Considering Renovating? Please read this.

Considering Renovating? Please read this.

You want to fix up the house and now is the time. It is an older house and the insulation is non-existent, the roof leaks from time to time and you want a layout that better suits your lifestyle. You have tried to “patch” the problems but you are tired of throwing good money after bad. You have a budget and you want to be smart about making the “dollars go farther”.

We see this scenario often. Very often.

Two major mistakes we see in this scenario are:

Not being realistic in the assessment of the situation.  What you hope for and what is possible are not always the same things. A realistic assessment of the project and what the real risks are can lead to project overruns in the hundreds of thousands of dollars. Money completely wasted.

Not fully recognizing that the outlays are an investment and assessing the “return” carefully. Spending more, but effectively can be wiser than spending less to accommodate budgets. Smart money comes back in the market value of the home; expedient spending sometimes never gets recaptured.

If you are thinking of renovating, please read this. It is intended to provoke thought and help you assess the state of your project plan.

Engaging in any project, a homeowner must understand the difference in investing in elements of the home and expending resources in areas that do not create value for the current homeowner or will not represent value to the “next” homeowner.

Elements in any home or cottage construction project that drive value include the kitchens/ bathrooms/floor layouts/exterior aesthetics. Expenditures around the quality of the building envelope (foundation/insulation/windows/roof etc.) offer value, however poorly or inefficiently constructed building envelope will more likely diminish value.  A strong infrastructure is expected.  Inefficient execution of the structural elements of a build will produce “negative value”.  Resources will be expended inefficiently and generally not be recaptured through resale or operational efficiency of the home.

Project costs in the home construction industry differ depending on the type of project. A renovation project consistently has the highest costs, subdivision homes the lowest, and the custom builds, somewhere in the middle.

The subdivision build, typically has the lowest costs as the “cookie cutter effect” reduces construction variability and the cost of “construction risk” can be well managed.

The renovation build has the highest level of “construction risk” and costs tend to be highest.  The increases in costs are driven by the high variability of outcome.

The renovation project suffers from two general types of risk.

Managing and executing what is “known”. Even if it is well understood what the requirements are on a project there is “execution risk” as the time of construction and It is not a specific task that has been executed repeatedly, so assumptions are made to estimate cost of final execution and quoted costs are higher to accommodate for the variability. In a renovation project surprises drive costs but so does the potential for surprises.

Managing what is unknown.  Unexpected construction requirements often present themselves in the course of a renovation project.  Dealing with the “unknowns” can drive costs higher in a renovation project as contingency budgeting is required to deal with the unexpected.

Managing the “risk costs” of renovations, many builders turn to a pricing strategy of “time and materials” however this leaves the owner very vulnerable to budget overruns and no financial alignment between the builder and the owner.

The custom build project can have the characteristics of a poorly planned renovation project. . Depending quality of the organization of the project, cost containment can be very effective. Risk costs can be eliminated almost completely with a well-executed plan.  We strive to give you a custom solution with a low construction risk cost and tightly control the cost of change. Renovation projects do not always afforded such a “clean” planning and execution cycle.


The one exception to the risk management of a project is in the area of site costs. Risks around site work are not known effectively until the backhoe is digging the hole.

The most effective way to manage a renovation project is to have a technically competent building partner who is highly organized.

One of the most significant “costs in a renovation project” beyond the “Safety Margin” requirements can be the “cost of change”.  “Change” can be both self inflicted or it can be inflicted upon a project. Both are very expensive propositions.

Self-inflicted change is “I don’t want that anymore now that I see it installed… I want this now.”  The cost of change is not just what the new item costs, but all the planning and procurement and costs that went into the item or strategy that is being discarded.  Measure twice, cut once as cutting twice is expensive.

Inflicted change. The original proposition is “This project is a renovation project and I will save money”.  The municipal building department assesses the project in mid-stream and determines the project to be unsafe and requires a complete teardown. New plans, new build and all the costs associated with the renovation are now wasted.  Unfortunately this happens more then it should.


The quality of the outcome or the “investment” should be a significant element in any decision making process.

Are there significant architectural features that are worth saving?

What am I getting for my money? What will the final outcome be and will my investment be worth it?

What is the quality of the building envelope?

What is the quality of the layout? Market appeal of the final product?

How efficient was the build?

Am I investing in areas that drive value (kitchens) and am I efficient and effective in the areas that are required (foundation, structural framing) but not drivers of a price premium in the marketplace?

How am I managing construction risk?

How am I managing the cost of “change”?

How confident am I in my plan to manage both the construction risk as well as the cost of change?

What is the risk level that the “cost of change” will be inflicted upon me? Building department? Site elements? Neighbours etc.

What is my level of anxiety going into the project? If high, why?

Going into any project, of any magnitude the plan should be strong as the unforeseen is always lurking.

Understanding what things cost is important but what is driving costs is even more important to keeping your project on budget, on time and an investment that you are proud of.

Sometimes renovating a quality structure is the way to go, often it is time to turn the page and build anew.

Ed FreibauerComment