Allocating the money

kmmhOctober 15, 2013

I notice a few web sites that have percentages that you should spend of your total budget on any one item. For example, I have seen several places where 48% of your budget should be cabinets. I have also seen 29% and 35%. The problem with every list I've seen is that it is incomplete.
One list is missing backsplash, another labor. How could you not include labor?!?
Anyway I am hoping someone here has a better way, or could share a formula to help us get a better handle on where we should be spending our money.
Thank you!

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Sophie Wheeler

40-50% for cabinets and install.
10-20% for appliances and install.
10-20% for flooring and install.
10-20% for counters and backsplash, installed.
10 for "incidentals", lighting, paint, knobs,
10-20% for plumbing and electrical for a "light" remodel.
10-30% for "labor" not covered by other elements installation. (Like your hood install or a window replacement, etc.0

It's gonna end up being more than 100% of your budget. It always does. The traditional guideline of 10-20% of a home's value for a kitchen redo only covers a basic redo, to a more upscale redo---with virtually the same footprint. When you start moving around stuff, or eliminating walls, or adding space, etc, the % starts moving up.

    Bookmark   October 15, 2013 at 1:28PM
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I think it would be extremely difficult to come up with a one-size fits all (or even some) set of percentages. The size of the kitchen is a huge factor - a 10'x10' kitchen will probably be heavier on cabinets than appliances, because there isn't room for a 48" fridge or double wall ovens, for example. A huge kitchen with an enormous island may have a much higher countertop percentage.

And everyone has different priorities. I'm perfectly happy with my inexpensive appliances, but I insisted on custom cabinets. Others may design a whole kitchen around a high-end range and dramatic hood.

And I don't know that you should even worry too much about where you "should" spend your money. You probably aren't going to put a $1200 faucet on laminate countertops - your taste and style will probably point you to a logical distribution of budget.

    Bookmark   October 15, 2013 at 1:38PM
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From my own experience, here's what i think, after reading here and playing with a bunch if calculators for my own kitchen. I have a sample size of 1 for this method, so proceed at your own risk.

If your appliances are at the end of their useful life and would be replaced regardless of the remodel, I would vote to not count them in your remodel budget as that is a cost you would incur anyway (but do include them somewhere on your cost list so you have enough money saved for them too!). If you are replacing appliances that really wouldn't be replaced soon otherwise, then I'd include them in the budget and increase by 5% (so 15-25% of the value of your home, see below).

I found the 10-20% of the home value made more sense to me. Unless you are at either extreme of the market, that is probably a good rough place to start. That way you don't go overboard, and won't severely under improve for your neighborhood (like if you replace everything in your $200k home's kitchen for $8k including labor, not DIY, you might have to wonder about quality/durability).

So then you have a rough range to start. Figure about 40% off the top for labor.

Then about half of what is left for cabinets. That should let you at least narrow your cabinets down a bit. If you want a specific level of features, this is where it may make sense to spend a little more, or look at a slightly higher end line vs adding many upgrades to a less expensive line.

Then what i did is make a list of everything else I needed. From lights to pulls to paint, etc. Then did some preliminary shopping to get a sense of how much what I wanted was going to cost and added it up to see how close I'd be to the remaining fuzzy budget amount.

Then, after I recovered from the sticker shock, I started really scrutinizing everything. Because it ALL adds up. I found many items were things I didn't want to compromise on, like installing LEDs for the recessed lights, because there was an added benefit/reason for spending a little more. I also found that it's hard to get a decent pull out faucet for less than about $200 (not impossible, just hard), so I couldn't really reduce the $250 I budgeted there unless I wanted to end up way over budget because it was not realistic.

When you have looked at everything on your list for realistic prices and compromises and still way too high, THEN go back and take out the cool things you are convinced you need from hanging out here (I'm only half joking with this). Put them on the list for the next kitchen. I already know my next kitchen is getting a window bump out behind the sink, dishwasher drawers, and a tapmaster, plus a bunch of other stuff. Air switch made it through, it's only like $50 and so worth it!

By this point, you should have a decent idea of what type of budget you need to get the things you need/want for your kitchen.

If you're bank account doesn't agree, then you have an issue. You either need to assess your ability to DIY some aspects of the project, reduce the scope of the project, decide if there is anything you can let go of, do at a later date, or change and still be happy (it's already gonna be fantastic compared to what you started with!), or hold off and save some more.

Now, if you use all the methods in this thread, you should have numbers start to group around certain ranges. That's probably the best way to get a fuzzy preliminary budget.

    Bookmark   October 15, 2013 at 2:31PM
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I was wondering about the same thing as OP. The replies are really helpful. Going to bookmark this. :)

    Bookmark   October 15, 2013 at 3:20PM
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The biggest thing to account for correctly is labor. Some people buy all their fixtures and pay prices that include labor, while others give the bulk of labor costs to a GC and buy the fixtures separately without labor costs built-in.

My cost breakdown seems pretty close to williamsem's. My cabinets were ~20% of overall remodel cost, while all labor (of all types) was about 45%. If you can estimate cost of cabinets, and cost of labor, you can fill in the rest (lighting, floors, counters, backsplash, appliances, etc) pretty quickly.

The 10-20% of a home price estimate doesn't always make sense. If you live in urban CA, that price point can lead to some pretty nice remodels!

    Bookmark   October 15, 2013 at 4:36PM
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If I spent even 10% of the value of my home on my kitchen, I'd be broke. The concept simply doesn't apply in places where all real estate is very expensive. I'm doing a new kitchen, I'd call it mid-level: higher end appliances (but not the highest), nice cabinets, but not fancy European cabinets, Ceasarstone counters. It will cost FAR under 5% of my home's value. My only point is these numbers are just numbers, they don't make sense except in individual circumstances.

    Bookmark   October 15, 2013 at 5:37PM
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Oops, just noticed that calumin had already made the same point! I do live in "urban CA".

    Bookmark   October 15, 2013 at 5:38PM
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Forget these percentages that are worthless to all but the specific neighborhood they were developed from. ALWAYS start with the land value in your neighborhood and what direction the neighborhood is going. Then assess the demand for what's on it with a cool and critical eye.

In many neighborhoods, especially older, still or newly desirable ones, most (sometimes almost all) of the price inflation has been in the value of land, even while the houses on them depreciate both physically and functionally (3/4 bath for the master, what master?, etc.). Many nice homes in these neighborhoods would require extensive add-ons of square footage and remodeling of existing space to meed market standards. In neighborhoods where now only the affluent can afford the land, many very nice homes are teardowns, with buyers planning to bulldoze everything on it.

In neighborhoods where the land didn't appreciate much, any improvement beyond a new coat of paint might be a waste of money -- economically. Personally being an entirely different matter.

In many newish outlying subdivisions the land might be all the way up to a whole $20K (from the $800/acre the developer paid), and most of the value would still be in relatively recent construction that hasn't had a chance to depreciate too much, either functionally or physically. What's the return on new kitchens over newish but boring in these neighborhood? Probably very bad, plus many of these neighborhoods are in danger of significant accelerated depreciation in future.

As for your own home, ask yourself: Does your home have what buyers interested in your neighborhood are looking for? If not, what would it take to make it so? Then ask yourself, if you invest that money in the house versus investing it another direction, what would that choice gain or lose you? If you have an almost original 1890s kitchen that got new Formica on its 27" counter in the 1970s, remodeling might well be actually profitable -- IF the owner sold the house. If it's a good condition 1998 golden oak U that bores you, it could be a money sink. Depending. Don't forget to subtract depreciation if you aren't planning to sell immediately. Today's maple Shaker will be tomorrow's raised panel golden oak.

Note that if a 1980s 3000 square foot home in reasonably good condition that suffers from 70% functional depreciation due to 8' ceilings, split level, and few and small bathrooms is sitting on a $220K lot, only a cheap refurbishing of the kitchen might be appropriate, the kind of thing a real estate agent trying to sell the place would do -- according to the numbers. Of course, owners for whom it's their "forever house" might strongly disagree.

If you're living in a genuine old Craftsman, Southern Shotgun Colonial, Mid-Century and people are always calling and sticking offers in your mailbox to buy it for prices that get your heart fluttering, you're in a different position entirely -- economically.

Odds are you're somewhere in that very broad middle and that a boring but sensible approach will serve you far better than a more exciting and promising "percentage" that suggests you can spend all you want -- offered by the very people hoping to sell you that really expensive product.

Note also that I'm NOT advocating a strictly economic approach except for those who are turned on by that stuff, or really need to stick to one. This is your home you have to live in, and the value of investment in your own pleasure needs to be tossed into the pot -- my own personal approach since every choice requires tradeoff. Do I want to remodel the kitchen or tour China, or should we just put the money in the accounts we started for our grandchildren?


    Bookmark   October 15, 2013 at 6:44PM
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Thanks everyone, it's great to hear different perspectives.

That's a helpful breakdown Hollysprings!

Annkh- I agree that taste and style are going to lead me, but with so many choices out there for everything, I do best with a limiting factor. I saw some beautiful hubbardton forge lights, but knowing that that one is the same as my whole lighting budget will make me rethink that choice.

Willemsem- This is true: "THEN go back and take out the cool things you are convinced you need from hanging out here" and it ties into "what type of budget you need to get the things you need/want for your kitchen"
We've been saving forever so we can afford this renovation, but do we NEED to spend it all.

Calumin- Don't live in CA, but another area where house prices skyrocketed during the boom and then only slightly fell. Never sure - do I base my remodel on the price the house was worth in 1998, or 2008 (which is was more than double 1998), or what I could sell it for now...

Sjhockeyfan- Your point is the reason I didn't ask what percentage of my house cost should my budget be? Instead I want to know if my budget is x, what percentage of that should go towards, cabs, counter, etc...

Rosie- So many good points:
This is us: "any improvement beyond a new coat of paint might be a waste of money...most of the value would still be in relatively recent construction that hasn't had a chance to depreciate too much, either functionally or physically." Though we need appliances as well and we are fixing a horrible layout, at first glance our kitchen doesn't look so bad. We are doing this for us, and it won't affect resale by any large amount.

Thanks everyone!

    Bookmark   October 15, 2013 at 10:01PM
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Also ... if you are moving plumbing, gas, walls and windows those costs need to be taken out of the budget before you figure out what to spend on cabinets and finishes.

If nothing is moving, you can spend more of the budget on the visible components.

When you have looked at everything on your list for realistic prices and compromises and still way too high, THEN go back and take out the cool things you are convinced you need from hanging out here ROFL!

    Bookmark   October 16, 2013 at 5:50AM
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I also don't think you can come up with a set formula. There are too many variables at work. It will be different for every project and every individual. Most people have a budget, so you have to get a general idea on costs as they pertain to quality, and what is most important to you in order to prioritize wants and needs. A lot of people on GW seem to spend a fortune on cabinetry. I'm not sure that's the norm. Personally, I think you can get nice cabinets without it costing a fortune and possibly using up most of the budget. Labor will also be a huge component.

Unless you are planning on moving fairly soon, I wouldn't base decisions and purchases on real estate value, neighborhood or ROI either. That doesn't mean you have to completely disregard those things and it is a high priority for some people. But a home is your personal refuge, your own little island. So I would suggest to build your nest to meet your own family's needs, comfort and enjoyment. The ROI there is unquantifiable.

This post was edited by snookums2 on Thu, Oct 17, 13 at 14:34

    Bookmark   October 16, 2013 at 4:18PM
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Lazy Gardens- We are moving plumbing, gas, no walls and 1 window and that does really add up!

Snookums2-I agree. Our home IS our personal refuge, and my spend a LOT of time in the kitchen, so we should make it how we want it!

Thanks again everyone, as always-so helpful!

    Bookmark   October 22, 2013 at 11:58AM
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