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Are you planning a renovation project but are worried about going over budget? Learn from builders and contractors about the rooms most likely to face spiraling costs and WHY, so you can make sure it won’t happen to you.

Starting a renovation project is an exciting time, especially right now as homeowners across the country are rapidly rethinking what they want from their homes.

In fact, a recent study has revealed that more than three in every four households in the United States have carried out at least one home improvement project since the start of the COVID pandemic, and 78% plan to undertake at least one in the next 12 months.

1 in 3 Renovations Go Over Budget

The reality, according to RenoFi CEO & Co-Founder Justin Goldman, is that: “Renovating is expensive. Homeowners are often shocked to learn that their renovation wishlist can cost hundreds of thousands of dollars (this is the moment when they realize Chip & Joanna’s HGTV show shouldn’t be classified as reality TV).”

And you might be surprised to hear that, according to the 2020 U.S. Houzz & Home study, only 36% of homeowners hit their remodeling budgets last year, 31% went over budget, 3% came in under and 29% didn’t set one at all.

Which Rooms Are Most Likely to Tip the Renovation Budget?

We wanted to understand which rooms in the home most commonly go over budget during a renovation and, to do so, turned to specialists spanning designers, remodelers, and contractors to get their expert insight.

And we can reveal that it’s your kitchen that will most commonly take you over your planned budget, followed by the master bathroom.

The Reasons Why Kitchen Renovations Go Over Budget

A combination of expensive tradework and the desire to chase the latest style trends are common contributing factors.

1. The sheer complexity of elements

“Kitchens are one of the most common renovation projects that go over budget due to their complexity,” states Jon Jordan, owner of Evergreen Home Exteriors & Remodeling.

Kitchen remodels can be quite complex because you are dealing with so many different elements: countertops, cabinets, appliances, plumbing, flooring, and more. In a bedroom, for example, there is no tiling involved, no major appliances being installed, and no countertops or cabinets, which add to the price in a kitchen.

“There are so many things you can change that may not even involve layout,” says Adam Sherman, President of Cottage Industries. “Updating appliances, plumbing fixtures, tiling, etc.”

2. The kitchen is the focal point of the home

An upgraded kitchen is one of the first things potential home buyers look at, so a lot of homeowners want the latest and greatest, not only for themselves to enjoy but also for that resale value.

Adam points out, “Homeowners are driven to make the kitchen fancier because it is a show place. It’s a place in the home where they are going to entertain, so they are going to make these more expensive changes.”

Homeowners love to pick out the perfect cabinets that will accent the rest of their kitchen, but custom cabinets can cost much more, according to Jon. “A lot of our customers want to upgrade to granite countertops, but don’t know how much of a price increase that is.”

3. Kitchen renovations require expensive tradework

Kitchens also require more expensive tradework, like plumbing, heating and electrical. These trades not only require more certifications and experience than some others, like painting, they also have more overhead costs involved. Overhead like trucks, equipment, labor can add onto the overall cost. Therefore, the labor and prep work itself, not just the materials, will cost more.

“When you are going room by room, it is clear that the rooms that have more trades involved will be more expensive,” says Adam.

4. It’s never just the kitchen

Oftentimes, kitchen renovations will lead to a redesign of the first floor layout, and first floor layout changes will be costly.

Greg Harth, President of Harth Builders, says that good spatial planning has a lot more cost involved than material selections and reframing.

“If you could bump a kitchen out two feet, it completely changes what we can do with an island and with a layout. It may be borrowing space from a dining room, or we are completely rethinking how someone comes into the house from the driveway, all the way to the back of the house,” says Greg.

Many times, when people say their kitchen needs to be redone, it is not because the cabinets are falling down, or they don’t like the color. “There is more to it than that,” Greg says. Homeowners are unhappy with the “first floor flow,” or the way their first floor layout conflicts with how they actually use the space.

The Reasons Why Bathroom Renovations Go Over Budget

The need for extensive and functional features as well as expensive installation costs both play a part in pushing up budgets in the master bathroom.

1. High end shower features

Showers, especially walk-in showers, are often a budget pain point because of the many different optional upgrades and features that homeowners want.

“Faucets, plumbing fixtures and shower components can be more expensive than someone is anticipating, because they want the quality and functionality of what they see in magazines and home shows," says Amy Fisher, a Design/Build Consultant at Harth Builders.

The price of bathroom materials, such as tile, also varies widely. Tile prices can range from $5 to $25 per sq. ft.

“People see walk-in showers with tile up the wall, fancy accent tiles, and high quality tiling cut into a true square. If you go inexpensive and find the cheapest option at Home Depot, you’ll go to lay it on the floor and nothing will line up cause all the pieces are slightly different,” says Amy. “People don’t get how expensive tiles can be. Everyone wants quality, not everyone wants to pay for it.”

Other optional shower features, like steam capabilities, can quickly add up as well.

“If you want to put in a steam shower in your master bath, that could easily add 5, 6, $7,000 to the cost of the project,” says Adam.

2. Expensive installation costs

In many cases, homeowners will pick cheaper materials for the bathrooms to try to cut costs, not realizing that the cost of installation will still be quite expensive no matter what material you use.

“Not everyone can lay tile,” says Amy. “There are also complex ways to waterproof things. Many homeowners want something done right, so they don’t have to revisit it in a few years because someone did something wrong.”

“If you pick out something complicated to install, homeowners will sometimes think the expense is added material cost. In reality, it’s more labor as well,” says Adam.

It’s also important to note that even “small” changes to a shower, like increasing space by six inches on each side, require complete relocation of the plumbing to get the space up to code and move supplies over.

“Master baths are more expensive than most people give them credit for,” says Greg.

Other Reasons Why Renovations Go Over Budget

Besides looking at specific rooms that are likely to go over budget, there are also certain general factors that can cause a project’s budget to spin out of control.

1. “While You’re Here” syndrome

Once the contractor starts putting in new appliances, painting and working each day, many homeowners start to realize there’s more they want to get done. Amy calls this common phenomena the “while you’re here” syndrome.

It’s a lot easier to go over budget once the project has already begun, because the contractors are already there. A homeowner may think: why not?

“They will add stuff and add stuff, like custom bookcases, for example,” says Adam. “Or say, while we are painting let’s just paint the whole floor. While we are at it, let’s change out all of the plumbing.”

2. Previous contractor errors

In many old houses that have been through several renovations already, poor workmanship and mistakes from other contractors can cause homeowners to go over budget during a renovation.

“In the last 100 years, some homeowners have had 10 different contractors doing 10 different things, so there can be issues caused by contractors hired by the previous homeowner that didn’t do a very good job,” says Adam. Oftentimes, it’s difficult to detect these errors until after demolition.

When contractors find things like this from previous remodels that they need to redo or fix, this can add to a project’s budget, which also leads to the next point.

3. Lack of x-ray vision

Every home remodeling project requires a certain degree of guesswork, because contractors don’t have x-ray vision. And the primary problem here is unforeseen issues behind walls and under floors. Sometimes it is a rotted subfloor or old electrical and plumbing that are unknown to the homeowner or the contractor before starting a renovation.

“Even the best builder,” says Amy, “who will make sure there isn’t HVAC running through a wall, doesn’t have x-ray vision. There is always the potential there could be overages in budget due to mechanical costs.”

These invisible problems that can cause renovations to go over budget are always a possibility in every renovation project. That’s why it’s important to plan ahead to keep your renovation budget in check.

Top Tips To Prevent Your Project From Going Over Budget

1. Remember that older homes often contain hidden surprises

Oftentimes, the cause of budget overages isn’t the type of room that’s being renovated, it’s the condition of the home. One-hundred-year-old homes often have outdated and broken fixtures hidden behind walls, causing budget overages when the contractor has to fix them unexpectedly. If you are renovating an older home, plan for budget overages early.

2. Splurge in the design phase, not the construction phase

It’s important to get all of the specifics of your project finalized in the design phase, before you actually start construction.

“The best way to keep a handle on budget is during the design process, not during the construction process,” says Adam.

Just think about it this way; it is an easier hurdle in someone’s mind to make the decision to go with higher-quality selections (for example, quartz or marble countertops vs granite) part of the way through a project.

3. Don’t go for contractor with the lowest price estimate

People are easily fooled by a lower hourly rate. If you want good work done, it will be more expensive. “People think they are getting the same thing for a different price; they are not,” says Adam. “It may not be clear what the difference is in the beginning, but it will be in the end.”

“There is a unicorn, a guy that can do it all, that might be the most inexpensive approach. But then that might come with a sacrifice in schedule,” says Amy. “Someone trying to shop for price may find someone who can’t do it in 8 weeks; instead he will take 16 weeks.”

Amy recommends that homeowners trying to save money choose what aspects they are willing to do themselves in advance: maybe it’s being their own project manager, doing the painting themselves, or making that timeliness sacrifice. But be realistic about what you can and can’t do as a homeowner, so you don’t have to increase your budget midway through.

4. Tack on an extra 3-5% in budget contingency

Many homeowners wonder: how much should I factor into my budget for unexpected costs? Amy recommends an extra 3-5% of the overall renovation budget.

“Don’t max out your budget before you even get into construction,” says Amy. “If you spend $50k, then you get into it and realize you need to spend another $3k, you’ll be totally out of money.”

Read our guide on how to pay for home renovations to learn more about your options.

5. Educate yourself on materials

While many clients are focused on the look of project materials, or how they fit into the home aesthetic, Amy emphasizes that the quality of the material will matter more in the long run. “You get what you pay for,” says Amy. “Budget-minded clients are not going to get better products that will last a long time. If you can educate yourself on materials, not just the aesthetic, but the actual product itself, that is really important.”

6. Use a RenoFi Loan

Kitchens should have a 30-40 year lifespan, says Greg, it’s the last 15-20% of your budget will make the biggest difference.

Taking out a RenoFi Loan can help you make those final changes that will extend your kitchen, and overall home’s value and lifespan, without going over your budget.

“Whatever you can add in at the end makes the greatest impact. People don’t want to look backwards and say ‘I should have spent a little bit more, I should have added that when I had the chance.’ We are encouraging people to spend a little bit more on the functionality of the kitchen,” says Greg.

RenoFi’s contractor due diligence process will also make sure that your renovation budget is realistic, and your contractor is ready to take on the project, mitigating the chance of budget overages down the line.

Greg recommends that homeowners “be clear with their contractor or designer about what their real constraints are.”

“Or preferably, come up with the right design or plan for your home, and then find a good resource such as RenoFi, to allow you to borrow to do the work.”

So What’s the Best Way to Finance Your Renovation?

If you’re thinking about remodeling right now, you’re probably also considering how you’re going to finance the project.

And whilst you’ve probably been recommended to use a construction loan, home equity loan, HELOC, cash-out refinance or even a personal loan, we think you’re going to want to learn about an alternative.

In fact, we’d go so far as to say that you shouldn’t use a construction loan for renovations, nor should you use a cash-out refinance, or an unsecured personal loan re-branded as a home improvement loan.

But we want to introduce you to RenoFi Loans.

A RenoFi home equity loan is a new type of home renovation loan that combines the best elements of a construction loan with a home equity loan.

It’s the only renovation loan that doesn’t require homeowners to refinance and it’s the only renovation loan that doesn’t require the funds to be disbursed to the contractor through a messy inspection & draw schedule process.

RenoFi Loans are based on the after renovation value, allowing homeowners to borrow the most money at the lowest possible rate without having to refinance.

To learn more about your options, contact RenoFi to discuss your renovation project today.

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