In part one of our renovation budgeting series, we established that that guessing at a budget, calling contractors to ask for quotes and going with the lowest bid is not the way to start your renovation project. We also outlined several common misconceptions about budgeting for a home renovation.

Now it’s time to solidify a better way to budget for renovation projects. By investing in design and planning, everyone involved will feel confident about the work to be completed and the proposed investment. Here’s what we recommend:

Step 1: Establish a Clear Scope of Work for your Renovation

A scope of work is a general description of the work you’d like to have completed. Ideally, you should put it in writing and be as detailed as possible, so your contractor understands all of the features you’d like to see included in your project. Also consider if there are some elements you’d be willing to sacrifice if budget becomes a concern.

This conversation starts with you, your partner and any other decision makers. Get clear on what matters most to you and understand what you want out of the home renovation. Your contractor will be able to help refine your scope of work, but a having a clear starting point is important.

Step 2: Establish a Budget Range

Unless you’re an experienced remodeler, it’s unlikely you’re going to know how much to budget for your scope of work. And that’s perfectly fine. Here are a few tips to help you get started:

  • Your initial budget should be a range, rather than a set amount. This will help your contractor provide options to meet your needs at various levels of investment. Your budget range provides a critical starting point to guide the design and planning work that must take place before actual costs can be determined.

  • Be willing to have an honest discussion about your budget to learn where it can be best invested. Think about what you can afford and are willing to invest to complete some or all of your project.

  • If there’s a limit to your investment, you need to define it. Is there a maximum amount you are willing to invest regardless of what can be accomplished?

  • To understand costs for ‘typical’ remodeling projects, we recommend the cost data published by Hanley Wood in their annual Cost vs. Value survey, which can be found at When viewing this data, please keep in mind that every remodel is a unique project and costs will vary accordingly. Your home has distinct features and you have unique preferences, each of which will affect the cost of your project.

With a clear scope of work, and an understanding of your budget parameters, you’ll be well prepared to take the next step and begin consulting with contractors.

Step 3: Schedule a Professional Consultation

The best way to evaluate your budget range is to schedule a consultation with a Design-Build contractor.  A Design-Build contractor can determine if your budget range is realistic for your desired scope of work. They will discuss budget options, but will avoid setting your expectations too firmly until a proper design and planning process can take place.

Depending on what you learn from the contractor, you may need to adjust your budget range to match your scope of work, or adjust your scope of work to match your budget range.

Keep in mind the initial estimate is likely to be an educated guess. This early assessment could be off by some degree, or you may choose to expand your scope of work during the design phase, so there is no guarantee that the final costs will fall within your target budget range. However, by following this process, in all likelihood, you’ll end up with a project that fits both your vision and your budget.

Once you’ve established a budget that you can afford and your contractor believes is realistic, you can begin more detailed design and planning work with confidence.

Step 4: Invest in Design and Planning

For a reasonable fee, you can hire a design-build contractor to complete the design and planning work for your project. In our experience, this is the step many homeowners skip – and it’s a huge mistake. Costs incurred as a result of poor planning can be staggering. A good design-build contractor will help you avoid these costs while achieving results more in-line with your vision. Many contractors will credit a portion of their design fee toward the cost of the project if you hire them to complete the work.

A good design-build contractor will foresee many of the challenges that crop up during a home renovation and will help you plan and budget for them. They can also make recommendations on how to creatively achieve your goals. They will be able to improve functionality while incorporating your desired design elements.

As your design evolves, your contractor will be able to establish more accurate costs and begin to tighten up the budget. Once design and planning work is complete your contractor will be able to present a complete scope of work and a final cost proposal. Unlike with the process described earlier, you will have confidence about the scope of work and the required budget before any work begins.

Additional Advice on Planning a Budget for a Home Renovation

If your budget range is well within your available cash reserves, then you simply need to set a reasonable limit on the amount you will spend on the project. If you do not have the cash on hand, you should investigate now how you plan to finance it. Will you need to take out a loan or a home equity line of credit? Talk to your bank and start exploring options to see how much funding you can have available before you finalize your budget and start planning your remodel.

No matter how well you and your contractor plan, there can be unanticipated costs. For example, once demolition work begins, you may discover that the drain pipes in your century home are starting to show signs of failure and you may want to replace them. To prepare for this, be sure to set aside about 10%-15% of your budget for unexpected expenses. Having that cushion will ensure that the remodel can keep moving ahead when unforeseen expenses occur.

Interested in discussing your upcoming renovation project? Contact Advance Design and Remodel to request a consultation.