How to avoid turning your dream home renovation into a financial nightmare

Money talks podcast. I'm about to get you some real life solid advice on how you need to manage your renovation budget so that you don't have to go through what I went through. And that advice is going to come from my guest today, Daniel Lim. He's the co-founder of Canvas. It's an online renovation platform and that's where homeowners like you can search for reliable interior design firms here in Singapore. Welcome to the podcast, Daniel. Thank you so much for having me.

So first we want to talk about setting the budget, right. This starts to happen when we enter the new house, we really do a deep inspection of the house and then some of the floors get revealed, the real condition of the unit gets revealed, right? So how do I work with my budget? How much fat um should I give to this budget? Because the renovation costs do tend to add up when we start seeing all these other things inside the house that reveal themselves. Correct? Yeah. No,

I think that's a very valid question. And I think, ah, your introduction, you mentioned that you start looking at info images and all that and that's the fun part. Yeah. And then, yeah, and then you come on to the dollars and cents and then that's, you know, the part that obviously is tricky because most people have an idea in mind. You know, you want to spend 20 30,000, 40,000.

But then when you inspect the house, you have a look and then some of those ideas that you have seen on those vision boards and you want to translate them into real life and then your contractor or designer tells you, hey, you know, I think you need a bit, a bit more in order to realize what you want and then your dream goes right? Or you say, ok, I'm gonna stretch a little bit and then get what

I want. So. Right. So I think, I think, I think that's challenging and it's always a tussle with great design. Having everything that you want as well as keeping it practical functional within budget. Right? I would think the first step you can take is really

doing research online. You can just search renovation calculator, Singapore, you might find a few, you can just input your, your size of your apartment or whether you are looking to do a full scale renovation with hacking and all the works or is it more just a smaller scale renovation? And with that after 57 minutes, you will get a quite a comprehensive list of, you know, line items of what you can budget for your innovation and give you at least an estimate in terms of what you can

look at. And then after that, I would still say even with that budget always just cater for, for surprises in terms of delays or maybe even variations because you might think you want something and then down the line you realize. Oh, ok. Actually I want to add something else you want to change. I want to or different material that maybe better suits your lifestyle, right? So all those come into play um especially more so for first time renovators where you know,

it's their first time. And then along the way in that process of the 3 to 4 months when they are designing and going through the renovation, they realize, ok, I want something a little different so that might add to the cost. So I always just give a ballpark of a 20 to 30% buffer. Ok. So if you know you had in mind like 3000, just make sure you have 6065 just to be very comfortable and safe so that you don't run into

any issues. So I'm told that the Renault budget should be in proportion to the size or even the price of the house. This is something that I picked up on a panel that I hosted recently. But some home buyers see the home as you know, a long term investment. They're thinking, ok, it's a long term investment. I'm going to stay here till I retire. Why not just spend the extra cash on better quality fittings, et cetera? But the question becomes how much is too much, right?

So you're saying 20 to 30% on top of the original budget you have in mind just to give some buffers what's above and beyond. That's considered too much though. I think it's really to each his own, right? Because I think some people really look at it as maybe a forever home. They want to stay there 1520 30 years even. And they are willing to invest in making sure they get the best materials, the best finishing and all that.

But of course, if you are very clear that it's for another purpose, maybe, you know, you're going to sell at the mop in five years, then would you really want to invest you know, 100 200,000 into that BT O and then sell it within five years. So I think you just got to weigh what your plans for the house are, is it going to be really long term stay or is it going to be 357 years and then you're gonna, you're gonna upgrade or you're going

to change your home? So I think that's 11 factor to consider the second one that you, I think rightly pointed out is the size. I wouldn't go too much with the price of the house. So to give you an example, if you buy a new condo, it might be highly priced, but it really comes furnished with quite a bit of the carpentry and all that is in the toilet already in. So most people may not want to then invest in a full scale renovation, right. So they just make sure

that they get good furnishing. Maybe they would add on more carpentry, for example, they need more storage, maybe they'll do the kitchen a little bit better, but they wouldn't tend to go full scale into a new condo. Yeah. So, whereas compared to a resale, maybe BT might cost less than a new condo, but it's all right. 20 years, 30 years, everything is falling apart. You want to invest, then you might spend even more into that. So I think it's more the newness of

the property, your life stage. What you're planning to do with the home. And then last but not least just your own personal budget, right? Keeping in mind what you can afford and then doing the best within that budget that you have with that buffer that I mentioned budgeting for long term versus short term stay. I'm also thinking about the ones that are renovating to rent out the flat, right? So that's a small pocket of people

who would do that. What would be a reasonable question to ask ourselves in terms of budget if we know that we're going to buy this unit where it's whether it's a condo or a an H DB flat to rent out later on, I think for that particular case, then it's an investment, right? So clearly, I think dollars and cents plays probably a bigger factor than maybe the design aesthetic of the place. So I think furnishing it appropriately make it nice with

decent quality materials. Just keeping in mind that you would have to rent it out to get maybe a specific yield that you're looking for, right. So just to give you an example, maybe a BT O forum flat currently costs about 45 to 50,000 on average based on the data that we have on canvas. So, but those are for people that are staying in the place, right? Maybe looking at that budget and seeing if you can save on that scale it down a little bit. So

that it makes your investment property more worthwhile. Yeah, that makes sense. That makes sense. So once we've decided on a budget, what's the first thing that we should be spending on? So for my mom, any new house, first thing to go, toilets? Ok. Second is kitchen and then it goes on and on in order of priority. But in terms of financial sense, what should be the first thing that we should work on?

So I guess before even realizing your dreams of your dream home or your dream property, maybe the first question you have to answer is do you go the contractor route or do you go to the interior designer route? Exactly. Right. Yeah. So which one do you go for? Right. Generally, if you prefer not to have the project manage the whole renovation, and you also want to have someone who has experience, to advise you on that renovation process and also to give you some maybe design input on

what can or cannot be done. That group of people would go with the inter designer route, right? And then for those that are willing to project, manage their own renovation, they are willing to source some materials and all that and they just need someone to just get the work done, you know, you can go to the contractor route. So again, that already would tell a difference in cost between the two options. So I think that's one. And then if we drill down a bit further into

what makes sense. Then again, I think it really depends on personal preference. So I'll give you an example. I generally do not cook as much kitchens to me may not be the number one priority in terms of where I want to spend my budget. Yeah, for me, I think it was a lot on carpentry because I didn't like to have things strewn around the house. So I think, I guess like neatness and

all that was a bit more important to me. So I built a lot of carpentry which would until higher costs as compared to maybe loose furnishing and you know, if you buy a cupboard, for example. Yeah. So I think that was what I decided to spend on whereas your mom might say, ok, toilets, kitchen. Yeah, although I would say that that is generally what people work. Yeah,

I mean toilets, understandable, you know why? But yeah, I think you brought up a really good point, understanding your priorities, how you're going to use the house because you are living in it. You're not just sitting there, it's how you're using it. Right. How much of a renovation budget should actually include your loose items, the furniture, the appliances, because I've always been confused about this. When you say renovation budget in my mind, it's just

the renovation. You're right. Right. Exactly. So should it include the furniture, the appliances and all that? Right. So I think that the numbers or figures I gave earlier was just for the pure renovation, the work, the work, the construction, your ma your hacking out that it does not include the loose finishing all your appliances. That's right. Correct. I think that's also what you would get from contractors or interior designers, you work with whatever that they could,

would always not include appliances and loose furnishing. So it's important to then set aside another budget for that typically about 30% of your renovation budget. So assuming you go with like about 60,000, right? So maybe 30% will be 20,000 additional for the appliances in terms of furnishing and all. And let me tell you the bigger the house, the more stuff you need, the more stuff you think you need, the more you think you need more you need, then you actually need, I I didn't really need two

of those just because I have two toilets. You talked a little bit earlier about surprise expenses making space for that. You're in the midst of renovating your own home now. Congratulations, by the way. Thank you so much. So what were some of the surprise expenses that you personally are encountering right now? I think sometimes people underestimate the need for electrical points. So you realize. Oh, ok. And then you realize, oh I need more. So I think that's one cause that

caught me a little bit. Ok, I need more electrical points. Carpentry was one as well. Yeah, so the more carpentry I said ok, I need storage here. I need storage here. So I think those are those would be the kind of built or renovation, surprise cost that might come in or yeah, just adding a new feature. Yeah, for me, that was doorknobs because I think it was just me and my fantasy and doorknobs were a

big thing. Like I think those little features that you want aesthetic features you wanted to get, but it does complete the look of the house, you know, small touches, sometimes you overlook them and I guess outside the renovation and of course, we don't hope it happens, but it does happen delays, right? So if there's a delay, then hopefully you already have your existing dwelling, but you're not renting.

But if you are renting or you have already maybe sold your house and you were expecting the renovation to finish next month and you're going to move in next month and then there's a one month delay, then what happens? Right. And then scramble and all my favorite words again, buffer,

I think you need to buffer. Yeah, you need to buffer that, that don't cut it too close because it causes a lot of unnecessary stress and it's buffer, not just on the renovation timeline, it's not just the cost, it's also your rental on the previous place or mortgage. It's also so your storage facility, if you use that's another month of delay, another month of fees, right. So yeah, I think these are really great surprise expenses that we need to consider. So now we want to talk about sticking

with the budget. Some of us may want to head over to the bank for a renovation loan. What are the three most important aspects of our renovation loan that we have to pay attention to? So for the renovation loan is of course, it must be based on the invoice, right? So I think once you have an invoice from either contractor or interior designer, then you are able to apply for renovation loan. But a renovation loan is typically kept at

a certain amount. And when you say invoice, we can also use the quotation from the contractor as well, right? Either one that actually shows a broad figure, so to speak, I've also heard of people doing renovation in phases and a lot of the times it is with the primary objective of saving on costs. So for example, this year, I'll do the kitchen and the toilets and then next year I'll maybe focus on hacking a wall. Is that necessarily a strategic financial move

to renovate the house in phases like that? Or do you end up spending more ultimately financially? I think it makes sense just because in a way you're just cutting up the renovation costs into according to correct. So I think that's from that point of view, I think it's ok. I guess you just have to weigh the cons of having to stay there, especially if you're not moving. I

assume they will not move out because you want to say. So, I think the inconvenience that could come from the renovations happening while you're there, especially maybe if you have young kids, for example, then it might be a bit more tricky in that sense. So I guess financially it might make sense to do that.

Although when I look at it from the contractors and new designers point of view for them to allocate resources multiple times as compared to doing a full project, I guess their preference is quite clear, they rather do the entire project one shot and everything. But if you want to just cut it up like that, I'm not sure. But I think there might be a case where cost individually might add up to be more than if you were to compete. Everything bearing man. Also,

I guess cost tends to go up. And after COVID, we saw a huge increase, but, you know, generally goes up as with everything. So there's inflation and you will see that most quotations given by these contracting firms will only be valid for maybe six months. So that same cost will not be the same two years later. So if you do a toilet today, you think it's, it's gonna be 5000 Tuesday, they could be 6005, right?

So then again, yeah, you might not be saving in absolute dollar terms, but I guess you are cutting it up into more bite size amounts. Yeah, I think it's about manageability in that sense. So some people advise that you should take on a renovation loan. If you already have a more heavy mortgage to pay, you can always sell the house if you can't service your mortgage. But then what happens if you can't pay up the rental loan? That's a bit different, isn't it?

Do you see the situation happening frequently? We only have our data on canvas to go by but we generally do not see much people opting for renovation loans. Actually, not, not that high percentage. We have a little check box on our form that says, do you require renovation loan? I think less than 20 or 15% check. Yes. So the rest just go through with. No. And I think it's just because I guess in the home ownership journey,

most people know that. Ok, if I buy a BT which are majority of our homeowners, I need X dollars to save for my renovation. And I think they have that maybe planned out. All right. So now let's talk about the renovation itself. Ok, I'm sure you as much as I have heard of many nightmare stories and experiences involving contractors, sometimes more bad than good. Then there are the solo operators versus the ID agencies, the bigger companies, right? The boutique agencies and

all that kind of stuff. The boutique firms where there's not really a contract but a quotation. I've not really seen a contract. So, if do you think, then we should be asking for one, a contract as opposed to just the quotation? So, yeah, I think you should know. I said, I guess the interior design contracting industry in general in Singapore is quite loosely regulated. So I think consumers just have to be very aware, they really have

to do their own research. And I think that's why there are multiple platforms available in Singapore to try to help guide them in that decision. Um You know, showcasing maybe more trusted firms making sure that, you know, we have done the due diligence as a platform and then offering it to the consumer. But yes, the due diligence or the owners is still on the consumer to make that decision finally at the

end of the day. And I would say that, yeah, way between a very small firm that has maybe not much track record 12 months, they just incorporated and then they are out here doing this business because again, there's no regulations, there's no certification needed to be a designer or contractor. So that is something that they are we all going for more maybe established firm that has been in operation

for 1520 years. And then maybe there's a bit more of a trust factor that oversight and I think maybe you might think, OK, at least they have been in operations for X number of years. And then I think your question about the quotation having or do you need a separate contract? I think most quotations I've seen from interior designers. At least they would have a quite a comprehensive list of T

and CS. So I don't think they need a separate contract because I think it's quite comprehensive and that bind, that is binding, that is binding because I think it's signed both parties and then I think the terms and conditions would be quite comprehensive. So I think in those situations, it would probably be ok if it's just a single piece of paper and there's no TNC and it's just lump sum payments where, you know, carpentry 50,000, that's like

sending me back, correct. So I think that's important to look at and the other very important thing with regards to terms and conditions would be the payment terms. I think that's what sometimes people do not look at. Ok. Budget is great. It is within my budget. I like this into design and design is great. But what about the payment terms? I will be very cautious if the interior designer contractor tells me to pay 50 percent upfront. Like today, I'll be cautious or even 30 40% would

be deemed high. 30% is considered high. Yes, upfront. Like just to secure the contract, we normally recommend probably not more than 20% just to secure the contract. Sure. Sure. Yeah. So I think anything more would be, I'll be very cautious. Ok. I'm good that we, we were able to put the number on it because a lot of us are never really sure. And most of us renovate maybe once, twice. That's it in our lifetime. Anything else that we need to look out for in the T and CS, outside

of the payment terms? I think some people also look at rectiv rectification and defects like what happens at the end of it. So I think some of the better contract I've seen would be the last maybe 5% payments with held until the rectifications are done. So I think something like that would be, would be good for the consumer. I think project timeline, if there are delays, anything like that should be indicated in the timeline for sure. Although I'm not sure how robust in terms of what happens

if the timeline is missed. So maybe that could be improved a midway or even close to the finish line. We discover things aren't up to scratch, they're not meeting the satisfactory conditions that we were hoping for. So what do we do if we encounter such episode with a contractor? Things go bad. Who can I complain to? Case would be the most obvious one. But that's only for maybe case trust ids that are under

case trust. So that's one I guess on canvas. If you found them through us, we have a canvas resolution center. You can come to us and we're able to help you get in touch with the ID or if you want to go higher, then we can get in touch with the man the management of the company just to make sure that we bring both parties to the table, try to mediate and get more parties because at the end of the day, we want the home to be happy. The home is their dream home. If it's a first time home, excited

to move. It's not one of those products that you can do that. I think it's a big cost and a lot of people obviously have a lot of heart put into it because yeah, it's my home, right? So I want it to be beautiful. I want it to be exactly how I envision it to be. I think

that's one area we try to help homeowners with. And then obviously on the inter designer side, I think if they are reputable companies that want to have recurring business, I think they are also in their interest to make sure they try to resolve it as best as possible so that there's at least positive word of mouth, people are able to recommend them to their friends, family and all that.

So I think that's also, I think sometimes what we try to do to just try to balance both sides and make sure that they come to an agreement when dealing with contractors or ID firms in general, you want to build that relationship with them because this is your heart and soul project, right? But at the same time, it is still transaction and we have to maintain an arm's length in a

manner of speaking. So any final piece of advice here when it comes to dealing with any kind of contractor, Erin or not, because at the service, exactly on the top tip, again, I just going back to the timeline. So again, just make sure that the schedule is very clearly laid out. And again, I will be very concerned if I'm paying 5070 percent very early on. Typically, it's a 5 to 10% maybe deposit to secure

the contract. And then from there, it's probably in stages of like 20 to 30% in the next two or three stages. Right before carpentry, I think before hacking and masonry, you would have a stage. So it's like 1030 30 2010, something like that. I think that would be a good payment schedule to follow, you know, not 50 40 10. So there will be a red flag to me. That's one. And I think the second thing would be more very open communication.

You have to communicate your expectations very clearly to the designer. And by that, I generally advise meetings or phone calls and not like over whatsapp. But nowadays, it is very easy set up whatsapp group. Everybody's in there. Yeah, but not everyone's reading. Sometimes everyone's in there, four or 56 people and then you message S MS are busy with multiple projects and then they might just say, OK, or

like they might miss it. So I think it's very important to clearly communicate up front, face to face in a meeting or even over a call and you can follow up with a message later for just, just to get back and white and all that. And that's fine. But I think communicating it very clearly with your expectations to the individual so that he knows what you're expecting and he tries his best not to fall short. I

think that's very clear. I've seen sometimes where homeowners are very, very nice because they are afraid to damage their working relationship. This is my friend. Ok. And he's helping me design my home and I don't want to piss him off because otherwise you don't appear naggy as well, like chasing someone because we, we face that at work. Right? Yeah, but it's your home. So I think you should be a bit naggy but communicate again, I guess, face to face and not just

over a message and think, ok, that's done. I've already communicated it. Thanks very much for this. I hope that, that our listeners and our viewers will be able to take away so much from this conversation. So now comes the fun part of the podcast. This is called Questions in a Hat. So there are five questions in here. Pick one hand it over to me and I will read it out. Your question is what is pricey but always worth it. Self-improvement. Oh,

tell me more. Yeah. So anything, I guess with regards to self improvement books causes talks, I would personally invest in that might cost a bit more like upfront, but I think the benefits are as intense. Yeah, intangible everlasting becomes part of you. So I personally invest in that. That's a lovely, lovely one. Thank you so much. Now, listener, we hope that we were able to stick to our promise of delivering sound advice on

managing your renovation fund and your budget. Most importantly, if you have a question about it, feel free to send us a message, you know, where to features Money talks is available on Apple podcasts as well as Spotify and youtube music. Don't forget to rate us if you're enjoying this podcast. And big thanks to the team Christina Robert Tiffany Ang Jaini, Johari, Joan Chan, Haida Amin to Yan Yan and Sayu Wind. I'm Andrea Heng. This has been the Money Talks podcast.