Renovation Cost: How much are you expected to pay?

Many home owners (especially first timers) do not really have any idea what is the amount of money they need to fork out when it comes to renovating their home.  In this post, I am going to guide you on:

1. What are you expected to pay for in a renovation works.
2. How to set your renovation budget (for your ID to work on)
3. How to stretch your money to accommodate all the renovation cost.

What are you expected to pay for in a renovation works

To give yourself a good starting guide, you can check out the packages from Interior Design Companies from renovation fair or on their websites.  Most of them provide similar packages which you can use it as a guide.  For this post, I am using the promotion renovation packages from Homesuccess as an example.

We will start off with the renovation cost that you will be paying your ID.  I have done a rounding up of price from Homesuccess.  Another example is from Image Creative.  I got the promotion pamphlet from a Renovation Fair.

Image Interior Package

HDB resale packages
3 room: $20,000
4 room: $23,000
5 room: $25,000
Exec. Apt.: $27,000

HDB standard packages
3 room: $10,000
4 room: $12,000
5 room: $13,000

HDB premium flat packages
4 room: $11,000
5 room: $11,000
Exec. Apt.: $12,000

New private Condo & DBSS packages $12,000

Looking at the price, you might think that these are the prices you will be paying.  However, you are wrong.  There are quite a number of other basic  renovation works that are not included or insufficient in the packages.  Works like changing of all windows and grilles, extension of kitchen cabinet (if you have a big kitchen), bedroom wardrobes, hacking of walls (if you intent to merge some rooms), doors, etc.  Depending on how fancy you want your home to be, you might need to top up the renovation packages by $5,000 – $10,000.  To conclude, (unless you are renovating your house like a palace or with many special requirements) your renovation cost to your ID should be about: package + $7,500 (estimated additional works not included).  If your house is HDB 4 room resale, your renovating cost to your ID is estimated to be $23,000 + $7,500 = $30,500.

That is not all, there are other accessories and other expenses that you will need to include into your TOTAL renovation cost:

1. Sanitary accessories: ranging between $4,000 – $8,000
2. Lighting accessories: ranging between $1,500 – $4,000
3. Electrical works (Common industry practice to exclude this from renovation cost): ranging between $2,000 – $4,000
4. Home electrical appliances: ranging between $7,000 – $15,000
5. Furniture: ranging between $5,000 – $15,000
6. Curtains: ranging between $1,500 – $5000
7. Miscellaneous cost (moving cost, pest control, etc): $500 – $1,000

My pricing range is from the minimum (nothing fancy but simple and lower end accessories) to high end accessories.  Of course, there are no limit for high end accessories, which can go even higher.

Therefore, if you take a HDB 4 room resale as an example with all the minimum estimated cost of accessories, the estimated total cost of renovation will be $52,000!  I guess a lot of first time homeowners are not expecting this kind of figure!

Here is a example of my renovation financial budget that I used for my 4 room HDB resale 2 years ago.  The total amount I paid for my renovation is very close to my forecast.

Renovation Financial Budget 1

Renovation Financial Budget 2

Renovation Financial Budget 3

Below is the excel spreadsheet (like what you see in the above pictures) for my renovation financial budget.  Hope it can be helpful to you.

Renovation Financial Budget

How to set your renovation budget (for your ID to work on)

Budget is one of the must asked questions by IDs.  They need to know how much you are willing to spend so that they know what can be done with that amount of money.  Rule of thumb for setting budget is “buy what you can afford”.

For homeowners who are wealthy enough to have no budget constrain, you might still want to let your ID know how much you are willing to spend.  This is to let your ID know that you are not a “open cheque book”!  For a 5 room HDB resale or 3 bedroom private condo, you should be able to renovate your home to your fancy and purchase good quality accessories with $150,000 (this is excluding extreme high end accessories e.g $10,000 sofa set).  Maybe you can work your way back from here by deducting the accessories cost and determine your renovation budget for your ID.  Using my maximum estimated cost for accessories, you will have a budget of $98,000 for your ID.

For most people, renovating home with a realistic budget is important.  You do not want to pay thru your nose for something that you cannot afford.  If you have limited cash and do not wish to take any loan or small loan amount, then work your way back starting from your cash (e.g. $50,000) with loan (e.g. $15,000) by deducting the accessories cost.  With a total fund of $65,000, using my minimum estimated cost for accessories, you will have a budget of $43,500 for your ID.

If you are using full renovation loan without cash, beware not to over commit yourself.  See my previous blog on renovation loan.  Many people over commit themselves just on the loan without thinking of the extra expense they need to spend on their accessories.  Do a financial plan for the whole renovation.  Think of where are you getting your money for the rest of the rest of the accessories.  Think of how much loan is comfortable for you and the repayment amount per month.  At least at the end of the day, you know that you are renovating at cost which you are comfortable in.

TIP:  If your budget is $50,000, do not declare the full $50,000 to your ID in your initial meeting.  Provide him with about 85% ($42,500) of your budget for him to work on.  Reason is because a lot of IDs will try to stretch your budget to the maximum by coming out with a renovation contract that is worth 10% – 20% more than your budget ($60,000 in this case).  Coming out with a higher price allows the IDs to maximise their profit from you and at the same time allows room for negotiation.  Therefore, if you declared a lower budget to your ID, you will alway keep your renovation cost under control or within your planned budget.

How to stretch your money to accommodate all the renovation cost

1. Make use credit card 0% instalment plan.  Furniture and electronics can be purchased using credit card in big electronics stalls like Courts, Harvey Norman or Gain City.
2. Buy your electronics during IT fair.
3. Overstate your renovation loan amount and get cash back from your ID. Example the actual renovation price from your ID is $50,000.  Your ID help you to overstate the renovation amount to $60,000 so that you can get the full renovation loan of $60,000 instead of $50,000.  After getting the cash from the bank, the ID will give you back $10,000 cash.  This method is not legal (as good as provide false information to the bank) but is being practiced by the industry.  I will not recommend using this method unless your ID is trustworthy.  Reason is because your ID will get the full amount of the renovation price before the renovation even started.  If the ID vanish with your money, you will incur a big debt without a renovated home.
4. Go sanitary and lighting shopping along Balestier Road.  Do your homework.  See my previous post on sanitary and lighting in Balestier Road.  I recommend that you do a walk with your partner in Balestier Road (without your ID) before doing the actual shopping at the shops that your ID bring you to.  I hope you understand what I mean. 
5. Use ID that do not charge design fee (about $3,000).  Most IDs do not charge design fee.  Therefore, there is no reason why you are paying design fee unless the ID is so special or he is providing exceptional design or services.
6. Negotiate prices for all your accessories.  This include Gain City as well.  Use 20% as a guide.

Hope this post can help you!

Vincent