Budget with an eye toward ROI
An important first step in any fixer-upper involves fast-forwarding to the last step: how the renovation will affect your home's value, aka its return on investment (or ROI).
The industry guideline on home renovations holds that your remodel should cost between 5 percent and 15 percent of the home's current value. The rationale? Spending less than 5 percent could adversely affect the home's value, while money spent over the 15 percent limit won't return at resale.
For estimated market returns by region for your specific renovation, check out the National Association of Realtors' annual Remodeling Cost vs. Value Report. A local Realtor can also provide a community comp (or comparable) for how your renovation might affect your home's market value.
Remember that classic renovation TV trope where the crew discovers costly surprises in the attic or cellar? Contractor Kenny Grono, president of Philadelphia-based Buckminster Green, suggests homeowners set aside 5 to 10 percent extra as a contingency fund if they're working with a skilled design/build team. If not, 15 to 20 percent might be safer.
"If they're more seat of the pants, you know things will probably come up because you've inevitably overlooked a lot of details," he says.
Looking for a home equity loan or line of credit? First, check out the rates at Bankrate.com.