It is best to finance projects with savings, but some use a home equity line or loan (discussed more later) for expensive projects. Avoid paying for renovation costs with a credit card unless you can pay off the balance in full the next month – a high amount of credit card debt can cost you a significant amount of money in interest charges and make it more difficult to pay all of your bills on time in the future. You can always wait and do the renovations at a later date.

Tips for Choosing a Contractor

• Ask friends and family for referrals
• Interview and get estimates (bids) from at least 3 contractors
• Verify that they are licensed and bonded
• Ask for references and make sure that you feel confident about your decision before you sign a contract

Tips for Contractor Bids

• Should include what work will be done, when it will be done, and how much it will cost
• Should be as detailed as possible - if questions arise later about whether the price includes imported kitchen tiles, you'll have a description to refer back to
• Make only a deposit upfront, never the full amount - if something goes wrong, you'll have little bargaining power if they already have the full amount

Take the time to choose a good contractor. As mentioned previously, ask friends and family for referrals as well as look at reviews online. Interview and get an estimate (also called a "bid") from at least three contractors. It’s best to hire a contractor that is licensed and bonded. Each contractor should submit a written bid that details what work will be done, when it will be done, and how much it will cost. Ask them to provide you with references and contact them before making your final decision.

The most affordable bid is certainly an important factor in your decision, but you should also pay attention to each contractor's knowledge and references. Once you select a contractor, you will sign a contract and make a deposit. Never pay the full amount up front – if something goes wrong, you have little bargaining power if they already have all of your money.

Is a Permit Required?

Certain types of renovations require permits (specifics vary from location to location). Your city’s website or city hall should have information on what requires a permit and the application process.

If work is done without a permit, it could make it more difficult to sell the house down the road, as most states require you to disclose that unpermitted work was done to potential buyers (who typically don’t see it as a positive). If you would like assistance to apply for permits, your contractor may be willing to do it for you for a fee. If you live in a community with a homeowners association, you may also need their approval to do the work as well.

Next Topic: Dealing with Neighbors