When it comes to your home renovation budget, make sure you understand where spending will be most impactful in terms of your home’s value. This is especially important if you are looking to sell in the next few years.
Here’s a simple rule of thumb to follow so you can avoid going overboard: Try not to spend more on a room than the value of that room as a percentage of your home’s overall value.1 Sound confusing? Here’s an example.
A kitchen is typically 10 to 15 percent of the property value, so if your home is worth $300,000, you’ll want to spend $45,000 or less to recoup the most from your investment.1
What about other parts of your house?
- Finished attic: No more than 15%2
- Finished basement: 15-20%3
- Bathroom: 5-10%4
- Landscaping: 5-10%5
While it’s important to consider the impact of renovations on your home’s value and their potential return on investment, you may have additional considerations that are less cut and dried. Are you a foodie who loves spending time whipping up new recipes? If so, you might consider going over that 10-to-15 percent guideline for your kitchen based on what’s important to you—just make sure it works with your overall budget and goals.
And remember to factor in an extra 10 to 20 percent (or more) of your renovation budget for unforeseen expenses, like unexpected electrical work.1