Costs can add up fast when you are planning to renovate your home, especially once you start factoring in updates like new flooring, cabinets, lighting, and more. That is where the 30% rule comes in. You may be wondering, “What is the 30% rule for remodeling?” Simply put, it is a budgeting guideline to follow when looking to remodel your home. In this article, we will discuss the 30% rule and how to apply it to your remodel.
What Is the 30% Rule for Remodeling?
Know that the 30% rule is a general benchmark, not exactly a strict budget cap. It just encourages you to keep your remodeling costs proportionate to your home’s total value. For example, if your home is worth $400,000, you would ideally aim to have your renovation cost less than $120,000.
The reason for this rule is to balance your upgrade with a realistic resale potential. Pouring extra cash into your home remodel in a neighborhood of more modest homes will not necessarily yield the financial return you would hope for. On the other hand, investing less in a higher-end property can also work against you when you are looking to sell. That is why many find this rule useful – it gives a target to aim for and helps the homeowner prioritize what to remodel first.
Prioritizing Your Budget: Where Should the Money Go?
Once you have outlined your maximum budget with the 30% rule, you then need to decide how to spend the money. The fact is that some upgrades have a bigger impact than others, both in terms of use and potential investment return.
Consider the following breakdown:
- 40% on kitchen and bathroom, which are usually the most expensive but also the areas that add the most value.
- 25% on flooring, paint, and finishes to freshen up the space.
- 20% on systems including plumbing, electrical, or HVAC.
- 15% on miscellaneous expenses or unexpected costs (almost inevitable in remodeling
Building in a contingency fund (10-15% of the total budget) can be useful in the event of unforeseen problems like hidden water damage, mold, or structural issues.
How the 30% Rule Applies Room by Room
Not every remodel needs to follow the 30% rule literally, especially if the project is focused on single rooms. Here is a rough idea of how much to spend on each room as a portion of the home’s value:
- Kitchen remodel: up to 10-15% of the home’s value
- Bathroom remodel: 5-10%
- Living room or bedroom updates: 1-3% each
- New flooring throughout: 2-5%
These smaller percentages show how the 30% rule can be applied on a micro level. This can be helpful if your renovations are being done in different phases over time.
How to Stay on Budget Without Sacrificing Style
One of the biggest challenges faced by homeowners is making design choices that do not blow the budget. Remodeling on a budget does not have to mean settling for cheap materials or cutting corners. The first step is to identify where to save versus splurge. For example, splurge on custom cabinets or quality countertops, but save on hardware, lighting fixtures, or flooring, and choose cost-effective and attractive alternatives.
Shopping during holiday sales, using reclaimed materials, and checking local reuse centers can also stretch your dollar further!
When You Can Go Beyond 30%
There are times when it is justified to go beyond the 30% rule. If you intend to live in your home for a long time and want it customized to your exact needs, then spending may be worth it. Also, if the home is a fixer-upper, you would potentially need major repairs to make the home livable.
That being said, it is in your best interest to consult a real estate agent or appraiser before going all in, even more so if you are concerned about the resale value. Their expertise can help you see whether your investment makes sense based on market trends and local comps.
The Role of a Remodeling Contractor
Even if sticking to a budget comes to you naturally, it can be very overwhelming to handle a renovation without professional help. A remodeling contractor can be there for you to plan smartly, estimate costs realistically, and coordinate timelines with vendors and suppliers. Contractors can also guide you through local building codes and permits, which would prevent costly mistakes. A good contractor can help you stay within the target percentage and still achieve the look of your home you are hoping for. Get a consultation today!
