You and your kitchen spend a lot of time together. Are you happy with each other? Maybe you’ve noticed those old countertops have lost their luster, or that rickety cabinet door feels like it could pop off any minute. And maybe your kitchen can sense you’ve been looking at it…differently of late.
But as much as you may think about tearing down your kitchen to the floorboards and building your dream kitchen from scratch, you have to ask yourself: How much will these improvements cost and how much will they add to the value of my home?
For most home improvements, the answer is not as much value as it costs to actually make the improvement. But some home renovations offer more bang for your buck than others. Most real estate agents and remodelers agree that updated kitchens and baths still bring a significant payoff.
When you’ve decided it’s time for some sprucing up, you’ll need to do a little research and planning to make the best choices, save the most money and get the best possible return on your investment.
SO, WHERE TO START?
First, decide if you’re looking to sell soon or stay awhile – this decision alone can greatly affect your cost and choices.
Then take a serious look around and determine exactly what you need to change: Countertops? Cabinets? Plumbing and wiring? All of the above?
And finally, decide on how much you can afford to spend.
You may not be able to answer all these right off the bat, so here’s a few valuable tips to help you along:
- Selling or staying – If the main motivation for remodeling your kitchen is to sell the home, keep in mind that homebuyers tend to gravitate toward several common features – granite countertops and stainless steel appliances, for example. But let’s say you’ve been thinking about getting that red gum handcrafted hardwood butcher block countertop for some time. You should keep in mind that not all potential buyers will share your appreciation for the exotic and this choice may hamper your ability to make a quick sale. It’s also helpful to know the average home values in your neighborhood, so you don’t over- or under-spend on renovations.
- Update or remodel – Doing a kitchen update instead of a remodel is cheaper, faster and can hold you over for years. For the biggest returns, focus on simple, high-visibility changes, like recessed lighting, updated cabinets, new plumbing fixtures and stone countertops. But, if you need major repairs or have to replace your plumbing or wiring, or you’ve simply outgrown your space and need a new design, go ahead and completely remodel.
- Plan your budget – Of course, every situation will be different and there are many contributing factors that affect how much value you can get on your updates. But, according to HomeAdvisor, the general rule is that your kitchen remodel should be budgeted at somewhere between 5 and 15 percent of your current home value. HomeAdvisor notes that spending less than 5 percent may result in a lower home value, while you’re unlikely to recoup much more than a 15 percent investment in a resale. It’s also a good idea to leave a little wiggle room for unexpected costs, like: overruns when a project takes longer than planned, interest payments for a home-equity loan and higher property taxes when your home is reassessed.
Return on Investment
For nearly 30 years, Remodeling magazine has conducted an annual cost-versus-value analysis for residential remodeling projects around the country. It collects data on how much projects cost to complete and how much they might add to a home’s selling price one year later.
According to their Cost vs. Value Report for 2015, a major kitchen remodel will return an average of 67.8 percent of the project’s cost back to the home’s value nationally. While a minor kitchen remodel will add 79.3 percent.
HGTV paints an even brighter picture, reporting that minor kitchen remodels have been known to provide returns of more than 100 percent in some cities. It adds that, among others, such updates would include: all-wood cabinets, natural wood or stone floors and stone countertops.
The Market – How much remodeling your kitchen improves your home’s value depends on the strength of your local housing market. SFGate notes that a low housing market will hurt your home resale value, while a robust market will help home improvement projects deliver a better return on investment. But, just as your home’s value should be in line with your local market, your improvements should be in line with the value of your home. Be careful not to exceed the limits for the neighborhood, or you won’t get your money back.
The Timeline – The longer you stay in your house, the more likely you are to recoup your costs. As noted in This Old House, home prices will rise an average of about 5 percent a year, so your expenditures will eventually be absorbed into the increased property value. However, there is no guarantee that prices will continue to follow this upward pattern. Also, your circumstances may change unexpectedly and you may have to sell your house sooner than you had planned.
WHERE TO SPEND YOUR MONEY
Interestingly, the top-ranking home improvement, according to Remodeling magazine’s annual Cost vs. Value Report for 2014, is a new (steel) front door, returning an average of 96.6 percent of the amount you spent to the value to your home.
But when it comes to remodeling your kitchen, think solid wood cabinets, commercial-look appliances, natural wood or stone floors and stone or fabricated stone countertops.