Home renovation projects are often a good idea. Your home will age, and it will need repair; and if you are smart about it, you can make intelligent changes over time to improve your home’s integrity before problems arise.
One way to be smart about Renovco home renovation, though, is to establish a budget. To figure out how much you should spend—not necessarily how much you can afford—is really the first step. Yes, it is true, you might not be able to afford all of the renovation projects you want, but again, if you stay ahead of your home’s needs you should be able to perform these renovations over time, investing your time and money wisely.
TIP #1: The Room-To-Room Cost-To-Benefit Ratio
And if you are on a budget (and most of us are) the smart way to choose where to spend your renovation money is to conduct a room-to-room cost-to-benefit ratio analysis. Basically, this will tell you which rooms have the best return on investment. Now, some rooms may cost more to renovate, but down the road it could save you money or recoup that investment when it comes time to sell.
For example, the kitchen is typically a major selling point of any home. It is often smart to renovate a kitchen. The average kitchen renovation costs about $15,000 (in the United States) but you can recoup almost all of it when you sell your home. And many kitchen renovations involve upgrading to energy-efficient appliances, for example, which can also save you money every year.
On the other hand, the average bathroom is probably no more than half the size of the average kitchen but can cost significantly more to renovate. And while it may be important to update a bathroom, it may not be wise—at least at first—because it does not guarantee as much return as a kitchen.
TIP #2: Establishing A Budget
Now that you have considered this analysis, this is how you should determine where you should spend your money. Use this guideline and compare it with your analysis to make smarter choices about your home renovation projects:
- Between 10 and 15 percent of your home’s value for a kitchen remodel
- approximately 5 percent on bathroom renovations
- 10 percent your home’s value to update the master bathroom suite
- another 10 to 15 percent to finish a basement or an attic
- between 1 and 3 percent on renovating additional bedrooms and other shared spaces (den, dining room, living room)
- between 2 and 5 percent on outdoor fixtures and other aesthetics (aka “curb appeal”)