What is a general rule of thumb of how much to invest in updating a kitchen?
One of the key elements when undertaking a remodeling project is the budget. Not only does the project have to be affordable, it also has to be a good investment. While there are studies available showing the rate of return of a typical project (Cost vs. Value, Remodeling Magazine, remodeling.hw.net), that is, how much of your investment will be recouped upon the sale of your home, there is less data advising on how much to invest in a project.
Each homeowner’s situation is different, and a variety of items need to be taken into consideration. The most valuable investment in a home is a remodel of the kitchen, followed closely by bathroom renovations. When house hunting, if the kitchen needs work, potential home buyers will walk away or deeply discount their purchase offer.
But how much should that investment be? A kitchen, because of its nature (appliances, plumbing, cabinets, lighting, flooring), is typically the most expensive room to remodel.
The budget should take into account how long a homeowner plans on living in the home. If it is less than five years, make materials and appliance selections that are more moderately priced. However, if a homeowner plans staying in the home for more than five years, selections can be made that will give the greatest enjoyment for years to come.
Don't try to not out-do the Jones. Check out the home values in your neighborhood. If you over invest in your home, but the neighborhood can’t sustain that value, you won’t recoup it when it comes time to sell. On the other hand, if you love your neighborhood and plan to stay, turn your home into one you can love for a long time; do what you can afford.
After considering these variables, apply them to a recommended 10% of the home’s worth for a kitchen remodel. If a home is worth $750,000 and you plan on moving in less than five years, $75,000 is a reasonable figure to use for a kitchen remodel. If you plan on staying in the home for more than five years, 15% is a good investment. If your plans are to stay in your home for seven or more years, invest as much as you can afford. After all, it’s for your enjoyment, not the next owners.