It is very important to determine a budget for any home improvement project, and kitchen remodeling is no exception.
A
word of caution: I spent several hours researching kitchen remodeling
cost and budgeting on the internet to gather data for this article. I
ran into a couple websites that gave square footage pricing for kitchen
remodeling. Although I commiserate with their attempt to find a simple
method to figure out remodeling pricing, this type of advice is not
based in reality. Remodeling jobs in general are so specific to the
conditions of the building and tastes of the homeowner that no square
footage pricing will ever be realistic. I also ran into many sites that
did not give you any real information about establishing a budget but
basically interpreted Hanley Wood's Remodeling Cost vs. Value report
which is published each year. You are much better off visiting the Cost
vs. Value report online and evaluating the results for yourself.
Like
anything else in this world a kitchen remodel is going to cost more
than you thought it would and the sky is the limit on what it can cost
depending on your tastes. There are multiple factors that go into
determining a remodeling budget.
There are several places online
you can go to help you establish a basic budget number to start with. My
personal recommendation is Remodeling Magazine's Cost vs. Value Report
which is released by region and major city each year. The really nice
thing about this report is that it gives a description of the "average"
project so that you can gauge if your kitchen remodel is going to fall
above or below the benchmark. I also find their average pricing to be an
accurate reflection of the pricing for our company, so by recommending
to clients before I even meet with them that they investigate this
report they are more likely to establish a realistic budget we can work
within to give them a fantastic kitchen.
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While
Remodeling Magazine's report is very helpful, it is still a very one
size fits all approach to establishing a budget. Keep reading if you'd
like to try to hone your numbers a bit.
Get out a pad and paper and jot down a few notes about each factor as you go through this list:
Factor
1 Home Value- Consider not only what you think your home is worth, but
also the value of similar homes in your neighborhood that already have
updates. My favorite website to check home values is zillow.com, simply
enter your address and you get an interactive map with home values and
other information listed right on the map. Take note of which homes are
of similar size to yours, have been purchased more recently, but have a
higher value, then peek in their windows to see what the house looks
like. Ok, seriously, I was only kidding. If you don't know them perhaps
it's time to meet the neighbors and ask for a quick tour.
Factor 2
Wow! - This has everything to do with your goals and motivations. Write
down each motivational factor which is important to you in a kitchen
remodel. Here are some possible examples: Kitchen is falling apart. You
love to cook and the layout doesn't suit you. You love to entertain and
want to open up the kitchen as a place to gather. You want a kitchen
that wows your guests. You are getting ready to sell your home and the
kitchen is a sticking point with buyers... Now that you have your list,
evaluate which motivations are most important and relist them in
motivational order. Imagining your budget starting in "the middle" take
note of which factors might move the budget up or down...i.e. wanting to
remodel to encourage a sale might move the budget down, remodeling to
wow guest might max it out...etc.
Factor 3 Did someone say AGA? -
List any "must haves" for a kitchen remodel to be worth it to you.
Possible examples: granite counters, an island with an extra sink, a
second dishwasher, a commercial quality gas range, etc.
Factor 4 Longevity- Determine to the best of your ability the length of time you plan on owning the home.
Factor
5 Size Matters- Determine what percentage of your home your kitchen
encompasses. A sampling of over 100 modern home floorplans of 1000 to
3000 square foot homes revealed the average kitchen square footage to be
7% of the home's square footage. If your kitchen is larger or smaller
than this average you may need to increase or decrease your budget
accordingly.
Factor 6 Layout- if you already know you're going to
want the sink moved, an island sink added, an interior wall moved and
an exterior door added, then you need to add money to your budget well
beyond what a basic facelift would cost.
Tricky layout: the decorative column conceals a sound wrapped drain pipe
Factor
7 Funding- Determine the maximum amount of money you could afford to
spend. If you are financing your project you can calculate what a lender
will likely lend you. Lenders want to see a debt to income ratio(DTI)
of.36 or less. Your DTI is established by taking all your monthly debt
obligations (credit card payments, auto loans, mortgage, etc.) and
dividing by your monthly income. To determine your maximum safe monthly
debt multiply.36 times your monthly income. Now subtract your existing
monthly debt from this number and you have a monthly budget maximum.
Here's a link to a calculator that will do the math for you: mortgage
calculator
Putting it All Together
The key to determining
your budget is finding the percentage of your home's value you should
use as a budget guideline. While researching this article I ran across
recommendations to use percentages ranging from 10% to 25% of home
value. For a kitchen remodel of any substance that includes new
flooring, appliances, cabinets, sink/faucet, lighting and bringing
electric up to code I find anything less than 15% to be a very dubious
number. I suppose on a million dollar house 10% would be a workable
budget, but on a 200k house a 20k budget is marginal at best for a full
blown kitchen remodel.
If resale value is important to you it is
wise to keept the cost of your kitchen renovation project within 20% of
the current value of your home. Staying within this range insures that a
majority of the new kitchen's cost is recouped in increased home value
immediately, and the remaining cost should be recouped within 5 years as
your home appreciates.
Ok, let's run through an example. Keep in
mind, there is no exact formula here. We are simply doing our best to
be as informed as possible and make a wise decision about how much to
spend on our kitchen remodel.
For our example let's use my house. It's a 50's cape cod with a modest square footage of 1500.
Factor
1 value: Zillow gives me an estimated value of $167,500, however, I
notice zillow hasn't yet updated and accounted for the single family
homes which were recently built in the field behind us with a starting
price of $270k. Zillow also has our square footage listed at under 1200.
Looks like the previous owner did a little remodeling without a permit.
I'm going to base my budget on a price of 180k which is similar to
other houses in the neighborhood that are the same size.
Factor 2
Goals: My wife and I love to entertain guests. To make a kitchen
remodel worthwhile for us we need to lose an interior wall to open up
the kitchen and dining nook to the living room. I'm going to add 1% to
budget for this.
Factor 3 Must Haves: As a former chef two must
haves for me are a new oven and a really nice propane range(no natural
gas service here), preferably a commercial range modified for home use
(real commercial ranges don't have insulation around the oven, critical
for home safety). I'm going to add another 1% to my budget to make sure
there is enough money to get me my range and propane installation.
Factor
4 Longevity: We plan to stay in our house a minimum of 4 years. As a
rule of thumb it takes 5 years for most remodeling to appreciate and
recoup all of its cost. Since we will likely be here at least 5 years
I'm not going to penalize the budget, but since there is a good chance
we'll move right around 5 years I'm not going to increase it like I
would if we were staying much longer.
Factor 5 Size of Kitchen:
Our kitchen is about 140SquareFeet(SF). That's over 9% of the SF of the
house, 2% above average. Obviously this kitchen is going to require some
extra material and cabinets. I'm going to up the budget 1% for this, I
hope it's enough.
Factor 6 Layout: We are going to change the
layout of our kitchen pretty extensively. We currently have a cooktop
peninsula. The range is going to go on a differnet wall and the
dishwasher will move to the peninsula, though we might ditch the
peninsula, move the fridge and add an island instead. About the only
thing that won't move is the sink. I'm going to add another 1% to my
budget, again hoping $1800 (1% of our 180k value) is enough to cover the
electrical and plumbing changes.
For my base I'm going to use
20%. As I mentioned before, there are going to be people who will argue
with me on that, but going lower often doesn't leave you with workable
budget numbers for full blown kitchen remodels. I'm adding 4% based on
my factors listed above. I adjusted my zillow.com estimated home value
to 180k based on the comparable square footage and value of other homes
around me. This gives me a working budget of 24% x 180k= $43,200 When I
compare this to the Cost Vs. Value report I see that in the Middle
Atlantic Region a Major Kitchen Renovation is $59, 098. It looks like my
budget could be bit low, especially since I really would like granite
countertops and the Cost Vs. Value specs call for laminate tops. On the
other hand my kitchen is significantly smaller than their 200SF
benchmark, so I think I'll go with my budget number and see what my
contractor can do for me in that budget.
Please note that I
ignored Factor 7 Available Funds. Obviously Factor 7 either makes or
breaks budget numbers and there is no point in discussing it here.
Good luck with your kitchen remodeling project!
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106 S St Cloud Ave, Valrico FL 33594
Phone: +1 813-651-2333
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