When it comes to determining the real cost of remodeling, throw the budgets shared on those home makeover shows out the window.
Those budgets pale in comparison to what you really need to achieve remodeling success because they don’t factor in the hard and soft costs of remodeling and most likely get materials and labor donated in exchange for free public relations.
So, what’s a homeowner to do? Research the real cost of remodeling before getting started with the planning of your project. As mentioned in a previous post, Top 10 Remodeling Question: Should I Remodel or Move?, I suggested taking a look at the Remodeling 2013 Cost vs. Value Report* because it is a great benchmark for reality checking your proposed budget. However, while this report contains detailed descriptions of common remodeling projects and their associated construction costs in major U.S. housing markets, it only takes hard costs (i.e. the costs associated with actual construction like plumbing, framing and finish materials) into consideration leaving soft costs out of the loop. Another budgeting resource is Houzz.com‘s breakthrough Real Cost Finder.**
So, what are soft costs? Soft costs are the non-physical costs involved in the completion of your remodeling project, which include but are not limited to professional fees such as architectural and engineering fees, permitting, etc. The Remodeling 2013 Cost vs. Value Report and Houzz’s Real Cost Finder also do not factor in an important aspect of your budget, a contingency reserve to cover unexpected costs such as termite damage or a water leak.
As you look at the hard costs shared in these reports, budget for soft costs by using the 20% to 29% Rule. For every $10,000 in hard remodeling costs, budget $2,000 to $2,900 in soft remodeling costs as follows:
Keep in mind that every remodeling project does not require all of these costs. However, the broader the scope of work (i.e. the more bells and whistles you want), the more likely you’ll need to consider more of these soft costs.
As far as the contingency reserve mentioned above, set aside an additional 15-20% to cover unexpected costs such as termite damage or an extensive, undetected water leak.
Always having your budget bases covered is a great way to reduce the stress associated with remodeling.
Infographic credit: Tiffany Hales