Working Out Your Ideal Renovation Budget

Are you worried about creating a renovation budget that’s within your means? Or, are you unsure of how much you should be spending on your renovation?

Fear not!

It’s so crucial to work out the budget you’ll be using to fund your renovation. However, when doing so, there are four factors you need to consider.

Today I share some pointers on these factors, and how you can apply them to your personal budget and goals.

Keep reading below as we share a few pointers or simply listen to the full podcast here instead…

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So, let me ask you a question:

How much money do you have to play with?

You don’t actually have to tell me, you just have to work it out. Why? Because this is the basis of what your renovation project will be riding on. You can’t exactly go nuts with extensions and open plans and pools when you only have enough funds for a paint job and kitchen do-over.

How do you work out your available funding?

Think about everything you own: your savings, your house, your car, any businesses, shares or rental income you have – that’s all stuff that is seen as a plus when it comes to budget.

But make sure you also consider the things that can take away from your wealth pool: is your car on finance? Do you have ten credit cards to your name? These things can limit how much money you can use. Consider culling the credit cards you don’t use.

By tightening some of your daily expenses, you can stretch your renovation budget. A bank or other lender is more likely to give you the sum you want when your splurges are in check.

How exactly do you get this available funding?

Ok, so it’s all well and good that you’ve got assets, but how do you go about getting a hold of that money to actually use on your renovation?

Most of us don’t have wads of cash lying around like you see in the movies. We can’t just waltz up to an auctioneer and slam a briefcase full of money down and be done with it.

Most of us go and get our money from a bank, either directly or through a broker. There are heaps of different ways to actually get the money, be it a property loan, overdraft, line of credit… and so on.

The important part here is that the expert on the other end has explained whatever the form is that your money is coming in. If they haven’t – run! And go ask another ACTUAL pro for advice. It won’t cost you a thing, brokers are free advice givers. Yippee! More money to spend on the renovation.

So now you know where to get your initial funding. Moving on to the actual property costs.

How much will your razzle-bedazzle cost?

And how do you know how much is a smart amount to invest? And how much is too much?

So many questions!

Before you can work out how much all that upgrading, upscaling, cleaning, fixing and flipping will cost, you need to have worked out what it is you actually want to do to the property.

Then, when you have worked out all the bedazzling that you’ll be doing, can you work out how much each item on your budget is going to cost. Remember, this means taking into account not just the cost of the actual cabinets, or the paint, or the tiles, but also the cost of the labour involved; the plumbers and carpenters need to get paid too! And as I’ve mentioned before, DIY is not a smart option here.

Written it all down, room by room? Great!

Having that all down on paper in front of you will help you gauge what the biggest expenses will be, so you’re not in for any surprises down the track. But, more importantly, it will also show you where you biggest money-suckers are – this way you can re-assess whether you really need to feature wall or that exposed cement ceiling. And if you find you don’t, you can adjust your budget accordingly, or tweak the options to save yourself some money (without cutting any corners, of course!).

How much will your perfect property cost?

Well, that depends a lot on your initial pre-approval amount – there’s no point in bidding on a property three times above your pre-approval. That would just be a waste of time.

But just because you’ve been pre-approved for a certain amount, doesn’t mean you have to use it all. Would you pay 30% more for a more expensive shoe brand just because you have that exact amount sitting in your wallet? Probably not, and so you shouldn’t be lured into buying something you don’t really want just because it fits your pre-loan amount.

Don’t forget that that pre-approval sum should also include some of the other costs of a property. Which leads me to my next question.

How much are the initial set up costs?

These are the necessary evils of snatching up a property. Are you using a lawyer or conveyancer? Well, they have to be paid. As do all the finicky little other expenses surrounding conveyancing like title and settlement fees. And don’t forget the biggest one of them all: stamp duty. It can be a pretty hefty sum.

Unless you have the money saved up and ready to go, these costs should be factored into your pre-approval. This will make things smoother and hassle-free. You don’t want to be pulling your hair out before you even start the renovations!

So once you’ve snatched the perfect property, there’s one more question to take into account.

How much are the holding costs going to be?

What do I mean by holding costs? These are all the things you will have to pay when your name is on the paperwork: stuff like council fees, strata, water rates and of course mortgage repayments.

It can be easy to forget to include these in your budget, but they are a pretty big expense. That is also why many people who house flip try to do so as fast as possible. Otherwise the holding costs can really eat into your budget and profit.

So those are the costs that have to do with you actually keeping the property in your own name.

If you spend the time to work all these costs out before you start, you won’t have to worry about it when it comes to renovating – that way, you can actually focus on the exciting part: the actual renovating!

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