HOME IMPROVEMENT BLOG

How To Keep Your Renovation Within Budget

How To Avoid A Budget Blowout When Renovating

It’s the question Kevin McCloud, host of TV Show Grand Designs, seems to like asking the most: “How much did you actually spend?”

The usual response is something considerably higher than the budget detailed earlier in the episode.

Whilst most home building projects are more modest in design and scope than the ones featured on TV shows, blowing the budget is still one of the biggest concerns for renovators.

However, there is no reason why this should happen. With some planning and discipline, you can achieve the result you want within the finances you have assigned.

At Addbuild we have more than 40 years’ experience building additions and extensions for Sydney homeowners, so we are drawing on plenty of real examples to offer the following advice:

Planning Stage 1: Your Big Goal

Take some extra time to decide exactly what you want from your renovation. Being thorough now will save you heartache later on.

Begin with your overall goal:

  • Do you need new rooms for new family members?
  • Do your soon-to-be teenagers need their own rooms (and return the bathroom to you!)?
  • Are several family members working or studying at home and you need a dedicated home office?
  • Do you have a parent moving back in who would like to maintain their independence by having their own kitchen and bathroom?
  • Are you renovating for profit, or creating your ‘forever home’?

Whatever your reason, don’t lose sight of the overall goal and don’t be side-tracked by ideas that don’t fit ‘the brief’.

Planning Stage 2: The Type of Building Work

Next in the early planning process, you have to decide on the type of building work that will achieve your goal.

As a ‘design and build’ company, Addbuild often advises clients at the very beginning of their project, even before any money changes hands.

As one of our recent clients explains, there is a significant advantage to bouncing your ideas off someone with deep experience of the options.

In the case of Anjali and Rob, this process led to them opting for an addition (going up) rather than an extension (going out), a decision they are now delighted about but hadn’t considered before meeting Emmory, one of our design consultants.

Planning Stage 3: The Fine Details

Once you decide your goal and type of building, don’t rush: you are still in a crucial planning phase.

It’s now worth spending more time detailing and ordering a list of all your ‘needs’ and all your ‘wants’.

Making a distinction between the two lists will help you find the right balance of inclusions for the project.

‘Needs’ are generally things that are non-negotiable, whereas ‘wants’ are things that might be traded away for different reasons.

This is especially important if you are looking to renovate on a tight budget.

Planning Stage 4: Getting Sketches Before Ordering Plans

Some, but not all, design and build companies will provide you with detailed sketch drawings of your project for free as part of the initial design process, along with an indicative quote.

This means you get a much better idea of what you are building and how much it should cost before going to the “Plans Order” stage which is a ‘fee for service’.

This is part of Addbuild’s design process, and we know that this can be a significant help for people who need to visualise their project.

In our case, we only proceed to the Plans Order stage when our client is completely comfortable with what has been provided beforehand.

Planning Stage 5: Your Finances

Not going ‘over budget’ assumes you have set the right budget in the first place!

Deciding on your budget is a mixture of what you can borrow or afford to spend, and how much you’ll be adding to your home’s value.

Whilst it’s usually unwise to over-capitalise your home improvements, there are some circumstances where you might take a longer term view.

Having said that, one of the potential advantages of building an extension or addition is that you can add value to your home in excess of the amount you spend on the work.

As one leading Sydney real estate agent explains, there are some home improvements that will add more value to your home than others.

It is also important that you build a contingency into your budget. We recommend 15-20%.

Again, referring back to Anjali and Rob’s experience, there are some parts of the building process that a builder cannot accurately account for – which your builder should be clear about – like old pipes that aren’t revealed until excavation occurs.

More often, even with the best planning, there may be something minor you hadn’t anticipated and want to change. The idea of planning is to keep any changes to the very minimum, and therefore, well within your contingency.

Get a Fixed Price Building Contract

There are several key factors you should consider when selecting a builder. In terms of staying within budget, one of the most important is whether the builder offers a fixed price contract.

As indicated above, there are some situations that aren’t covered by a fixed priced contract, but these should be explicitly explained to you by the builder.

And because of this, the builder you select should make it clear any extra work that they undertake outside of the fixed price contract should be:

  1. Costed up front and detailed in writing.
  2. Only undertaken after you have agreed to the extra work in writing.

It should also be clear that if the builder doesn’t follow the building plans, unless directed in writing by you, they are liable to pick up the bill for any resulting ‘make good’ work.

Stick to Your Plan

Here’s where the discipline bit comes in!

Having read the above, it probably goes without saying that if you plan well, budget well (including a contingency), and secure a fixed price contract, you should stay within your budget.

However, if you do start to change your mind, or be tempted to add back in some of those ‘nice to have’ ideas you decided against, you are at risk of a budget blow out.

OK, So You Did Change Your Mind…

All the advice to this point is trying to prevent this happening, but circumstances – and minds – do sometimes change.

No reputable builder will want to continue with plans that you really don’t want to live with. If this happens:

  1. Raise any issues immediately no matter how potentially innocuous they may seem. It might be that they can be dealt with quickly and efficiently, saving you time and money.
  2. Communication must go through the builder / site supervisor, not the tradesmen on site.
  3. Ensure that all changes to the plans or specifications are done in writing (a ‘Variation’) even if there is no associated cost.
  4. Variations should be covered in your building contract in terms of how additional costs should be addressed as well as additional time. Building contracts – such as the NSW Office of Fair Trading Building Contract (as used by Addbuild) – stipulate that any variation to the agreed contract price needs to be put in writing by the builder for consideration by the client.
  5. As we mentioned above, acceptance or rejection of the variation must also be in writing by the client back to the builder.

Further Finance Tips

There are some other tips that will ensure your home alterations go off without a hitch outside of budget control.

It is also important that you familiarise yourself with your rights in NSW, and that you understand all the insurance that your builder needs to prove to you they have.

In combination, this should protect you financially and legally from any unforeseen circumstances, like a builder being incapacitated and unable to continue, or a sub-contractor being injured on site.

Next Steps:

We realise we’ve given you a lot to think about (and read!). You might only do a major renovation once in your lifetime, so it really pays to be well informed.

If you feel that your project is ready to take forward and you would like to talk with one of our design consultants, contact us by calling (02) 8765 1555 or use our online form.

You can read client feedback about Addbuild on our reviews page and longer interviews with clients talking about their experience with Addbuild using our blog’s client testimonials tag.

Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email