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For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: When remodeling my house, I don't want to spend a lot of money on updates that don't actually increase my home value. How do I know how much is a smart amount amount to invest, and when I would be going overboard?

A: Jump into a renovation project without first setting a budget and you may spend loads of cash on all sorts of lovely options—from a marble island-top for your kitchen to a two-person hot tub for your new patio—that you won’t get paid back for if you sell your house in a few years.

While that may not be a concern if you’re staying put for the long haul, if you’re likely to move in 10 years or less, it pays to limit your spending to what you might reasonably hope to get back at resale.

Thus start with renovating only spaces that are functionally obsolete, says Omaha, Nebraska, appraiser John Bredemeyer, a spokesman for the Appraisal Institute, a trade association. “Changing out a perfectly good, 10-year-old kitchen, for example, just because you don’t like the previous owner’s style choices, is not an investment that will pay you back at resale,” he says. But if that kitchen is from the 1940s, 1960s, or even the 1970s, a well-budgeted renovation makes financial sense.

How much should you invest? Bredemeyer’s rule of thumb is to spend no more on each room than the value of that room as a percentage of your overall house value (you can find an approximate value of your home at zillow.com).

Here’s how the percentages break down for each room:

Kitchen: 10% to 15% of house's value

Kitchen renovation budget for a:

$300,000 house: $30,000 to $45,000

$500,000 house: $50,000 to $75,000

$750,000 house: $75,000 to $112,500
Master Bathroom Suite: 10% of house's value

Master bathroom suite renovation budget for a:

$300,000 house: $30,000

$500,000 house: $50,000

$750,000 house: $75,000

 

Powder Room/Bathroom: 5% of house's value

Powder room/bathroom renovation budget for a:

$300,000 house: $15,000

$500,000 house: $25,000

$750,000 house: $37,500

 

Finished Attic or Basement: 10% to 15% of house's value

Attic or basement finishing budget for a:

$300,000 house: $30,000 to $45,000

$500,000 house: $50,000 to $75,000

$750,000 house: $75,000 to $112,500

 

Other Rooms: 1% to 3% of house's value

Living room, dining room, or bedroom renovation budget for a:

$300,000 house: $3,000 to $9,000

$500,000 house: $5,000 to $15,000

$750,000 house: $7,500 to $22,500

 

Patio, Deck, Paths, and Plantings: 2% to 5% of house's value

$300,000 house: $6,000 to $15,000

$500,000 house: $10,000 to $25,000

$750,000 house: $15,000 to $37,500

 

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