Budgeting a Kitchen Remodel

Major vs. Minor

According to Remodeling Magazine's Cost vs. Value Report for 2010-2011, a major kitchen remodel in Seattle is expected to yield a 59.7 - 66% immediate return on investment, while a minor kitchen remodel in Seattle is expected to yield a 72.8% - 84.1% return on investment.  

What makes it a major remodel?  Changing anything you wouldn't have to change in order to simply update the kitchen (such as moving walls, replacing or relocating windows, relocating water and/or waste lines, adding new electrical circuits, etc.)  

How do you decide whether to go major or keep it minor?  If you are certain you will sell the house within 3 years, my suggestion is to keep it minor.  If you spend only a few hours watching HGTV, you will quickly get the message that, in a buyer's eyes, updated finishes are more important than an ideal layout.  So, why not keep that extra money you'd spend in your pocket?

If you're planning to stay, or there is any likelihood that you will (such as conversations about moving "next year" that have gone on for more than 10 years), then I think it is wise to fix what is broken while you update finishes.  You may need to improve the use of space, open it up to the adjacent room (or perhaps close it off), or move things around so that two cooks can comfortably work together.  You may already know that you will live here well into your retirement years, and it would be wise to look at Universal Design features and dimensions that will make aging-in-place a more comfortable and safe experience.  

"How much should I budget for Construction Cost?"  

Unless you are not moving much of anything and are simply updating finishes, I wouldn't expect to be in the price range that this article quotes for a "minor kitchen remodel" ($21,695 - $23,603).  Remember, these numbers are Construction Cost numbers (the amount you pay the general contractor), and they do not include "soft costs" such as permit fees, professional services (architect and/or engineer), reimbursable expenses, and a contingency fund (for unforeseen conditions that must be addressed - an unavoidable reality when remodeling).  For soft costs, I suggest that you set aside 35% of your budget.  

Also, appliances, cabinet knobs/pulls, and decorative light fixtures are typically not included in the Construction Cost.

The midrange numbers for a "major kitchen remodel" are more realistic, and even with that budget, you will have to make some very price-conscious choices.  Appliance prices can go sky-high, and few clients are happy with the bargain-priced options.  I typically see appliance purchases for a midrange kitchen remodel in the $8,000 - $12,000 range.  

Knobs and pulls can vary from $2.50 to $20+ each.  The best-priced knobs and pulls are frequently found at "big box" stores, like Home Depot, Lowe's, and Target, or online.  Be sure that you order more than you think you'll need.  Finding out that something has been discontinued after the return-policy window has expired happens way too often!  

Decorative light fixtures can also be found at "big box" stores or online.  You may find ceiling fixtures for $20 that will work in less important areas, or you may need something that is higher-quality where visual impact is important.  A good working budget is $100/bulb.  In other words, a dining room chandelier with 4 bulbs is probably going to be in the $400 range for a quality fixture from a store like Rejuvenation Hardware.  

Total project cost

Using a round number of $60,000 for "major kitchen remodel, midrange," let's see how that is adding up.:

$60,000 Construction Cost

$21,000 "soft costs" (35% of Construction Cost)

$10,000 appliances (middle of $8,000 - $12,000 range)

$410 75 @ $5 per knob + tax = $410

$1,424 (3) 2-bulb flush-mount ceiling fixtures, (3) 1-bulb pendents, (1) 4-bulb chandelier = 13 bulbs @ $100/bulb + tax

$92,834

"Okay, we're going for it.  How do I know if my choices are on target for my budget?"

Cabinets are one of the biggest homeowner-chosen line items, representing 30-35% of the Construction Cost.  Working with the $60,000 Construction Cost budget above, that means $18,000 - $21,000 for the cabinet budget including the builder's mark-up (12-18%), sales tax (9.5% in Seattle) and installation (typically $2,500 - $3,000).  Using the higher end of the range and 15% mark-up, that brings $21,000 down to about $13,500.  If your cabinet package is more than that number, you need to re-evaluate your choices or adjust your budget.

Other rules of thumb for line items are (and don't forget to factor in the builder's mark-up and sales tax):

Flooring 5 - 7% (including pre-installation preparation, installation, and finishing)

Countertops 5 - 20% (installed - low end would be plastic laminate, high end would be stone)

Backsplash 1 - 2% (installed, including pre-installation preparation)

"Really?  That seems like a LOT."

Yes, really.  Kitchens have a lot going on, with lots of different trades involved.  Remember, next to "location, location, location," the kitchen is often what sells a house - and the difference between having a house sell quickly and having to carry the cost while it sits on the market is NOT factored into the return on investment equations.  

And, if you really don't care about resale value, then consider the fact that you will use your kitchen each and every day.  In most homes, the kitchen is the hardest-working room of the house.  

Also see How Much Will My Project Cost?