Why Renovation Budgets Explode — And How to Keep Yours Under Control | Rewind

Return on Design - Rachel Niederhofer

This episode explores why renovation budgets often spiral out of control and offers a strategic roadmap to prevent overspending. Host Rachel Niederhofer shares proven methods for staying on budget through planning, prior

Key takeaways

• Scope creep from unplanned changes is a top cause of budget overruns

Transcript preview

It always starts with diagnosing the problem and developing real goals before you ever start designing anything, knocking down walls, trying to buy material. Yeah, that's always step one. You know, going through that systematic process of how to think, how to actually analyze the property, what to ask yourself, you know, where am I, where do I want to be? What is the problem? How do I correct the problem? Don't limit yourself just to the finish aesthetic and this this is like a universal thing. It doesn't matter if it's your personal home. If you're an interior designer if you're a real estate investor flipping a property like Don't start making any type of renovation or design decisions until you understand what the goal is needs strategy and interiors become assets that perform. I'm your host Rachel Meerhopper, designer, investor, and builder of high-impact spaces that deliver real results. Alongside my husband, I run both a design firm and a real estate investment company where I live at the intersection of creativity and ROI every day. Each week I'll be unpacking what most people overlook how strategic design decisions can grow your investment, elevate, elevate your lifestyle, and unlock the full potential of your property. You'll get real tools, proven strategies, and unfiltered conversations with industry experts who are doing it right. So if you're ready to invest with purpose and leverage design as a powerful tool, this podcast is for you. Welcome back. Today we are going to talk to you about why renovation budgets tend to explode and how to stop that from happening. you know it's not one major thing that goes wrong that makes budgets get way out of hand it's like lots of small things being made over time that before you know it your budget is completely blown and that is a pain point nobody wants to experience yeah and we'll talk about the tools that we use when evaluating projects so that we budget correctly adequately and stay on on budget. Yes. Okay, so real life here, like why do renovation budgets spiral and even new construction sometimes like this happens more often than not and nobody likes that awful sticker shock at the end of a project. So let's walk through, you know, primary reasons why this happens. I would say number one is definitely scope creep. So, if you're adding through to your new build and it just keeps you just keep adding keep adding keep adding keep adding I mean you are just adding that's like dollar science and it's something that happens a lot we've seen it with a lot of clients we've seen it in projects like well I'm already here might as well yes or you know and we've talked about how so many times about how you never really know what's behind something until you start taking walls down. And that in and of itself is where a lot of spiral can happen because if you don't have that forethought ahead of time that like we're gonna plan for this but we need to we need to put this buffer because once we take this wall down there could be water damage back here or there could be you know prime example we fixed the shower recently that there was a visible leak in the shower like by the door. on to the base board and so we knew okay once we start taking this bad boy down there's a possibility that there's more damage that we can't see on the surface we got it all straightened away but point being is you know if you're not if you're not patting that so to speak with the possibility of the unknown I mean you can easily start okay great well we got to fix this we got to add this do this and to take that one step further it looked like it was a simple I have a leak point here. Well, as we started to dig into it, no, the problem was actually a whole lot more. So instead of being able to repair the leak, we actually had to gut the entire shower and redo the entire thing. So that's where that scope creek kind of kicked in or not planning for, you know. Fortunately, we had the conversation. Yeah, and that's almost like a mechanical failure scope increase, right? Like, we've got to fix this. But another aspect of scope increase is like, I really wish I had another light fixture in here. Let's just add it. Let's just add that. Or you know I was only gonna tile the back splash up to the vent hood but now that I see it let's just go all the way to the ceiling. You know so you're you're making decisions based off of one viewpoint that maybe isn't in alignment with what your original budget could afford and now who scope increase you get a nice big fat bill after all that tile gets applied but that's just an example. right? Yeah. So yeah, like keeping that emotional momentum in check and making sure you have a threshold of why we're making decisions to increase scope and understanding that that happens because sometimes people will add on stuff and it hasn't been articulated that that's actually going to cost you more money. Okay, what's another example of classic trap people fall into where things start to spend when it comes to budget. Late decisions. Yes. Making that last minute change, that kind of along the lines of the skull creeper, you know, let's just keep going, let's keep adding. Being able to stop those late decisions helps to keep you away from rush fees, rush orders or even delays that compound. Oh, I've got, I've decided to add this. Well, I've got to wait for it to get here. well that pushes this guy back which then pushes the next guy back all in the while stretching out how long your budget is actually being pushed and and causing causing more headache yeah and sometimes it can seem very innocent like you know I want to just hold off for a moment because I you know need to I don't know evaluate this space better for myself or whatever the case is and to your point you stop the momentum of a project effect and that can cause more money to have to add into the equation and yeah people don't factor for