613.225.5555

What is the return on investment on a kitchen renovation? border=

 

What is the return on investment on a kitchen renovation?


 

As a professional in the kitchen cabinet industry with over 25 years experience, I was surprised to see the answers I found on the internet to this question.

Even if kitchen renovations was at the top of the list after paint renovations, most web sites say that return on investment on kitchen renovations is between 70% and 80%.

In my experience this would be the worst case scenario, I believe the answer to this question is more complicated than that, we need to answer more questions before giving an expert opinion.

  • What is the ratio of the cost of the renovation over the value of the house?  Having a $75 000 kitchen renovation on a house with a value of $250 000 will not have a good return on investment, nor having a $5 000 kitchen renovation on a house value of $1 000 000.  It is very important that you respect the proper ratio of kitchen value over house value, this ratio is typically around 7% but once again this is not a fixed number.  What you need to do is hire the right people that will help you answer these questions.  Who can help you with this?  Your local realtor, an expert on house values in your neighborhood can tell you what the value of your house is today and what it will be after the renovation.  An experienced kitchen designer can also help you determine the proper ratios.  Most kitchen designers work on commission and want to make you happy, it is in their own interest to make sure that your investment pays off if you decide to sell your house, since it will mean recurring business for them.
  • What is the value of the existing kitchen?  You would never think that the value of the old kitchen is important in the renovation process!!!  Let me explain myself, some kitchens can have a negative value on the value of the house (very outdated, broken parts, design issues, shows signs of wear and tear), some kitchens have a zero value on the value of the house (it’s an ok kitchen, nothing special), some kitchens can have a plus value to the house (custom design, solid surface counter tops, appealing accessories).Example 1: 10 year old house, builder grade, $350 000 value, zero added value on kitchen, $25 000 kitchen renovation = increased value $370 000, return in investment 80%.Example 2: 40 year old house, custom build, $500 000 value, negative value of kitchen -$50 000, $35 000 kitchen renovation = increased value $570 000, return on investment 200%.
  • Why are you doing a renovation? Is it that your kitchen looks old, outdated, not functional = higher return on investment.  Is it that you hate the color and style of the existing kitchen = lower return on investment.
  • When are you planning to sell the house?  Is this a flip?  If so you will have to be more careful on your choices.  Is it for your own benefit, you will live, cook and appreciate your newly design kitchen for the next 15 years, if so, you will have to take in to account the benefits this transformation will have on your life, it’s not always about money.
The good news is that a kitchen renovation is one of the best investments you can do in a house, it is also one of the most expensive renovations in a house.  For that reason,  it is very important that you surround yourself with experienced professionals, realtors, kitchen designers, architects, contractors.  These professionals will help you make the right decisions and will ease the pain and stress of a kitchen renovation, so at the end of the day you are happy with the results.



Leave a Reply