An outdated, dilapidated 1941 Cape Cod wasn't
exactly the home that Erika and Greg Tansey dreamed of when they
moved to the well-to-do Portland, Ore. suburb of Lake Oswego last
year. But they were unable to afford the kind of house they really
wanted on their $600,000 budget, so they opted for Plan B: a fixer-upper.
And this $446,000 house sure fit the bill. "Greg called the
backyard the 'heart of darkness' because it was totally overgrown
and infested with hornets," says Erika. "The bathroom
was so small that your knees hit the tub when you used the toilet.
The hallways were narrow and dark. And the garage was basically
falling over."
What
the house lacked in charm, space and amenities, it made up for
in location—within
walking distance of shops and restaurants and in a terrific school
district. Besides, it had great bones. It just needed a little
work. "Originally, we didn't think it'd be that big a project,"
says Erika, before delivering the kicker. "We ended up gutting
the entire house."
A remodel is an ambitious undertaking no matter
what the circumstances. "It's expensive, it's intrusive,
it's disruptive, and if you haven't planned very well, you end
up having to make snap decisions that send your anxiety levels
through the roof," says Alan Heavens, author of What No
One Ever Tells You About Renovating Your Home. Still, millions
of people take on renovation projects each year. Some, in this
weak selling market, do it as a way to stay in homes they've outgrown;
others, like the Tanseys, do it as a way to afford a house in
the first place.
Erika and Greg started demolition on their place
in September 2005, with more significant plans than they'd first
imagined. Among their goals: to raise the roof, put in an addition,
double the square footage and reconfigure the layout. Aiming to
do much of the work themselves, Erika, 34, a freelance marketing
consultant, and Greg, 35, a venture capitalist, budgeted their
extreme home makeover at $200,000 tops.
Well, renovating ain't called the money pit for
nothing: The project took six months longer than expected, cost
$80,000 more than their worst-case scenario and finished just
as the bubble began deflating. By the time they moved into their
(almost) completed house in August, they were thoroughly exhausted—but
very eager to share what they'd learned.
Lesson 1
The Words "Under" and "Budget" Do Not Coexist
For most homeowners taking on a major renovation,
the first step is to hire a general contractor to manage the project.
Among other things, the "G.C." creates a budget, shops
for materials and hires subcontractors. If you're willing to take
on the equivalent of a full-time job, you can act as your own
G.C. and save as much as 20% of the total budget. The Tanseys,
both of whom have M.B.A.s and project-management experience, dared
to do this. By going it alone in this regard (with family friend
and licensed G.C. Dave Fahlman on speed dial), the couple expected
to save roughly $50,000, money that Greg hoped "we could
put back into getting the house we wanted."
But they ended up spending all those savings—and
then some. Despite generally on-target projections of expenses,
the Tanseys made a few costly blunders. "Some of our estimates
were way off," says Erika. Upgrades were the biggest culprit.
Like the siding: They'd initially budgeted it at $7,000, which
might have paid for the vinyl variety. Only later did the Tanseys
realize that they preferred cedar shingles, which cost five times
that amount. They ended up compromising on cedar siding, which
still rang up at $21,000. Their budget came further undone with
other late-in-the-game upgrades, such as mahogany decking.
Obviously, a budget is essential for any renovation.
It's key too that the document be as detailed as possible. "There
are thousands of items that go into a house," says Carl Heldmann,
author of Be Your Own House Contractor. Pay $1 more for
each and your expenditures quickly multiply. Ideally, you should
know from the get-go exactly what you'll want—basics
and upgrades. Even if you have a pro making the budget,
you'll still have to choose materials, a decision that can significantly
affect the bottom line. After all, you can spend $1,000 on a basic
kitchen range or $10,000 on a Viking.
As Erika and Greg learned, it's also crucial to
have room in the budget to account for errors and uncertainties.
Even the most seasoned G.C. can't know exactly what's needed until
the walls come down or predict how the next natural disaster will
affect wood prices. To prepare yourself for unknowns, add 10%
to your total budget, advises Heldmann. "I promise you'll
spend every penny."
