Renovation funding choices affect both the cost of the work and your position if the project overruns.
Renovation is funded either from accumulated savings or from borrowing, and the decision affects more than cost. It determines what happens if the project overruns, which renovation projects do more reliably than new construction.
Fund from savings at a glance
Paying for the work from accumulated funds, with no obligation created and no cost beyond the work itself.
Fund with a secured facility at a glance
Borrowing against the property to fund the work, spreading the cost over time at a cost that reflects the security.
Cost
Fund from savings: Only the cost of the work, with no financing cost at all.
Fund with a secured facility: The work plus financing cost over the term, which can be substantial for a long term.
Effect on reserves
Fund from savings: Depletes them, which is the main risk, particularly if the project overruns.
Fund with a secured facility: Preserves them, which matters when renovation reveals unexpected conditions.
Flexibility to phase
Fund from savings: High. You can pause between phases as funds allow.
Fund with a secured facility: Lower. Borrowed funds are usually drawn for a defined scope.
Pressure on scope
Fund from savings: Natural discipline, since spending is directly visible.
Fund with a secured facility: Scope can expand because funds are available, which is how renovation budgets grow.
Risk if the project overruns
Fund from savings: You stop or slow down, which is unpleasant but contained.
Fund with a secured facility: You need additional funds while already carrying an obligation, which is a harder position.
When fund from savings wins
- The work is discretionary and can be phased.
- You have savings beyond your emergency reserve.
- You want to avoid any obligation against the property.
- The scope is modest enough to complete in stages.
When fund with a secured facility wins
- The work is necessary rather than optional, such as structural or waterproofing repair.
- The renovation will materially increase value or rental income.
- Savings would be depleted entirely by funding it directly.
- The work must be done at once rather than in phases.
How to decide
Fund from savings where the work is discretionary and can be phased, keeping your reserve intact. Borrow where the work is necessary, cannot be phased, or will produce a return that justifies the cost, and only after establishing a contingency for the overrun that renovation projects routinely produce.
Whichever route you choose, price the work with a contingency appropriate to renovation rather than to new construction. The discovery risk in existing buildings is genuinely higher, and a budget without allowance for it is a plan that depends on finding nothing unexpected.
If you are weighing a financing decision, Domira can review the offers, model the total cost and stress test the obligation with you before you sign anything.
Frequently Asked Questions
Does renovation increase value by more than it costs?
Sometimes, and it depends heavily on what is done and where the property sits relative to the ceiling for its area. Necessary repairs protect value; cosmetic improvements often return part of their cost; extensive reconfiguration frequently returns less than it costs.
How much contingency should a renovation budget carry?
More than a new build, because existing buildings conceal their condition until work begins. The appropriate figure depends on the age and condition of the property and on how much of the structure will be opened up.
Is it better to renovate before or after letting a property?
Before, where the work affects lettability or would be disruptive to a tenant. Work performed between tenancies avoids both the disruption and the loss of rent that accompanies renovating around an occupied property.
Have a Property Question?
Domira can help you navigate property, financing and investment decisions in Saudi Arabia. Speak with our team for an initial consultation.
