In the year 2022 inflation rates reach record highs and one of the biggest costs is housing. Being able to own a home and increase its value is a great hedge against inflation. Housing costs can be contained and reduced by buying houses that need fixing. The costs of the material needed to complete the rehab can also be contained. Below I will explain the biggest costs in home renovation. For each cost I will explain how to save money when rehabbing a house.
How can I save money while renovating?
In this case study I will provide my personal experience rehabbing a house that was completed mostly DIY. My total cost to rehab was $108,819 including labor and materials. This does not include down payment. This cost was for a 1609 square foot house breaking down to $67 per square foot cost.
The biggest cost is labor
Labor includes wages for laborers, electricians, plumbers, HVAC, and consultants. By far labor is the largest cost in a home renovation. My labor cost was $81,657 amongst all hired workers. This brakes down to 75% of my cost for the whole house rehab was for paying labor.
| Trade | Cost | Percentage of total |
| HVAC Installation | $6,300 | 7.7% |
| Electric | $3,200 | 3.9% |
| Plumbing | $9,186 | 11.2% |
| Consulting | $1,650 | 2% |
| Insulating | $2,600 | 3.1% |
| General labor and carpentry | $58,721 | 71.9% |
I broke the chart above chart down into different trades to show which areas cost the most. No surprise general carpentry is the biggest cost because there a million things that need to be done in a house.
How to save money when rehabbing a house: labor
The only way to cut down on labor costs is to do as much as possible DIY! Specifically the general labor and carpentry cost can be reduced by completing tasks on your own. This is why I broke down the trades in the above chart because it shows what labor will be harder to reduce. For example its harder to DIY technical trades like electrical and plumbing and so there is not as much opportunity to cut cost.
When to to do it yourself and when to hire out
When I was rehabbing this house pretty much everything needed to be replaced. The house was vacant for a while so it was in pretty tough shape and outdated. Places where I exported tasks to laborers definitely drove up my cost. I hired to install doors, windows, siding, fascia board, kitchen install, tiling, trim and yard work.
Value your time
At the time I was working a full time job so I could only complete so many tasks. It made sense to me to export these parts of the job to laborers or technical experts. Despite hiring lots of people to help I also completed a ton of the work myself.
The tradeoff
Every time you hire someone it is tradeoff between saving money and giving yourself the opportunity to make more money elsewhere. If you have a job that is high paying sometimes it makes sense to focus your energy on that. If you allocate your time entirely to the build project you have tons of opportunities to save money.
Do It yourself!
Most demolition, carpentry, tiling, handyman types of labor can be learned and done slowly. Not to say these jobs don’t require skill its just that they offer opportunity to save money when rehabbing a house. Most of any house rehab will require wood working skills so it is a good skill to learn. More technical skills like electrical and HVAC require more intense training and special equipment. This means they make more sense to export to others.
What projects I completed
On the house I rehabbed I did demolition, carpentry, sheetrock, tile, landscaping, painting, and smaller plumbing projects. By taking on these tasks I was able to save tens of thousands of dollars on the rehab project. If I decided to do more tasks myself I could have cut down big on my $58,721 general labor budget.
Second biggest cost is materials
I spent $27,162 on materials to rehab the house. This includes lumber, doors, sheetrock, nails, screws, tools, paint, tile, adhesives, roofing material, landscaping, plumbing and electrical supplies. All materials accounts for 25% of the budget on the house rehab. To make things easier to read I grouped together somme expenses based on project. For example for the tile ceiling install I not only needed the ceiling panels but the adhesive to attach it.
| Material type | Cost | % of total |
| Roofing material | $4,153 | 15.2% |
| Landscaping | $793 | 2.9% |
| Windows | $14,000 | 51.5% |
| Doors | $866 | 3.1% |
| Lumber | $440 | 1.6% |
| Cabinets | $2489 | 9.1% |
| Flooring | $2300 | 8.5% |
| Ceiling panels | $1100 | 4% |
| Paint | $320 | 1.1% |
| Plumbing and electrical supplies | $245 | .09% |
| Tiling | $356 | 1.3% |
After glancing at my numbers you may be shocked some areas are as high as they are and some areas are as low as they are. For example 51% of my materials budget was spent on windows! This is because I bought brand new higher performance windows to replace all 14 windows in the house. Despite the cost this will likely pay off in the long run with energy efficiency and resale value.
What to spend and what to save when renovating a house?
The best way to save money when rehabbing a house is to spend more money on high value items and cut costs on lower value items. For example I only spend $440 on lumber and $2489 on cabinets. I was able to get my cabinets from Ikea where they have a high aesthetic value but are cheaper because you need to assemble them. I was able to acquire reclaimed lumber from other job sites in my neighborhood.
How to save money when rehabbing a house: materials
The key to cutting costs in materials is acquiring used or reclaimed building supplies. Some things will be impossible to get reclaimed and make sense to buy new. Sheet plywood is really hard to find reclaimed. Some things such as high performance windows make sense to buy new. However a reclaimed 2×4 will be nearly identical as a brand new 2×4.
Top areas to cut costs are lumber, doors, cabinets, tiles, paint, adhesives. Areas that are harder to cut are windows, roofing material, plywood and ceiling panels. This is the strategy I used in my house rehab and only spent $27,162 for a 1609 SqFt house.
Aquire reclaimed materials
The best way to save money when rehabbing a house is by acquiring reclaimed materials. Reclaimed materials are acquired for free by scavenging. Lumber in particular is the one that is rather easy to find. For the house rehab project I found most of my lumber for free on craigslist. I found a few doors on the side of the road. I got some free cabinets, tiles and paint supplies from a facebook sharing group.
The best places to find reclaimed building supplies are facebook marketplace and craigslist free section. Another place to look is for local job sites in the neighborhood that are doing demolition. I scored around 50 pieces of lumber from a single source.
Buy Used
If you cant find it for free the next best move is buying reclaimed materials from a store. Habitat humanity restore is great source for used or reclaimed materials. Since the materials are donated to the store they can have very affordable prices. For the bathroom rehabs in the house I bought cheap tile in bulk at restore.
Buy in bulk
Its best when rehabbing a house to acquire all of your supplies upfront. In particular if there are materials that need to bought new they should be bought in bulk. The big box stores usually will have discounts if you buy over certain threshold of stuff. For home depot and lowes it is spending over $1500 and discounts are applied based on the product.
Buy everything in one run to save you time on future store runs. You can have the material delivered too which will make it much easier.
Is a recession a good time to renovate a house?
Yes a recession is a good time to renovate. During a recession jobs can be less plentiful so it can make more sense to hire yourself to save money when rehabbing a house.
Conclusion:
Learning to save money when rehabbing a house is easy! If you know where to look and where the opportunities are they become obvious. It’s been in my experience that a gut rehab done DIY costs around $50 per square foot. Hopefully these tips will be inspiration for future generation of DIYers.
More Resources: Can I build a floor with pallet wood?