Setting a budget for your renovation with Claudia Brdar

Claudia from The Renovate Avenue shares practical advice on how to set a budget for your next home renovation project.

We cover:

Claudia's budget renovation formula

How to ensure there's space in your budget for unexpected expenses

Exactly how to go about setting the budget

Tools to set-up your budget

Where and how to save money in your budget (including what you can and can't DIY)

Why you need to speak to an Accountant before setting your budget

What to do if you start going over budget

This episode is part of a very special DIY renovation series.

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Claudia from @therenovateavenue and Founder of the DIY Renovation Academy will join us once a month on the show to take you through EVERYTHING you need to know to DIY your reno.⠀

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This is like a little sneak peek into her super popular DIY Renovation Academy course.⠀

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This series is exclusively for Dream Home Movement listeners.

**This episode of the Dream Home Movement was recorded live at the RPPFM**

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Guest bio

Claudia and her husband Pete have renovated small properties right through to large scale projects. Several years ago they bought a run-down 1960's weatherboard house (purchased for $460K) and ended up completing a major renovation ($75K), creating a beautiful sought after home ... on a tight budget! They set the suburb record for a property price of $1.035 million (2017)!

They're currently renovating a 1960's brick house to sell.

Both Pete and Claudia have a real hands-on DIY approach when it comes to renovating, focusing on achieving that ‘WOW’ factor ... thinking bigger, outside-the-box, and never afraid to take a risk.

Claudia created The Renovate Avenue to share her knowledge, and inspire others to climb the property market via the renovation avenue, building a financially stable future to retire earlier (and do what you love).

Transcript

(00:00):

Welcome to the dream home movement. This is your weekly dose of home and property inspiration, bringing you clever tips and advice from the very best experts and real life reno stories with your host Jo Violeta

(00:22):

We are talking about setting a budget for your renovation and this is part two of our series with Claudia Brdar from The Renovate Avenue. Now Claudia, I think you'll recognise her voice and name because she's been on the show a few times, but just to remind you just in case you're a new listener, Claudia is a renovation and home-style specialist on any budget and she's the founder of the DIY Renovation Academy of which I am honoured to be a student. I am learning so much and what I'm learning in the course is how to succeed with my renovation and if you want to check out the course, if you want to learn how to succeed with your renovation, then I highly recommend checking it out. Claudia, welcome back to the studio. It's lovely to have you here.

(01:18):

Thank you so much, Jo. I've got to say you're a great student to have on board at the DIY Renovation Academy. Thank you so much for the feedback that you're offering and I'm glad to hear that you're enjoying it. I'm enjoying it so much. So every question I feel like I've ever had about renovations, home improvement style, like it's all being answered in a great, like a great amount of detail, but not so much that it's not accessible or overwhelming. It's awesome. It's just the right balance. So yeah, it's really, really good. And the little Facebook community that you've got rockin' on there is, is awesome as well. Aimee's part of the community we had Aimee on. Aimee's one of Claudia students. You might remember Aimee from a past episode. Aimee is the founder of Tiny Stays, so she actually builds tiny houses and then people can go and stay in them,uthrough Airbnb and they're just beautiful.

(02:17):

But we're not talking tiny houses today. We're talking budgets and numbers, which is equally as exciting, but it's super important. So let's start with the why, Claudia. Why is it important to set a budget for your renovation? Well, firstly, once you know exactly what budget you have to work with, you want to make sure you're meeting that budget. You're not blowing your budget. So that is why it's so important to plan out exactly what your renovation will entail, what you'll need to spend money on so you don't blow out your budget. And I also want to mention as well, when you're working at your budget, always allow 10 to 20% because nine times out of 10, to be absolutely honest, your budget will blow out. For some reason. There may be some unforeseen issues that you will only come across a once you know, this things such as termites that you only get to see once you pull out the, put the plaster, the walls, you'll get to see termites, hopefully not.

(03:20):

But the, and there's things like molding and stuff that you need to fix. So these sorts of things and issues come up. Once you get stuck into your Reno, you may be like halfway through and you're like, Oh no, there's, there's this issue that we've come across and we're going to need to put money towards that. So like I said, 10 to 20% on your buffer is really important when working at your budget's so important and you want to stay on track and check in with your budget regularly to absolutely. I agree. Carl, my husband Carl so he presents our finance segment,uand he helps people organise home loans and urefinances for their renovations and that sort of thing. But he always recommends if you're going to be organising some money for your renovation, that you do need to factor in that buffer because you just can't, you can't, you can plan and we're all for planning, but there are some things that you just can't predict, like as you said, the termites or renovating your bathroom and pulling out a wall and then realising that there's mould there and will, or one of my friends recently that they had like a drip in their bathroom and they had only recently had it renovated like a few years ago.

(04:36):

And they discovered that their, all, their plumbing had not been installed correctly and it just all needs to be redone, which has happens. Super expensive. So I think, yeah, that buffer is so very important. And also say, you know, how last last episode when we had you on we were talking about setting your goals, so the wife, your renovation. So if the wife, your renovation is to make profit. Yep. Your budget needs to fit in. Yeah. We've actually made exactly profit. So we agree. Setting your budget is super important. And having that buffer that, how do we actually go about setting up a budget, particularly for beginners. We've never done anything like this before. Know exactly what work needs to be undertaken. So know exactly what you're going to need to do. Write it all down, write everything down. I'm talking from you know, painting to the knobs on your doors and you know, front door, whatever.

(05:39):

Just write it all down, everything you need to change and update, write it down and then start researching what all the costs are going to be. So, and I'm talking even even door knobs, like kitchen cabinet handles can cost from $10 to 80 bucks. So start researching, go out there, you know, go to your Bunnings store, go to Reece, Tradelink or wherever you want to go to source your products and start getting an idea of what things are going to cost you and write it all down and know exactly what you can splurge on. And you know, you got to understand that there was a client recently that I dealt with and she picked a stone bath. It was like $10,000, and didn't really take into consideration that the $10,000 was going to blow out her budget. She just loved this stone bath and who doesn't, you know, the stone bath's absolutely amazing, but they're gorgeous.

(06:34):

Be realistic, be absolutely, really stick. If it's not within your budget and it's gonna throw it all out please just take any consideration that that $10,000 bath is going to eat into your vanity, your shower and, and the rest of this stuff. So just really be you know, keep that in mind. Be realistic with what you're splurging on and what you can't splurge on. Okay? So if you see something that you have to have, then you need to make adjustments elsewhere. Yeah, yeah, yeah, that's right. If you really want to go for $10,000 stone bath, then it's most likely your vanity will be of a lesser quality if it's not gonna fit into your budget. So just be realistic shop around. There's sales happening all the time too, and you can get stuff, you don't have to pay full price for everything these days.

(07:20):

There's sales happening all the time. So just really get out there, shop around and do your research. And where do you set up your, your budget. So do you set it up in a spreadsheet or is there a special app or Excel? So I go into Excel and make a spreadsheet. There's a spreadsheet on my course but it's a spreadsheet which shows your low range costs, mid range cost and then high end range costs. And it gives you a sort of estimate and rough pricing on what things will cost from your bathroom, your kitchen plumbing costs and things like that. So you can really work out on Excel. So just, and like I said, with your list of everything that you need to implement, so all the work that you need to do, write every single thing down and then, you know, exactly what needs to be done and what price goes against it as well.

(08:13):

What you can spend against it. But using Excel is really, really helpful. I think just recording everything is you know, and just checking in with it regularly to make sure that you're on track with your budget too. I think that's really key. Checking in regularly. And I love that at that spreadsheet that you've set up because it also on the spreadsheet, Claudia also showed you what can be DIY and what must not be DIY, but you need to get a trade in force. It's important to when you're setting up your budget to be clear on what you can do yourself. And you do need to invest in a professional. Yeah, definitely, definitely to do. And where I've saved money, for example, my husband and I, Pete, where we've saved money with DIY is painting. I know it's hard work and it takes time, but it's going to save you thousands of dollars, do it yourself.

(09:05):

And if you're not sure, ask, go to your paint shop, ask, ask the people that work there or go on YouTube. There's so many different videos on how to paint effectively, do a good job. And not leave streaks all over the place. And there's also other things you can DIY such as the outside you know, you landscaping or if it, you know, you want to paint the outside of your house, that's things you can do yourself as well. Don't do plumbing yourself if you're not a qualified plumber. Don't do electrical work if you're not an electrician. And those sorts of things, leave that to the qualified tradies and the stuff that you can, DIY is more the painting or if it's cosmetic renovations you can do yourself. But there's ways you can save money on your budget too and take off thousands of dollars there. How do you, we spoke about setting a budget because it can help to make sure that their renovation is actually profitable. If that's your goal, how do you figure out whether your renovation will be profitable? Like is there a formula or, yeah, there is. There's a renovation formula which will help you work out whether you're going to make a profit return on, on sales. So there's a few things I'm going to go through it. Jo and lucky that I am lucky that there is actually a formula that would have been a little bit.

(10:26):

No, I kind of knew there was, there's a formula that I usually work out when I'm looking at a property and I and Pete and I are considering renovating, we'll work out exactly what the sale price is and what the potential resale price could be. So what you want to work out is your potential sale price. So like I said in the previous episode, do your research on the property market, suburb due diligence as well and from your potential sale price work out minus your purchase price, then minus your renovation costs. So ensure all your budget and financial finances are in place. Sorry. Then you've got to minus your hold costs, your fees, your duties, costs, solicitor, agents, marketing costs as well. So minus that as well. And then what that will equal is your potential return. So what you expect the sale price to be achieved.

(11:29):

So again, it's your potential sale price. Start with that minus your purchase price. Then minus your renovation costs minus your fees. So your solicitor fees, agent fees and that should equal your potential return. So what you expect the sell price to be achieved and you need to work out whether that's going to be beneficial to you, whether that end result will be beneficial from that, this formula will give you a much better idea of what your potential outcome could be. So that really helps me work out. Whether the property I'm looking at could be a good investment or not. Oh, that's really smart. Especially that, that you mentioned also factor in the agent fees and that the legal fees like the conveyancer and all that sort of thing. Because I don't think people factor that in. They're just like, okay, I bought this house for 500 I reckon I can renovate it and sell it for 700 the rhino is going to cost me a hundred grand, I'm going to make a hundred grand profit.

(12:37):

Yes. No you're not. No, because there's other expenses involved. And then I suppose, I suppose when you're making that decision, you're looking at why don't you take away all those expenses, you look at what you're left with and then I guess it's a case of, well, is that worth my time? That's right. Exactly. I so agree. I so agree. And the tears and the late nights and the, you know, exactly giving up my weekends. So yeah. And then there's also capital gains tax, which is another one. So if you've bought a property, and this will vary between each state. So just check it out. And I think only with listeners a year in Victoria, is that right? Ah, we actually, we, so the live show, if you're listening on 98.7 RPP FM that goes through, yeah, just in Victoria. So I'm wanting to push that through to Cranbourne but it also streams live in the RPP app that's worldwide.

(13:30):

And then the podcast worldwide audience, like everyone in the United States, we have lots of listeners there, [inaudible], Malaysia, all over the place. So I think that's a really good point though, that look, this is going to vary depending on where you live. Yes. And Claudia and I live in Victoria and so a lot of the information that we give could be specific to that's right. Yeah. To our location. Exactly. But you know, this is general advice, general information, so yeah, yeah, yeah. You want to check with whatever laws and regulations apply to wherever you live. Yes, of course. Of course. So check your capital gains tax and what that is for your state because it does vary. And in the past for us, it's been if you've renovated and you sell the property within 12 months, you'll get slapped with a tax fee.

(14:27):

So please check that out depending on where you're living and speak to an expert about that too. So that's another one. Yeah. So that would be your accountant. And I think a lot of people when they're renovating or they're buying properties, they just don't think to speak to their, to an accountant. But an accountant is a really important part of your, of your team. Yes, exactly. Yeah, I agree. And I'm just source information from the people around you to people that have done it before as well. So if you've got friends and family and neighbours that have done renovations speak to them, the more knowledge you have, the better. So knowledge is power and I believe that yeah, the, the, the more things that you research and you have an understanding of the more that you will hopefully have a successful outcome.

(15:15):

Yeah. Make some informed decisions. Yes. People, the one informed decision. Okay. So let's say we've done, we've, we've set our budget, we've done all our research, we're making informed decisions and all of that good stuff. But we start to realise, even though we've got the buffer and everything that we're starting to go over our budget, what do we do? Do we just stop and just so like I said before, you need to track your budget regularly, so to make sure that there's no nasty surprises that you're running on track and everything's going well. If for some reason you blow out of budget, it means that you may need to cut back on some things that you had ideally planned from the start. Maybe that stone boxbath is not going to happen. Maybe that marble bench top is not going to happen.

(16:06):

So just cutting back on some things I think can, you know, like there's different bench tops these days that can cost thousands of dollars and you know what, there's laminate bench tops out there that look fantastic and can take thousands of dollars off your budget. So just cutting back on some things and some things that you maybe thought you were going to splurge on from the start. Maybe, maybe that's not going to happen now if you've, if you've exploded and you know, your budget's not running on track anymore than just really think about cutting back on some things and some changes are gonna have to happen, I guess, which sounds sad, but it can still be a great result. Yeah. Yeah, it really can. So you're just having a look to say where you can make some adjustments. It's just like of your family budget as well. You're just always reviewing and that's right. And adjusting. That's right. It's like cutting back on Foxtel when you have to.

(17:03):

So today we have covered in this episode we've covered the budget, which is so crucial. Next time Claudia comes into the studio, which is in a month's time, we are going to talk about how to select a property to buy and renovate. So how to research neighborhoods, what you're actually looking for in that, that property, all of Claudia's insider hints and tips. Claudia, thank you so much for coming into the studio tonight. And if people want to get more information on how to set the budget for their renovation or planning their renovation in general, how can they do that? So I am on Instagram and Facebook under the renovate Avenue. And I also have my online course, which I've created from my and the mistakes I've made The DIY Renovation Academy which will give you a renovation plan to take action and ready to go. So I've implemented that which is called the DIY renovation Academy. So if you need some more information, please just get in touch. You're happy for people to DMU and stuff on Instagram, Facebook, email me or you can message Jo and Jo will get me to contact you.

(18:14):

Thanks for joining us on the dream home movement. Be sure to come over and say hi on Facebook and Instagram. I hope that your dream home projects are going well and I look forward to chatting with you again next week.