Intro to Project Planning
The topics discussed in this section represent decisions that will affect the entire project and should be made early in the process. Good planning is key to the overall success of the project.
This section discusses the two major early planning decisions that will most affect the outcome and timeline of the project: financial decisions and management decisions. Financial decisions include budgeting, contingency planning, and financing. Management decisions include timeframe, "sweat equity", and hiring professionals.
Keep in mind that no amount of planning will cover all contingencies, but a sound plan can help you overcome any setbacks that crop up through the process.
One of the fundamental aspects of sticking to a good plan is to start with good record keeping. I strongly suggest maintaining a three-ring binder with copies of all proposals, invoices, decisions, and research. You can also use this binder to store warranties for the fixtures, appliances, and materials in your project. At the end of the project it serves as a historical record of your process.
Taking Stock
One of the first issues that needs to be addressed is your own set of needs and desires for your home. The questions on the Programming Questionnaire page can help you figure identify these needs and wants. You will need to determine among other things:
- What "level" of project you are ready to undertake - full gut rehab or simply redoing the kitchen and bathroom
- Where you want to live - every neighborhood has its own individual character
- The kinds of spaces you want in your new/old home
- How do you want the home to feel - modern, historic, refined...
- The level of finish you desire - solid surface or laminate counter tops, vinyl or ceramic tile, carpet or hardwood floors...the list goes on and on
- Which architectural features in the home can be saved, replicated or refinished
- How will the project be financed - several banks offer rehab loans based on the future assessed value of the home. In addition, there are state, federal, and local incentives to renovate homes in certain areas
Preliminary Financial Planning
The most difficult and stressful decisions you will have to make through this process are likely those that have to do with budgeting and financing. There is no getting around that fact that renovation is risky and can cost a lot of money. Your early financial decisions (how you will fund the project) have a large impact on later work and your ability to successfully complete the job.
Budget
Budgeting for a renovation project is closer to art than science. Anyone who has ever gone through this process knows that keeping within a budget involves making difficult decisions. The ways to spend your money are endless, but your bank account is most likely not. Your Realtor®, your lender, your design professional, your contractor, and helpful friends who have been through the process can assist you in setting realistic financial goals and fitting your ideas and goals into your budget.
If your decide to get a standard construction loan, it is likely that your lender will require a detailed budget as part of the approval process. In this case you may need to get preliminary drawings and preliminary bids from contractors prior to closing. Other loan products require you to hire a "consultant" who prepares a budget and approves construction draws as the work progresses. Even if you are financing out of pocket, a preliminary budget is indispensable.
Contingency
Your ballpark target budget should include 10-15% or more as a "contengency" fund. You will need to tap into this money when your contractor determines that you need to replace an additional six floor joists under the bathroom. Or when you find out that the windows you thought you could repaint aren’t salvageable (see rule
number two).
Funding and Financing
You have many options for funding your renovation project, but make sure that you have enough money in place before you begin the project. You don’t want to be caught in situation where you have invested money in your property and cannot complete the renovation. If this happens, you are not likely to recoup your investment. Several banks offer “purchase-renovate” products and will loan you money based on the after-improved value of the property. Depending on the location and type of project, the state and federal governments both have tax-credit programs that can help defray renovation costs of properties in designated historic districts.
Be careful that you do not agree to borrow more money than you can comfortably make payments on. Be wary of adjustable rate mortgages (ARMs), interest-only loans, and other programs that you either don't understand all the rules. This is a particularly key point for first-time homebuyers. On top of your mortgage payments, home ownership carries with it a host of additional financial requirements including (but not limited to) ongoing maintenance, insurance, taxes, sewer, water, electric, security, and gas.
Preliminary Management Decisions
It takes an especially dedicated person to live in a house while it is being renovated. If you intend to do this, you must have a minimum set of working facilities such as bathroom and kitchen in order to occupy a residence. Since most gut rehabs take between 6-12 months to acquire, finance, design, and construct, people generally prefer to maintain an alternate residence during construction.
Plan out what you will do if the project takes longer than expected, or contractors are difficult to schedule when you need them. The summer months when everyone is working on house projects are typically a contractors’ busiest.
Your Involvement
You must determine the extent to which you want to be involved in the process. Things to consider while making this decision include:
- How much “sweat equity” can you contribute? You can save money by doing some of the non-structural demolition yourself (plaster, non-structural walls, old wiring, old plumbing, etc). Other things that are relatively easy to learn are painting, tiling, cabinet installation, and hardware installation.
- Can you serve as general contractor? The general contractor gets bids for work, coordinates sub-contractors, verifies workmanship, and makes sure that work is performed per plans.
- What is your decision-making process?You will be expected to make numerous decisions regarding finishes such as counters, cabinets, colors, fixtures, carpet, etc. The more reading and research you do beforehand, the better equipped you will be to make informed decisions.