How to Budget for a Bathroom Renovation
Things to Consider
Bathroom renovation costs can vary greatly depending upon many factors. When budgeting for a bathroom renovation, you must consider whether you wish to make only basic cosmetic updates, gut the existing and start from scratch, or your renovation plans may fall somewhere in between these two extremes.
In any case, you should perform a thorough study of the potential ROI (Return on Investment) before moving forward with your project because, if you’re like most, you don’t want to dump money into a bathroom renovation if you have no chance of getting some back when you sell your home! (Note: you may have all the money in the world and the ROI for you is purely the personal enjoyment of a bathroom renovated to your liking, if this isn’t you, keep reading.)
The information available regarding recouping of bathroom renovation costs is highly variable. National averages and typical home improvement data for return on investment of bathroom remodels (or any remodels, for that matter) are based on large sample groups of information and should only be consulted as a starting point for consideration. The truth of the matter is, everyone’s home situation is different.
Housing markets differ from state to state, city to city, and neighborhood to neighborhood. So, basing your bathroom renovation budget on ROI information derived from national averages is an unwise idea. Instead, follow these steps to help determine what your budget should be if you wish to base it on recouping the majority of the renovation costs in the future when you sell.
First, start with your desired bathroom renovation plan and pull together pricing. You can approach this in two different ways: Solicit pricing from professional contractors or, if you are a do-it-yourselfer, work up an estimate to self-perform the work.
When soliciting a budget price from a professional contractor, the more detailed information you provide, the more accurate the pricing can be. Most contractors will provide free estimates and will meet with you to walk through various aspects of your plans.
Your best bet when basing a budget on contractor pricing is to solicit three or more prices for the same work from highly recommended contractors in your area. The pricing you receive from each contractor should not be highly variable from the others.
If one is, you may request further break-out pricing and information from this particular contractor to determine potential reasons why. With comparable pricing in hand, you can use the average of these prices as a good budget to move forward into further consideration of your bathroom remodel.
If you are a fairly skilled do-it-yourself homeowner, you may wish to self-perform the renovation work to save on labor and markup costs. If so, work up a detailed estimate of the tools, materials, and equipment necessary for you to perform the renovation and use this as your initial budget to move forward to the next step.
Once you have budgetary pricing, contact your real estate agent to assist with determining your potential ROI. Discuss your renovation plans with the agent and provide them with the bathroom renovation budgets you have pulled together.
A good, local real estate agent should know your specific housing market and neighborhood well. They should be able to provide you with a market resale value of homes within your area that contain renovations and updates similar to those you are proposing for your home.
The resale value of these similar homes within your market area should then be compared to the current market value of your home (in its current condition) plus the renovation budget costs. This comparison will provide you with your potential ROI.
For example, you may have a $100,000 home in its current condition and your proposed bathroom renovation will cost approximately $10,000. Your real estate agent finds that similar homes within your market region with bathrooms similar to your proposed update sell for around $110,000.
This information confirms that you likely can recoup your bathroom renovation investment at the current budget.
You may find, however, that your bathroom remodels costs outweigh the resale potential of your home with the update. If this is the case, you have several options to consider.
First, go back to the drawing board of your remodel plans and find ways to decrease your costs. This can be achieved by reconsidering material grades (are you using premium gold-plated materials in your plans?) or decreasing the scope of the renovation.
Be careful not to stray too greatly from your original plans, as this may affect the original ROI analysis and require that you reassess the updated market value used. Another scenario may be that you have the potential to recover some of the costs of your remodel, but not all.
If you are willing to forego full recovery of the costs to, in turn, have some personal enjoyment in the remodeled space before you sell (or you have no plans to sell), then you’ll need to decide how much this enjoyment is worth to you. Lastly, if your bathroom remodels is too expensive and can recover little to no costs during re-sale, you may wish to abandon your plans for renovation all together and perform simpler, cheaper updates such as a fresh coat of paint and new fixtures for your own personal benefit.
In any case, the scope of your bathroom renovation is as endless as your imagination, but only you can determine your budget based on your personal financial situation, the price you’re willing to pay for the personal benefit, and potential for a return on investment at the time of resale within your local housing market.