house renovation

How to stick to a shoestring renovation budget

Information verified correct on May 1st, 2017

Renovate your house without breaking the bank.

Estimating your budget, sticking to it, and keeping tabs on your expenditure are essential for effective renovation
budgeting and planning.

  • Renovation budget

Typically a realistic renovation budget is around 5% of the purchase price for the property-- although this will vary greatly depending on the scale of your renovation budget-- this gives you a starting point. For example, for a $850,000 property you would need to set aside $42,500 for the project.

While it may be tempting to opt for a heated towel rail or a home theatre system, you need to be careful.

It’s a good idea to break-up each component of your renovation so you know what percentage of your budget you should allocate to different areas.

The below is an example of how you could break up a $42,500 budget.

RoomBudget percentage (%)Budget amount ($)
Master bedroom & ensuite15%$6,375
Guest bedroom15%$6,375
Contingency buffer10%$4,250

Use our calculator to find out how much you can afford to borrow for your renovation by entering your details.

  • Value-added

Before you start a renovation, it’s a good idea to discuss your renovation plans with a conveyancer to get an idea of how much value the renovation will add to your property.

The aim of a renovation is to increase the future value of the property. To forecast your return on investment (ROI), you should multiply the total cost of renovating the property by 10%. For instance, if your budget is $42,500 (and you stick to it), then you would expect to make a ‘profit’ of $46,750.

  • Project objectives

When setting your renovation objectives, it’s a good idea to start with the end in mind. To ensure your renovation is realistic, you should set SMART objectives that are specific, measurable, attainable, realistic and timely.

For instance, if you’re planning a landscape renovation you need to consider exactly what features you’re spending the money on (e.g. pergola and outdoor BBQ), the amount of money you need to spend on each item (e.g. $15,000), whether or not you can afford it, and the projected timing of your project (e.g. 3 months).
This will not only help you gauge your cash flow for the project, but it will also help with your time and project management- if you don’t set a deadline, you’ll never finish!

ALSO READ: How much will an outdoor renovation cost me?
ALSO READ: How much will a kitchen upgrade cost?

  • Be selective about splashing out

renovation budgetYour renovation will likely involve some degree of compromise, so be careful about the elements where you decide to splash out, and those where you cut costs. You need to separate ‘needs’ from ‘wants’ (you don’t need to spend $500 on 3 pillows like Ebony did on The Block).

Consider where it will be worthwhile cutting costs and areas where it makes sense to spend more. For instance, splurge on high-traffic or frequently used areas such as a kitchen floor and opt for cost-effective solutions in areas that won’t be used as frequently, such as a guest bedroom.

You can speak with a local agent to determine where you can save and where you should splurge based on similar properties in the market. This will help you understand what will add value to your property in the long term.

  • Research costs

Not only should you research material and product costs, but you should also become familiar with the labour and installation costs of different trade services, such as plumbing, electrical work and concreting.

You can use resources such as PayScale, the Australian Bureau of Statistics (ABS) or Service Seeking to compare the average labour costs for different Australian states.

For each renovation task (e.g. bathroom tiling), you should source at least three different quotes from suppliers to ensure that you’re getting a fair market price.

During this research stage, it’s a good idea to contact your local council or building authority to ensure that you’re not breaching any codes or regulations.

ALSO READ: How much should I be dishing out for trades?

  • Break-down costs

budget renovationYou need to break down the costs of the renovation by each individual task. For instance, rather than labelling one element "tiling", you need to break down this task into separate cost items such as  ‘area clean up’, ‘cost of tiles’ ‘waterproofing’, ‘labour’ (by square meter)  and ‘disposal of waste’.

As well as estimating the separate costs, consider the property value and the risk of over capitalising with your project.

Understanding the value of your property can help plan the renovation budget. For instance, a kitchen renovation may cost between $5,000 to $50,000 depending on the scale of the renovation as well as the appliances and fixtures you select. Generally, it is recommended that you spend 5% of the value of your property for a major kitchen upgrade.

  • Estimate costs

When enlisting a team of professionals, make sure you get itemised, written cost estimates to ensure that there is no ambiguity about what is included, or not included in the price.

Consider hiring a building inspector to assess whether any structural work needs fixing, because any major repair expenses will need to be factored into your budget.

Additionally, you should speak to an architect and request detailed drawings of your renovation plans, as well as licensed builders and specialised tradesmen, to get a complete outline of the costs involved for each project element.

Need finance for your renovation? Compare the loans below.

When you're renovating you may need a different type of financing to help pay for trades and for supplies as the bills come in. Compare the below personal loans and lines of credit to see which one could suit your needs.

Rates last updated May 1st, 2017
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
NAB Personal Loan Unsecured Variable Rate
An unsecured loan with a redraw facility that allows you to access money you've paid in advance. You must have held a NAB Credit Card or Transaction account for at least 6 months before applying.
From 14.69% (variable) 15.55% $5,000 1 to 7 years $150 Go to site More
Latitude Personal Loans (Unsecured)
An unsecured loan designed for multiple purposes – renovating, buying a car or travelling. Funds can be in your count in as little as 24 hours.
From 13.99% (fixed) 15.2% $3,000 2 to 7 years $250 (Loans under $4000 - $140) Go to site More
CUA Discount Fixed Personal Loan (Loans over $30,000)
Take advantage of a competitive fixed rate and no monthly fees when you borrow over $30,000
From 10.99% (fixed) 10.99% $30,000 1 to 7 years $0 Go to site More
NAB Personal Loan Unsecured Fixed
An unsecured loan available for a wide range of purposes for a long period of time up to 7 years. You must have held a NAB Credit Card or Transaction account for at least 6 months before applying.
From 14.99% (fixed) 15.85% $5,000 1 to 7 years $150 Go to site More
St.George Get Set Loan Personal Loan
A revolving line of credit that lets you access your funds as and when you need to.
From 17% (variable) $5,000 $150 Go to site More
ANZ Fixed Rate Personal Loan
A flexible loan option that lets you pay off your debt, buy a car, fix up your house or cover travel costs.
From 13.95% (fixed) 14.81% $5,000 1 to 7 years $150 Go to site More
ANZ Variable Rate Personal Loan
A variable rate loan that lets you make and redraw additional repayments.
From 14.69% (variable) 15.55% $5,000 1 to 7 years $150 Go to site More
Bank of Melbourne Unsecured Personal Loan
An unsecured personal loan that gives you a choice between a fixed or variable rate.
From 12.99% (variable) 13.87% $3,000 1 to 7 years $195 Go to site More
BankSA Unsecured Personal Loan
BankSA allows you to borrow up to $40,000 with your choice of a fixed or variable rate.
From 12.99% (variable) 13.87% $3,000 1 to 7 years $195 Go to site More
Rates last updated May 1st, 2017
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
Citibank Ready Credit 7.9%
A low-rate, flexible personal loan that makes it easy to achieve what really matters to you.
From 7.9% (fixed) $5,000 2 years $149 (One off establishment fee) Go to site More
Bank of Melbourne Get Set Loan - Line of Credit
This is a flexible line of credit loan from Bank of Melbourne.
From 17% (variable) $5,000 $150 Go to site More
St.George Get Set Loan Personal Loan
A revolving line of credit that lets you access your funds as and when you need to.
From 17% (variable) $5,000 $150 Go to site More
BankSA Get Set Loan
The BankSA Get Set Loan is a line of credit offering flexible payment options.
From 17% (variable) $5,000 $150 Go to site More
Rates last updated May 1st, 2017
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
4.59% 5.00% $0 $0 p.a. 95% Go to site More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.88% 3.89% $0 $0 p.a. 95% Enquire now
NAB Portfolio Facility (LOC) - $500,000 to $999,999
Enjoy the flexibility of a line of credit home loan which allows you to borrow against your equity for investments and other purposes.
5.41% $0 $550 p.a. 90% Go to site More info
Westpac Equity Access
A loan with low minimum loan amount , low ongoing fee and borrow up to 95% LVR.
6.08% $600 $10 monthly ($120 p.a.) 95% Enquire now
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  • Beware of hidden or unnecessary costs

It’s worth considering DIY projects, such as painting or creating your own furniture, to cut costs.

Speak with people to highlight any costs that you may not have considered in your budget and planning, such as the cost of waste disposal. However, don’t fall into the trap of thinking that you can mbudgetcostsinimise costs by purchasing fixtures and materials yourself- remember that professionals buy in bulk, so they’re entitled to a trade discount.

If possible, don’t move plumbing and electrics as this can add significantly to your costs due to the cost of removing and installing new pipes.

Ensure you consider all possible costs involved for the renovation- council fees, architect or conveyancer fees, or the cost of your mortgage repayments, may be easy to overlook at the outset. Make sure you conduct a complete cost analysis to ensure that all expenses are accounted for.

  • Contingency buffer

One of the most critical components of budget planning is to have a contingency buffer of funds to ensure that you're financially stable if things don’t go as planned. As a rule of thumb, you should set 10-15% of your overall budget aside for any unexpected costs that may arise in future.

  • Track your expenditure

Keep a record of your receipts and maintain a budget spreadsheet that's up-to-date. By keeping track of invoices and receipts, you’ll have a clear idea of your cashflow and you’ll be less tempted to splurge on that underfloor heating.

Remember to speak to a tax specialist before you start your renovation or investment project so you understand the tax implications involved.

Make sure you record any variations or unexpected costs for your project, as this may help with future planning and decision making.

  • Consider a fixed-price contract

Some builders offer fixed-price contracts which may be useful because it will allow you to know your costs upfront which can facilitate your cash flow and budgeting.Street appeal is an important consideration for any home renovation.

  • Think about street appeal

You should consider the exterior of your property and think of ways that you can boost its appeal to onlookers. This may involve small tasks such as installing a new fence, investing in a modern letterbox, sprucing up your outdoor pathway or altering the front door with fresh paint or a new handle.

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Belinda Punshon

Belinda is a journalist here at Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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