Paycheck Chronicles

Underestimating The Costs of Renovations

I love to watch television programs about house renovations.  I don't watch TV in general, and we don't get any home improvement channels where we live, but I do quite enjoy it when I'm visiting family or sitting in a waiting room.

One thing I don't like about this type of television is that the programs always make it look like you can do huge-mongeous renovations on a house for very small amounts of money.  That's just not realistic, and we all need to keep that in mind when house hunting.

I watched a program last night (yes, visiting family) where they practically rebuilt an entire house for $80,000.  It was awesome.  It was also completely ridiculous in the real world.  A full kitchen tear-out and redo isn't cheap.  Neither is tearing out a bathroom, drywalling, or wiring.

PCSing families often look to not-perfect houses and plan on how they can make those houses work for their families.  Maybe you need a place for your parents to visit.  Maybe you have a child with some special needs.  Maybe someone works from home.  Maybe you have all three!  It is pretty rare to find exactly the right house in exactly the right area at exactly the right price.  That is one of the reasons that television house renovation shows are so popular.

So, what do you need to do when you're looking at a house, and you know it needs work?

1.  First, get some actual estimates from actual builders.  They're not going to be able to get specific, but they should be able to get you a price range.  If the current owners can't wait for you to figure out if the house can be renovated to be right for you, this isn't the right house.

2.  Second, assume that any work will cost significantly more than estimated.  I'd say to assume that it will be 1 1/2 times the estimate.  Hopefully, you'll be way off and you'll have significant funds left over.  But you'd rather plan high and be pleasantly surprised than planning low and being unpleasantly surprised.

3.  Third, make sure that the cost of a house and the cost of the renovations doesn't pull your budget apart at the corners.  If you can afford $2200 for housing costs, don't get a $1700 mortgage and then a $600 loan for renovations.  It is so easy to justify that extra cost, especially if you choose short-term financing.  "We'll just cut back for a year or two."  This is truly a recipe for disaster.  Don't put yourself in this situation.  Again, better to be pleasantly surprised if your budget has free funds.  In a perfect world, you've saved up that renovation money before you start the job.  (We all know this isn't always possible - life is challenging!)

Remodeling can be the solution when you have certain needs and they can't be met by the available housing in the area.  However, don't let the costs get out of hand or you'll create problems that last longer than the thrill of the project.

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