Renovating a Home on a Budget: Everything You Need to Know

A patch of lawn, a welcoming front door, a back patio and a barbecue grill. For generations, the idyllic vision of homeownership has been central to The American Dream.

These days, that dream is harder to attain, especially for first-time homebuyers competing for houses in a historically hot market. But the dream is still within reach, especially for those who are willing to buy a fixer-upper.

Of course, buying a house is no small expense, even one that needs some TLC. Once you’ve made your down payment and covered your closing costs, there may not be much left to start your renovations.

Fortunately, renovating a home on a budget is easier than you’d think. We’ll tell you how to do it.

Before you buy, get a home inspection

Home sales and bidding wars have prompted some buyers to skip home inspections to convince sellers to accept their offers. But that can spell trouble, especially in an old house.

For all their benefits, older houses may have certain quirks or serious structural issues you need to know about before you decide to buy.

“It is more important than ever to have a home inspection,” says Chris Egner, president of the National Association of the Remodeling Industry (NARI) and owner of Chris Egner Design-Build-Remodel in New Berlin, Wis.

A master certified remodeler, Egner urges home buyers to hire a professional inspector to evaluate the foundation and the home’s structure and electrical and plumbing systems before committing to a purchase.

Just because a house needs a lot of work doesn’t mean you shouldn’t buy it. But you should know the extent of the renovations required, as well as an estimate of how much the work will cost. The dream of owning a fixer-upper can turn into a nightmare if you get in over your head.

Besides, getting an inspection will help you brainstorm which projects to tackle first and how you can save on them.

Take the DIY approach

For prospective homebuyers who are willing to roll up their sleeves, renovating a home on a budget could grant you the keys to a stately old Victorian or 1700s farmhouse in the countryside.

There are many beautiful old houses just waiting for someone to fix them up and turn them into a modern, well-loved home. Just look at the Instagram account @savingoldhouses for proof.

While fixing up a beautiful old house might seem overwhelming, there’s a lot you can do on your own to keep the cost manageable.

You’ll find no end of high-quality renovation tutorials on YouTube, and detailed posts on Reddit threads and other online forums.

“With good quality YouTube channels like This Old House, you can find episodes online, and they walk you through, step-by-step, how to do the project,” says Emilio Montesdeoca, a Realtor with Morganelli Properties in Hellertown, Pa.

Even TikTok and Instagram can be great places to find tips and anecdotes on how other people DIY-ed their renovations on a budget.

You can also find tips on everything from cleaning furniture and upholstery to laying tile, flooring, cabinet repair, or installation on sites like Ask the Builder, Build.com, and DIY Network.

It should go without saying that the DIY approach comes with a learning curve and that there will be some trial and error. But it’s also a great way to save money and to feel even more connected to the house.

Keep in mind: Most renovation loan programs don’t allow DIY or “self-help.” So if you are planning to purchase a home and finance the renovations with the same loan, DIY may not be an option.

Plan on paper first

The Family Handyman Do It Yourself Home Improvement website recommends taking several steps before you start breaking out your tools or busting into walls:

• Research the project
• Create a project plan based on the end result you’ve envisioned
• Set a budget
• Establish a realistic timeline based on your skills and limits

This is also when you’ll want to find out whether a project requires a permit, or whether there are any local laws that will affect your plans.

Montesdeoca urges clients to contact their municipality’s offices before lifting a hammer or buying materials for projects.

“See if you can get the permit [for the project], or if a licensed professional is required to do the work,” he said.

He said this simple phone call to ask about required project permits can save a lot of headaches down the road. If you don’t get the appropriate permits and sell the house at some point, this can complicate the sale and potentially cause you to lose money.

Plus, you’ll need to factor any permit fees into your budget.

Go for easy wins

If you’ve never renovated a property before, don’t start breaking down walls right off the bat. Start with something relatively easy that will help you build some skills and also keep up your morale.

Budget-friendly renovation ideas:

• Paint the interior rooms a warm, inviting color
• Paint the exterior as well, if needed
• Add a colorful stair tread runner to reduce slipperiness and cover up scratches and dents in old floors
• Put down area rugs purchased from consignment shops or secondhand to buy time on refinishing scuffed flooring
• Install indoor shutters, which can be cheaper and easier to maintain than shades or window treatments
• Plant a garden. Ornamental flowers and inexpensive shrubs can add to a home’s value and curb appeal, not to mention your enjoyment of the property

Of course, you’ll want to tackle any urgent fixes first – things that would affect day-to-day livability and safety. In fact, if you’re using a renovation loan, minimum property standards and safety concerns must be addressed first before improvements.

Even something like a cracked sidewalk or patio could take precedence if there’s a chance someone could trip and seriously injure themselves. And a leaky pipe could derail your budget with a higher-than-necessary water bill.

Look for creative ways to save money

Renovating a home on a budget doesn’t mean buying low-quality fixtures or settling for less. It just means getting creative with ways to save money, such as:

• Buying discount or upcycled materials from salvage yards
• Scouring yard sales, estate sales, and Facebook Marketplace for deals on fixtures and decor
• Shopping for dishes and housewares at secondhand and thrift stores
• Recruiting friends and family for painting parties, hauling away old appliances, or unloading your moving truck to save on movers
• Sell unwanted furniture, clothing, appliances, and other items and use the cash for renovations
• If the house you bought has vintage tile or fixtures that you don’t plan to keep, sell them to collectors and homeowners trying to restore their properties to their original aesthetic

You can also look for interim solutions to long-term repairs.

“If you can get a couple more years out of a roof, or do repairs to stretch the shelf life on the roof,” you can budget for a new one later, suggests Montesdeoca.

Getting things to a place that’s good enough for now will give you the breathing room to save up for big repairs that you know you’ll have to do in a few years’ time.

Loans for renovating a home on a budget

If you expect to be short on cash for renovations, you might consider a low-down payment renovation loan:

• USDA renovation loan: 0% down
• VA renovation loan: 0% down
• FHA 203k loan: 3.5% down
• Conventional renovation loan: as low as 3% down

These renovation mortgages allow you to purchase a home and finance the renovations in a single loan. However, most lenders won’t be able to do the renovations yourself.

You can also take out a home equity loan, home equity line of credit (HELOC), or a cash-out refinance loan after you have built up some equity in the property. The drawback with a home equity loan or HELOC is that you will make payments on those in addition to your monthly mortgage payment.

A cash-out refinance replaces your current mortgage with a new loan, which includes the remaining balance on the current mortgage plus however much you’ve borrowed against your equity.

Renovating a home on a budget FAQs

Renovating a home on a budget can pay off big

Home renovations not only add to your enjoyment and use of the home and property, they’re an investment in your home’s value over time.

The following projects tend to have an especially strong return on investment (ROI):

• New roof: 61%
• Bathroom: 55% to 60%
• Window replacement: 67% to 69%
• Kitchen remodel: 54% to 72%
• Garage door: 94%

Buying a fixer-upper can help you purchase a home for less than you’d spend on a new build or a newly remodeled home. If you can then renovate the house on a budget and increase its value, the home could end up being worth significantly more than what you paid for it.

And the more equity you have in the property, the more options you have for using that equity to purchase another residence or investment property, fund higher education costs, or other wealth-building goals.

The information in this advertisement does not constitute financial planning advice. Please consult a financial planner regarding your specific situation.