How to Stick to a Renovation or Construction Budget: A Definitive Guide

It is possible, always (almost)! Your friends who go on and on and at dinner parties aren’t actually complaining they’re bragging! It’s pretty much one of the only socially acceptable ways to brag about all of the excess money you have compared to your friends. But it sounds like complaining about overages and project timelines. A lot of those people have either knowingly or unknowingly, probably gotten themselves into this of their own accord.

So how do I know about this? Good question! My mom was and still is a constant renovator who was always out of town mid project when I was still living at home leaving me to do a lot of the general contracting stuff. I went of to manage our condo building for 5 years, we were self managed and I was the president. We did about $250 000 dollars in planned renovations to the 12 unit building, one was under budget by $11 000 (14%) and one was over by $1500 (2%) the others were all bang on. And mostly I’ve seen, or over seen, 100’s of honey’s projects move through the process.

Need a new roof and full second storey over the weekend, no problem, we can do that but it’s gonna cost you!

But also a disclaimer. This is for planned projects not responding to an emergency. That’s it, that’s the disclaimer. No you can’t name you price if your furnace goes or you have a burst pipe of septic back up but you can still stay on budget when the contractor says, “You’re not going to believe what we found in the walls.” So here is the definitive guide to staying on budget then.

Don’t plan to spend your whole budget. CONTINGENCY PLANS and cost plus work. Holy crap! You’ve heard it no one does it. Take at least 15 % of your actual budget (I recommend 20%, more on that later) and PLAN NOT TO SPEND IT. You will spend it don’t worry but pretend at the beginning you won’t. Your going to get some quotes and pick a guy right? His quote will cover the scope of work but he can not know what’s behind the walls, if your budget is the quote price you will be over and you will be stressed from the first day. Little things that come up are truthfully handled in the wiggle room in the quote but there is a limit. You might hear things like, “for now we’re good but if anything else comes up then we need to talk.”

Extra work will be billed at cost plus but what does that mean? and how is it different from quote pricing? It means you will pay the costs (material and labour) plus some profit. Realistically the profit part is included in the labour for the most part. But say a new sub has to be hired or their work expanded they will be billing you contractor at cost plus too or as emergency pricing. Your contractor begged them to show up often pleading and tracking them down to get them to come to your house since it wasn’t in the original plan and that sub is busy too. The time spent organizing, overseeing and helping the sub has to be paid for, that is the plus of cost plus.

Here’s an example that may come up, your doing a kitchen overhaul with no real movement of fixtures or plumbing, the contrafctor can handle changing plumbing pretty well but past changing fixtures a plumber or electrician might need to be hiered. Let’s say you decide to change the placement of something or when the walls are opened three illegial hidden junction boxes are discovered on two separate lines. An electricition has to come in to either trace back two lines back to the panel or install a bunch of visible boxes in your ceiling so your probably going to pick option 1. That means about 250 ft of wire at over a dollar a foot plus two new breakers a $25 and three hours to do the work if fishing it through the walls goes really well. That’s an additional bill of $650 + and the 5 hours overseeing and organizing it so that’s why you have about an extra thousand dollars to fix the problem. Not so crazy now right?

Clearly tell your contractor what your actual budget is. Why are you not telling your contractor what your budget actually is? Are you afraid that he’s going to turn you down because it’s so low? Or bill you the whole amount regardless of the work done? If you tell your construction professional you have a hard budget of 50 k for your upstairs remodel with a $8000 hold back for unexpected problems that you’d rather spend on a family trip to Disney when this is all over, he’s going to love you! What he hears is ok, lets get this done for 42 k but if something comes up it’s not going to strain the relationship, cause you financial strain and stress and mostly that you’re going to be able to pay the last bill on time. He probably has a family too or at least is part of a family or at the very least was once a child and gets it.

However what we mostly hear is something more like this. “Ahh yeah the quote looks good. It’s a bit more than we thought but I guess it makes sense when you break it down like that. That’s everything though right? Oh ok well, I guess well cross that bridge if we come to it? But that’s not likely to happen right? the house isn’t that old, and our inspector said it was really well built, so we’ll be fine right?”

If you were the contractor which customer do you want? Instead tell him it’s 5k over budget, he’ll suggest 7k in cuts, you can always add that back later or delay a year.

Be present to make decisions but trust your contractor. It’s probably best to meet with your contractor multiple times a week and appoint a point person or deal with him as a team, always. Ideally we would like to see you every day or every other day.  Once a week just isn’t going to cut it there are a lot of decisions to make and moving parts to deal with. A phone call in the afternoon is really good too!  Your going to have to pick flooring in time for delivery a week before it’s installed, paint colours three days before it goes up, trim as soon as drywall is complete, fixtures (electrical and plumbing) two days  if its in stock or 6 weeks if it’s not, before those trades are in and grout the night the tile is down for installation the next day. But.. if your contractor picks out your toilet, overflow, trim white, grout, closet organizers or lighting or interior door knobs you’ll probably be happy with the decision, he won’t go over budget and it’ll be there when he needs it.

Ideally if the guys pack up for 5 could one of you show up at 4:40 go through the day and any action points for you that are coming up for the next day or few days if there is a floor that can’t be walked on, a sink that’s not hooked up or a decision about sconce mounting direction that has to be made you’ll know. If a decision has been made that day you don’t like it’s still correctable. Also make the lines of communication clear . There is literally no reason your contractor should hear one thing from one person and something else from another. This puts him in a rock and a hard place which is truly no win. If you told him “yeah we’ll get that Kohler dual flush toilet and matching fixtures I’ll deal with the husband on the price” and “we’re maxed out on upgrades for the duration of the project” from him WTF is he supposed to do. A lot of marital conflict during the renovation is played out through the contractor and that’s not fair or in your best interest. Plus it just costs you more money in wasted time in the long run. In the event you actually did hire the wrong guy a tight watch will minimize problems and expedite the process. If he’s not showing up your going to know about it.

Recognize that most of your desires for finishes are actually really high end and cost accordingly. Finishes are expensive and add up quickly. If you are paying to build a house as you go you might get used to $10 000 bills every two weeks or so. Concrete and form work, framing, siding and drywall (expensive but goes up slow and is usually delivered as needed) plug away at a pretty constant rate. Bigger bills along the way, electrical, openings (windows and doors) and maybe systems (heating and waste) are pretty expected and few and far between. But man does that finish line come quick and cost a lot. Flooring is fast and comes next, trim is about $1.50 a foot, usually more, and goes up 10 ft at a time. Plumbing fixtures, tubs, toilets are next. Then cupboards in the kitchen and vanities, electrical fixture install then counter-tops, appliances and it’s done!

By this time we’re eyeing the next job which me might be late for already so the push is on! Weather delays aren’t an issue and neither is light so long days and a few extra workers aren’t a problem. A lot of this might come with built in extra workers too. A final week we can look like this with a flurry of activity. We can have our guys doing hardwood and banging up trim in the living spaces and bedrooms for the duration. Tilers in the kitchen and bathroom Monday and Tuesday. Cabinets from the kitchen place in Wednesday followed by grout that evening. Bathrooms installed with the cabinets on Wednesday and Thursday. Appliances can come on Thursday too. Electrical can install fixtures starting on monday and painters can work around the chaos on the trim as it goes up. All that’s left is counter top install which can’t be measured until the lowers are in but we can come back for that day when they’re ready. That my friends is at least a $75 000 week in a 2200 square foot home with typical finishes.

 In the last 10 -15 years high end finishes has become really standard and standard is probably what the quote covers unless stated. So what are standard finishes? Basic bulk trim, mid grade pre-finished hardwood (maybe laminate), 12 x 12 ceramic, pre-made cabinets and vanities, laminate counter, and basic sinks, facets, tubs, bulk pulls and dome light fixtures. Not standard finishes are… wide or ornate trim, crown moulding, backsplash tile, granite or stone counter tops, porcelain or over size tile, brushed pulls or plumbing fixtures, clear grade or wide plank hardwood, stainless or high end appliances, anything but colonial interior doors, chandeliers (really any light fixtures you’d actually want), built ins, closet organizers, dual flush, cedar or large decks, custom cabinets or vanities and… Yeah you want all of those things don’t you? If you don’t get some of these upgrades, or all of them even, you will be ok. It will all work and look great. Your life, happiness and how much you enjoy your home will not be diminished.  Your house value will essentially be the same.


Bulk trim at my house, you’ll see this literally every where $.78 a foot though!


Real estate buyers vs homeowner investors. Which brings us to the next point rising home values combined with low interest rates since the savings and loans crisis in the 80’s have led people to somewhat rightly feel that investing in their home is worth it. It probably was. My mom bought a $50 000 home around 1979 if that home stood as it did then with regular maintenance of about $1500 per year it would be worth about $250 000 or more now. That’s north of 9% per year even deducting maintenance and mortgage payments! But that same maintained house would have been worth $250 000 in 2003 too. However the house does not remain unchanged. It’s received three separate extensions and numerous re-models as well as a guest house.

More than just the 2008 recession is in play here. Home values on average have not risen at the extreme rates previously seen since 2005 but that renovation bug was deep into the zeitgeist by then. Home improvement shows and the expectation, buoyed by low interest rates, that your first house should be as nice as the one you grew up in raised the bar so to speak. But as of late banks aren’t as free and easy as they once were and expectations are coming back into line with reality.

Homeowners have gotten the message your home is great to invest in and upgrades will make it sell for top dollar and have blinged out their homes to the max. While home values were skyrocketing this all made sense on paper and raising values made it seem that you’d gotten your money back for that travertine after all. An industry popped up around this rennovating and people took the message to heart.

However buyers squeezed by tighter budgets imposed by the bank are now more motivated by square footage than anything else. They expect their first home to be the size of their parents plus they’ve grown up with renovations being a normal part of life at their parents house too. They are motivated by size and address and perceptions so when that house appears in budget they start making their own renovation list. As long as it’s livable granite counters, appliances, hardwood and an out door kitchen can come later as long as it has 5 bedrooms and 4 baths. Meanwhile fully upgraded homes are selling for only a few thousand dollars more than their basic counterparts. There’s a disconnect.

As further evidence emotionally detached real estate flippers and investors are doing it differently. We do projects like this somewhat frequently and there is still money to be made in it. For one they are sticking to their budget no matter what by following a lot of the points made on this guide, in fact that’s where a lot of it comes from. They clean everything up and make it new picking discounted finishes like clearance hardwood and tile, basic stainless appliances and if possible granite from an on sale ready made supplier, no slabs here, and make everything else work with paint. But they forgo these upgrades if the project gets bigger than first anticipated knowing todays buyer will plan on switching out the counters down the road. I guess the point I’m trying to make is this, don’t fall into the trap of felling pressured to upgrade for a future sale, you probably won’t get it back.

Try to manage and minimize changes. Changes that seem simple are usually not. Some are cost neutral but the simplest things go on and on and on. Some aren’t too bad if done early on. Simple things like changing the placement of the sink might mean changes or additional cabinets in a custom kitchen at rush pricing, a recall to the plumber, a wall to be re-opened, re drywalled and re painted, drain lines to be relocated in the basement requiring the same and cost more than a day. Even if it’s cost neutral this could delay the project three days waiting for the plumber and drywall and paint to dry, that’s not very likely to be cost neutrai in the long run even if the plumber doesn’t charge more. One little change might seem like no big deal or a defined cost change but the smaller things might require changes to the very systems of the house. Check out the detail on a tub I want in the net section! If a sub-zero fridge shows up after you pick out the appliances your contractor is going to say something like “yeah we’ll make it work” but it’s going to cost more than just the fridge. Changes and or additions that drag the project out cost more, period!

Have a worst case senecio cut/ dream list. With this in mind by all means plan on making your house the way you want and can afford but decide at the get go what can be cut if need be. Pick a few things from the end of the project that can go or be delayed if costs start to snowball, usually this doesn’t happen if you have a contingency reserve you can usually make all your dreams come true and sometimes still have more money leftover. Here are a few compromises I’ve seen made that had little or no effect but were at least thought to be possible cuts at the outset. Vinyl siding instead of cedar shakes, pre-made vs custom cabinets in the kitchen, bulk vs special order 3 inch trim, pre-made closet organizers and a pre-made vs custom tile shower.

Alternatively pick a few dream things that probably won’t fit in your budget at the outset to include if you have the money at the end. This helps you keep costs in line along the way. For me it would be that free standing tub with clean lines and about $8000 more than the standard acrylic $500 inset. The tub its self is only $2500 more with careful shopping but… the drilled well has to be about 20-40 ft deeper ($1800), the plumbing must come through the floor rather than the wall and be accessible through a panel ($600), deffintaly a larger hot water tank ($200), extra square footage to surround the tub ($2500) extra tile to cover that 10 square feet ($250), more expensive specialty fixtures ($500) and reinforced joists ($150). So unless I find a way to trim $8000 along the way building the house it’s an acrylic inset for me! Realistically I’ll still love my bubble bath time even if I don’t get my free standing tub and when you put it like that it’s way harder to justify. That costs signifigantly more than my last car.

Last but not least, advice from a contractor. I asked honey what his number one piece of advice was for staying on budget during a renovation and his answer was one word and simple, Don’t. When asked to expand on it he said build new or replace what you have as it wears out. At first I was annoyed with his seemingly uncooperative answer, still kinda am actually.But writing this he might actually be right. Sometimes you don’t really have a choice though. Some applience breaks and then you remember the cabents have been repaired so many times that their is nothing left to screw the hinges back too. That window leaks a little when the wind is just right and well it turns out your renovating your kitchen and that is the big one! But if you viewed it as replacing your stove, cabinets and re-installing a leaky window you might not start watching re-runs of MTV’s Cribs to get inspiration. The stainless sink and the pulls you changed when you moved in could be re-used, and the tile is pretty neutral. Now swapping out the fridge and dishwasher which are bassically at the end of their life anyway based on the stove and getting some new counter tops isn’t so bad. If everything goes easy then maybe an affordable granite is in the cards. You know what that is a kitchen re-model! And if you approach it they way honey suggested I think your way more likely to stay on budget.

Do you have any tips for staying on budget, if so share the insight in the comments below!


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