The economics of a kitchen remodel: how to budget for a kitchen and not lose money

Much has been made of the value a kitchen contributes to a home. This wasn’t always the case and I have a few theories as to why. Anyone who has a home that predates the 1970’s probably has a very small kitchen in a very compartmentalized home. Back then, the Little Woman did all the cooking and she didn’t need a big, open chef’s kitchen, did she? It’s true that many older homes built en masse are also small, but if you look at pre-1970’s kitchen-to-rest of the home ratio and current kitchen-to-rest of the home ratios, the difference is clear. Cooking has become more of a group activity (or, depending on your perspective, men have become more involved in cooking) and therefore kitchens have become a place to cook and socialize, which warrants a bigger space. Now, the kitchen is the most expensive room in an average home. Although if Mr. Los Angeles got his hands on a home with a dedicated theater, this would be a a different story.

After installing our new floors and giving our condo a coat of paint and a good scrub, the kitchen was the room that needed the most work. The condo came with appliances that appeared Soviet in era and design and they had to go. So right after having to buy a home, we had to buy appliances (ick!). Instead of hunting Craigslist or getting ding-and-scrapes from the big box stores, we went to our local appliance store and just got what we really wanted for the long run. Mr. Los Angeles scored a top of the line fridge due to an advertising misprint. So that’s a big chunk of our kitchen remodel budget that was removed from the equation (about $5,000 worth).

Buying the condo was a touch-and-go process so for months I browsed Houzz and all of my favorite design and kitchen blogs and had quite the wishlist! Stone countertops! Instant hot water for my tea! A sink big enough to bathe a Labrador! ALL THE THINGS!!! But my ever-logical better half is wise in most things and we agreed that installing a kitchen that was appropriate to the home’s value is the way to go. We live in a decent neighborhood but we’re certainly not in Brentwood, and the median home price in our condo complex is about $180,000. So is a $50,000 kitchen really going to give us a return on our investment? In these uncertain times with a real estate market that has been described as schizophrenic, counting on a big kitchen remodel to carry the value of a home through the reselling process isn’t very wise. And when I hear phrases like, “a kitchen can’t be done for less than…” I have to laugh. Of course you can do a kitchen remodel for less! But there’s a lot of noodling that needs to be done to the budget and a lot of tough choices to be made. Here’s what I recommend:

Manage your expectations

I am what you would call “Bad At The Maths.” With that in mind, here is my equation for setting a budget.

How much you can afford + what your home is worth + what your real estate market will bear when it comes to selling your home = your kitchen remodel budget.

In this market you’re lucky to break even on the buying/selling of a home, but we’d at least like to aim for a profit. So it turns out you have $45,000 for a kitchen remodel. Spectacular! But does your home warrant a kitchen that pricey? And when you go to sell your home, will you be losing money because the original purchase price of your home and the amount you spent on the remodeling is greater than the sale price? Maybe in 2003 this wasn’t as common but it certainly is now. This doesn’t mean you have to put in a sub-par kitchen, but it does mean you have to find ways to lower you budget in order for your home to truly be an investment*. With the way we lowered our budget, we were able to get everything we wanted and not have it go over $20,000.

Know your strengths

Not everyone is DIY-inclined. Even if you’re an experienced DIYer, there are many things you shouldn’t attempt by yourself (plumbing and electrical for sure). But if you need to cut the budget, labor is perhaps the biggest line item. We have all seen the TV shows where couples are doing the demolition themselves to save money, but we found that demo for our kitchen would only run us $600. Yea, that’s how small our kitchen is! However, cabinet installation would be between $2500 and $3000. We decided this was a task we could do ourselves. It wouldn’t be easy and it would certainly be time-consuming, but we knew this is one of our strengths and we should definitely DIY. Painting was another task that was almost $1000! Of course we can do that! Drywall and mud? Definitely not, although in a kitchen with tons of cabinets and backsplash, there will hardly be any visible wall surface. Nonetheless, we’re having the contractor cover this. We planned on doing the tile floors and just having the construction company handle leveling the floor and putting down backer board for the tile, but his bid came in lower than expected so we’re having him add it back into the project. Having a level floor is very important when it comes to installing cabinets and it’s not something we were 100% confident in doing. However, the tile backsplash is a simple project we’ve seen done a million times and we’ll be doing that as well.

We were fortunate enough to be able to find a contractor willing to give up these portions of the project. Most of them insist on doing the entire project themselves so we’re grateful that our contractor can work with us. We also were careful in not taking on too many smaller projects so we weren’t getting in the way of the construction workers. Installing cabinets is one of the last thing on the remodeling timeline so we felt confident in requesting to DIY this part.

Do your research on materials… in moderation

During this project we were afflicted with a condition known as paralysis by analysis, aka over-researching. We would search and search and spend hours reading about appliances or reviews on materials. After that we usually ended up right back where we started and even more confused than before! Know that you’ll probably find a bad review out there for everything. Most people will take the time to post a big rant about something when they’re angry, and few people will post a positive review when they’re satisfied. Talk to your contractor and ask their opinion. They spend their workday installing water heaters and laying tile so they know a thing or two about renovating a kitchen!

As for price research, do your best to find out when the sales are and get what you want. In the case of our IKEA kitchen purchase, we were able to time it so we bought the whole kitchen a week before the sale started and were able to take advantage of sale prices due to their 14-day price guarantee. It was more important for us to be organized and have our kitchen purchased all at the same time instead of chancing it and having IKEA be out of stock on half of our kitchen.

Our countertops ended up coming from a local stone company rather than a big box store and they were about 40% less and a much better product. Going to Lowe’s was great for reference but they certainly had poorer products at higher prices.

*Of course, if money isn’t an issue and you don’t care if you get a return on investment, then do whatever you like! I’m a big believer in making you home YOURS and not constantly worrying about resale. I see real estate as more of an expense than an investment, and statistically is it usually the former.¬†


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