

All that said, never forget that first rule: it will cost at least twice what you thought it might.

Posted by aaron on July 26, 2005 at 11:04 PM (5)

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