How to Create a Realistic Budget for Your Remodel
I’ve financed expansions that made money—and projects that quietly destroyed it. A remodel is capital deployment. If you don’t budget like an investor, you pay like an amateur.
Start With the True Cost, Not the Quote
Contractor quotes are optimistic by design.
Rule:
- Quote × 1.25 for real cost
- Add 10% contingency
Example:
- $20,000 quote → $27,500 real budget
Most remodel overruns land in the 20–30% range.
Break the Budget Into Control Buckets
Lump sums hide problems.
Smart split:
- 50% labor & materials
- 30% systems (plumbing, electrical)
- 20% contingency & surprises
Projects without buckets overspend faster.
Cap the Remodel Relative to Home Value
ROI matters.
Rule:
- Remodel budget ≤ 10–15% of home value
Spending beyond this rarely returns value at resale.
Choose Cash Over Credit
Interest kills ROI.
Example:
- $25,000 remodel at 14% interest ≈ $3,800 extra over 3 years
That money doesn’t improve the house—only the lender.
Track Spend Weekly
Monthly reviews are too late.
Weekly check:
- Planned vs actual
- Remaining contingency
- Work completed %
If spend outpaces progress, stop and reset.
Know When to Say No
Every upgrade isn’t an investment.
High ROI:
- Kitchens, bathrooms, lighting, paint
Low ROI: - Luxury finishes, custom extras
Ego upgrades drain capital.
Final Wall Street Rule
A remodel is successful when the house improves without damaging your balance sheet.
Budget like an investor, not a dreamer.
