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Before you start the work it’s wise to draft a preliminary budget that defines the scope of the project and provides a ballpark figure of overall costs. This will also lay the groundwork for establishing priorities if you have to scale back. Your budget should reflect the materials expenses all contractor costs including labor, professional fees (architect or engineer), and permit and inspection charges. When adding bedrooms, you may have to upgrade your septic system, so be sure to include an estimate for that as well. If you don’t have the cash to pay for the project in-full, incorporate the cost of financing a home equity loan.
Also, remember – if you can’t stay in your home for any part of the renovation, you’ll need to add the cost of interim housing. If you’re skilled, adventurous and planning to do the work yourself, include the cost of buying or renting the power tools you don’t own, such as heavy duty drills, saws, and nail guns; don’t forget the cost of large equipment such as ladders and scaffolding.
When hiring a contractor, it’s good to get at least three estimates. Factors that can influence a contractor’s price include the level of work you expect (high-end or average), time of year, the local market, weather, and time frame. As a rule of thumb, renovation costs should come in no higher than 20% to 30% of the value of your home. Be careful not to overbuild for your neighborhood.
Depending on the project, materials may account for as much as 50% to 75% of the total cost. For your budget’s sake, be sure to make a thorough “laundry list,” keeping in mind not just the “big” things like roofing, siding, windows, insulation, interior and exterior doors, framing lumber and sheathing, cabinets, countertops, appliances, heating and cooling equipment and so on, but also the less-noticeable – yet equally important – details such as electrical and plumbing rough-ins, lighting fixtures, vents, trim work, and finish flooring. You may be able to get estimates on the materials from local home centers, lumberyards, specialty retail outlets, and distributors that sell directly to consumers. When calculating the budget, use the everyday price for all materials, not the sale price unless you are guaranteed to get that price when ready to buy. For materials that have to be cut and fitted, factor in an extra 6% -10% cost for waste.
Be aware, if you are disturbing an existing electrical or plumbing installation, it may be out-dated and you will be required to bring it to code. There are also new government regulations relating to the removal of lead paint from interior and exterior surfaces, with which contractors have to comply. Other potential expenses to consider, if applicable, include tree trimming, the cost of site preparation to clear land, the price of protecting plantings, and a haul-away container.
After your preliminary prices are tallied, you may discover you need to trim the scope of the project or consider other materials alternatives for one or more of your big-ticket items. For instance, you can save a lot of money by switching from cedar shake wood siding, which has to be painted, to a highly-durable vinyl siding that looks like wood but costs less, is virtually maintenance free and available in a broad range of pre-finished colors. In the same way, you can substitute high performing vinyl clad windows and accessories for wood windows or, instead of using stone, specify hand crafted stone veneer that is not only lower in initial cost but also much less labor-intensive to install.