How Not to Blow Your Cash on a Remodel

Congratulations, you bought a fixer condo or a house to call home.  You get to put on your creative hat and design your dream place.

However, I have seen people overspend unknowingly, and then when it comes time to sell, they learn the hard way that they still have to sell for market value.  It is a sad story that happens time and time again.  But it can be avoided.  Here are four tips to make the most out of your remodel and budget.

1. Don’t exceed current comparable sales: When I sat down with a L.A. based designer that I consult with for my selling clients, he told me “you paid $X, and when it is fixed up it will be worth $Y.  That difference is your budget.”  So for example, if you by a home for $500,000 and comparable sales of move in ready homes are $700,000, your budget is $200,000 (excluding costs associated with selling).  This will help in creating a baseline for the budget.
2. Make sure to have a “surprise” (also known as contingency) line item: Surprises will come up.  When I remodeled my condo, I put a contingency of 10% even though other project managers told me to do 25%.  Big surprise, I spent 25% over budget.  Things come up once walls start opening and when things had to be moved around such as outlets and plumbing.
3. Take your time: Shop around, evaluate your budget, and don’t rush if you don’t have to. If you plan accordingly and take your time, it will more likely result in fewer surprises down the road.
4. Prioritize: Yes, having reclaimed wood would look great as an accent wall and having Bluetooth speakers installed throughout would make for a great party, but that shouldn’t be a higher priority than changing out an electrical panel or fixing leaking plumbing. Prioritizing is a must.  Focus on health and safety, then big impact items (such as painting or flooring), then luxury items.  In the long run you will be happier living there, and when you go to rent it out or sell, you will notice you will get more out of your investment. Once you have spent your budget plus contingency, stop, re-evaluate, and decide how important the rest of the outstanding items really are.

Remodeling can be fun, exciting, and a way to express your lifestyle.  Unfortunately, money doesn’t grow on trees, so it is important to stay organized and to make the important decisions.  Before closing on your purchase, consult with contractor, Realtor, and whoever else you trust to assist in the process.