Most renovations that "blow out" did not actually blow out. They were budgeted incompletely at the start, so real costs looked like overruns.
Here is how to structure the budget so that does not happen.
Build the budget in five parts
1. Pre construction
Design, engineering, certification, approval fees, reports and surveys. Modest relative to the build, but it comes first and it is often forgotten.
2. Construction
The contract price for the building work, based on a written scope.
3. Owner supplied items and selections
Appliances, tapware, tiles, lighting, floor coverings, joinery upgrades, window treatments, hardware. This is where budgets move most, because selections are emotional decisions made in showrooms.
4. Contingency
Held aside and untouched until the house is opened up. Hold more for older homes and for any job involving structural change.
5. Living costs during the build
Temporary kitchen, storage, rent if you move out, eating out more than usual, and the small costs that accumulate over months.
What sits inside construction that people assume is extra
| Item | Ask specifically |
|---|---|
| Demolition and waste | Included, and who disposes of it |
| Site protection, fencing, dust control | Included or excluded |
| Scaffolding and access equipment | Included for the whole duration |
| Electrical and plumbing upgrades | Whether current compliance work is allowed for |
| Waterproofing and wet area works | Product, warranty and inspection |
| Making good between new and old | Explicitly stated |
| Final clean | Included |
| External works and drainage | Usually a separate scope |
Setting priorities before you cut
When the numbers do not fit, cut in this order:
1. Cosmetic and decorative items 2. Upgraded finishes back to good standard finishes 3. Scope in rooms that are functional but dated 4. Staged work deferred to a later phase
Never cut:
- Structural sizing
- Waterproofing
- Drainage and stormwater
- Electrical safety and capacity
- Insulation, where the walls are already open
Those are the items that cost several times as much to fix later.
Staging a renovation properly
Staging works well if it is planned as one project and delivered in phases.
- Do the structural and services work across the whole area in the first stage
- Complete the rooms you use most first
- Rough in for future stages while walls and floors are open
- Keep the drawings and specification current so the later stages match
Poor staging is when each phase is designed separately, and the second stage has to undo the first.
Funding and cash flow
- Understand your progress payment schedule and align it with your funding.
- If you are borrowing, know what the lender requires at each stage and how long draws take.
- Do not allow payments to run ahead of completed work.
- Keep the contingency liquid, not committed to selections.
Tracking during the build
- One spreadsheet, updated weekly
- Contract sum, approved variations, and forecast final cost as three separate figures
- Every variation priced and approved in writing before work proceeds
- Selections tracked against their allowances so you know when you are ahead or behind
Related reading
- How much does a home renovation cost in Sydney
- Common home renovation mistakes
- Questions to ask a builder before signing a building contract
Build the budget from the bottom up
Rather than starting with a number you hope to spend, list what the project actually contains and price it in categories:
1. Consultants: design, engineering, survey, assessments, certification 2. Approvals and authority fees 3. Site works: demolition, waste, access, protection, scaffolding 4. Structure: framing, footings, roofing, repairs to existing 5. Services: electrical, plumbing, drainage, heating and cooling 6. Linings and finishes: plaster, tiling, painting, flooring 7. Joinery and fittings: kitchen, wardrobes, vanities, tapware, appliances 8. External: paving, decking, fencing, landscaping, stormwater 9. Contingency 10. Living costs: rent, storage, moving, meals if the kitchen is out
Line ten is the one owners forget, and on a long renovation it can be one of the larger figures in the list.
Cash flow, not just total cost
A budget that is correct in total can still fail if the money is not available when it is needed. Ask for the payment schedule tied to stages, map it against your own cash flow, and check when the largest payments fall. Deposits on joinery, appliances and windows often land earlier than people expect because of lead times.
Rules that keep a budget honest
- The contingency is for the unknown, not for upgrades
- No selection changes after the relevant trade has been ordered without pricing it first
- Review actual against budget monthly, not at the end
- Record every variation immediately, including the ones that reduce cost
- Decide in advance what gets deferred if the budget tightens
ORT Constructions prices renovation work against a written scope with the exclusions stated plainly, so the budget you set at the start is the one you are still working with at the end.
Frequently asked questions
- How much contingency should a renovation budget include?
- Hold a meaningful contingency separate from the construction budget, and increase it for older homes or any job involving structural change. It exists for what the house reveals, not for upgrades.
- Should selections be inside the builder's price?
- Either approach works provided it is clear. If items are allowances, know what the allowance covers and what happens if you spend above or below it.
- Is staging a renovation cheaper?
- Not overall, but it spreads the cost. It works well when the whole project is designed once and delivered in phases, with rough ins done while walls are already open.
