Kitchen renovation

[Moristans]

So, I just got a bid on a new kitchen renovation. The dimensions are around 10' x 10' and it will cost around $9,000 for demolition, new cabinets, slate floor, granite countertops and backsplash, and rewiring. I still need to price new appliances (Frig, elec stove, dishwasher, disposal).

The kitchen is functional as is. It's just a bit plain and the sink and stove are located in awkward positions next to walls.

Conventional wisdom used to say you did upgrades to add value to your home. Given the current market and that I'll probably be selling in 2 years, would you guys drop $12K on cosmetic upgrades, hoping to add value?

[Snowreap]

not on cosmetic upgrades, no. the biggest problem with cosmetic upgrades is that beauty is in the eye of the beholder.

you won't get an extra $12K from somebody whose first thought upon seeing the kitchen is "ugh. this looks like a science lab. well, we can take this stuff out and brighten the place up after we move in, I suppose."

-ken

[Moristans]

That's basically what we are doing right now with our choice of the "look". I figure granite countertops, neutral colors, and cherrywood stained, plain fronted cabinets are a safe investment.

The condo building was constructed in 1970 and none of the previous owners have done much of anything except paint the existing cabinets and install new handles. When I say "cosmetic", I really mean "bring it into the new millenium". Our original plan was to demolish the walls and open the "U" into an "L" but, apparently, the association has a problem with the unit above us collapsing into our kitchen so we are left with gutting the existing area and doing what we can wit hthe space we have.

If it weren't for the rest of the condo which had been upgraded at some point since Nixon was in office, the kitchen would have been a deal breaker.

The outlets work when you plug stuff in, but the wiring is 35 years old. The dishwasher might work, but it's not plumbed. The disposal is functional, but it's not wired. The stove works, but one side is against a wall which makes two of the burners useless. The sink is against the other wall, which makes the countertop area in between the sink and oven a common space for dishes and cooking.

So, we need to gut the kitchen to make the area more functional. It's really just a matter of what's going in once the area is clear. I could probably save a couple of thousand by going with lower end stuff for the install and I can save a bundle more my keeping the existing appliances instead of buying new stainless steel stuff.

I can probably cut the total cost to between $7 and $8K.

[Vanraw]

I dont know your specics, but I will say that 12k for a new kitchen remodel is a very good price. Also from a value perspective, Kitchen and bathroom remodels have the biggest bang for the buck.

[Moristans]

Edited my second post with some specifics Maul.

Well, compared to other bids for comparable stuff, the one I would accept is very competitive. I'm happy with the price for what they will be doing. I'm just wondering if ti's worth it, period.

Also from a value perspective, Kitchen and bathroom remodels have the biggest bang for the buck.

Agreed. I watch TLC.

[Hoofhurr]

Do you plan on living there for a while? Like 3-5 years? Then go for it but don't do it expecting to get a ton of value out of it. That 12k would go much much farther as part of a down payment on a new place. Those type of upgrades should do two things. 1) Make you happy. 2) Help you sell your place before the guy next to you sells his. It's not going to price you much higher, it's just going to make you look better.

If you are really investment conscious try to pick a scheme that will appeal to the broadest number of people. Consult with a couple of different people on that to get an idea. Better yet go into neighboring condos and look at your competition.

[Breand]

9k sounds extremely cheap for a kitchen renovation.

[Slamz]

IMO, if you end up needing to sell in a buyer's market, you have to either stand out in price or stand out in features. A nice kitchen definitely helps a place stand out. The place I originally tried to buy last year (before the seller's bank dropped the ball) had a really awesome kitchen.

I suspect you'd tend to get more out than you put in. While the new buyer could see the old kitchen and think the same thing about renovating it themselves, it's a whole lot easier if it's already done and they don't have to envision a "fixer upper" future.

[Moristans]

Well, I just closed escrow yesterday Blhurr. We haven't moved in yet.

We'll probably hold on to it for at least 2 years. Beyond that depends on where we want to settle for good.

Two things spurred the renovation. First, I had saved up $40K for a down payment, but FHA only requires 3.5% down. Second, the condo we chose after looking through at least 20 others in the area ended up appraising 20K lower than the price we negotiated. We weren't even sure the owners would want to sell after hearing that, so we ended up looking at 10 more condos while waiting for them to decide.

Like i said, i was planning on dropping at least $20K for wall demolition and a kitchen expansion.

9k sounds extremely cheap for a kitchen renovation.

Yeah, no doubt. It's a small space, but still. It's not a question of the price for the work. It's just more along the lines of Snowreaps reasoning that's keeping me from pulling the trigger.

[Kakarat]

9k is extremely cheap for a renovation especially with the granite counter tops.
I know people that have been paying 12k on the cabinets/counter tops alone, with labor on top of that.
I hear it all the time working at Nelson Lumber .

For a bit of pricing on your appliances, my sister is paying roughly $4800 for all her 4 kitchen appliances.
Mind you those are Canadian prices and I am not sure what the retail sector is doing in the USA.

[Hoofhurr]

Ahh you just bought the place then that definitely falls in favor of a remodel. You'll get your value out of it by enjoying it for a number of years before you sell. On the flip side it'll start to show wear by that time too but really don't worry about it. Enjoy your new kitchen.

[Moristans]

For a bit of pricing on your appliances, my sister is paying roughly $4800 for all her 4 kitchen appliances.
Mind you those are Canadian prices and I am not sure what the retail sector is doing in the USA.

A bottom freezer, double door frig, electric stove, dishwasher, and microwave oven with stovetop hood, all stainless steel, price out to between $3K and $4K at the Sears outlet. Granted, they aren't top of the line and they have blemishes, you're kind of stuck with what they have on hand on the day you go to purchase (can't purchase online yet), but they are otherwise new and fully serviced and installed by Sears.

[Snowreap]

Do you plan on living there for a while? Like 3-5 years? Then go for it but don't do it expecting to get a ton of value out of it. That 12k would go much much farther as part of a down payment on a new place. Those type of upgrades should do two things. 1) Make you happy. 2) Help you sell your place before the guy next to you sells his. It's not going to price you much higher, it's just going to make you look better.

I agree with this.

I was confusing money with value. no, you won't get $12K more for your condo by adding these upgrades. but yes, spending $12K will increase its value (but not necessarily in a way that nets you any additional cash when you sell).

-ken

[Zeel]

I say go for the near top end stuff and enjoy it while you are there. A 3 or 4 year old kitchen will still look amazing if you decide to sell that soon, and a nice kitchen can be a real value to a homebuyer when comparing with other properties.

[Moristans]

Thanks guys! I think I will go ahead with the planned renovation!

[Maren]

9K for a total kitchen remodel is pretty good. Updating something in an aged home is a real good selling point.

A couple of points though

- Look into Silestone rather than Granite. It looks the same but granite requires sealing every 6 months and is succeptable to heat discoloration. Silestone does not need to be sealed, is naturally anti-bacterial, and is heat resistant.

- If you only put 3.5% down, you are most likely paying PMI (mortgage insurance), unless you did an 80/20 loan. PMI is money that gets flushed down the toilet until you officially own 20% of the home.

- For appliances, Kenmore Elite/GE Profile are really good. You may not get full value out of them in resale however if the price range of the condos will not support it.

[Moristans]

- If you only put 3.5% down, you are most likely paying PMI (mortgage insurance), unless you did an 80/20 loan. PMI is money that gets flushed down the toilet until you officially own 20% of the home.

I did a 30 year fixed at 4.75%. I could have gone with a 3/1 ARM and saved a bundle on monthly payments, but I would have had to put more down. Yeah, PMI is a scam, but the savings in PMI would not recoup the amount I'll pay for a 20% down payment unless I plan on staying there awhile. I think if we would have found a place that was turnkey and move-in ready, I probably would have put the 20% down. In my price range though, anything we would have purchased would have required some level of renovating.

I thought about Silestone. I'll ask about it before they start.

[Breand]

You should always go 20% if you can avoid it, not sure I understand your reasoning. avoiding PMI is huge, and the housing market will still probably decline for another couple years, so depending on your region you could be upside down on your mortgage within a year if your down payment was small. 30 year fixed at that rate though is awesome.

[Moristans]

So, I guess real numbers help.

My purchase price was 310K, which is quite a bargain for So Cal and the area I'm moving into. The market in the area is like 25% down from where it was at it's peak in 2007. The condo I bought was going for over 400K back then.

20% down would have been 62K, to avoid a PMI of, I believe, around $150 - $200 a month. Instead, I put 3.5% down, saving about 30K of my hard earned cash money and anything i would have had to liquidate to make up the 20K needed.

I'm spending 15K total in renovations, which allows me to hold on to the other 15K.

Like you said, with the declining market, I feel that throwing 60K into the condo would be like throwing cash into depreciation, possibly making me hold on to it longer than I might like to to recoup my losses. Meanwhile, the monthly savings from putting 62K down would never allow me to squirrel away that much money over the next 2 - 5 years if it does decline in value.

Possibly a mistake in the long term, but i'm extremely comfortable with the monthly payments as is. It's not like I stretched myself to make this purchase.

[Breand]

Wow pretty crazy, shows that banks are still willing to make crazy lending arrangements =). What's a bargain tho...when comparing to 2007 prices, everything is a bargain. For 3.5% down you arent really buying the house, the bank is and they just hope you will live there long enough to make some short term interest profit off you. Despite what the NAR wants you to believe, there has been no signs anywhere that we've hit a bottom, and the Case Shiller Index thinks we're still 2 years off from one. Prices in So Cal will certainly drop more than 3.5% so you will go into negative equity rather quickly. So I dunno, it sounds like you want it to be a short term thing, yet the reality is your deal kind of forces you to stay there an extended period unless you want to OWE money when you resell it. Anyone buying a house nowadays has to be looking at it for long term.

Sorry to be a dick about it, just trying to look at it logically. I certainly don't know nor understand all the variables in your specific case so anything Ive said is just an assumption.

[amins]

On the flip side of Breand, which I think he's pretty much dead on, as the market declines from more bankruptcy (declining employment rate) and less demand, rental should be relitively stable down in socal. Makes a great holding strategy after you've done your renovations, allowing you to build that 15k and buy another place once the market gets closer to the bottom.

Breands just the messenger. :lol:

[Moristans]

We'll see what happens. This is my 3rd purchase. The first two worked out pretty well. The first was in 2002 and I stayed there for 2 years before selling. The last one was at the very end of 2007 which I flipped in 2 weeks.

My immediate plans are just to live there, enjoy the new neighborhood, and enjoy paying about $500 less a month compared to the rent in my current apartment. I'll reevaluate in two years.

[Vanraw]

Well buying should always be better then renting. In Iowa it is and will continue to be. But we didnt see the massive increase in home cost nor price bomb. I still think that the West Coast and parts of the East coast are a long way from a bottom of the correction. I see prices out there for single floor ranch homes at 1500 sq feet that cost 3 times the amount of a 3000 square foot home in Iowa. I dont get it. I mean its not material cost.......

[Hoofhurr]

There are many many situations where renting is better than buying. For instance, everyone that waited to buy from about 2006 until nowish made a really smart/lucky/necessary decision.
Many people just admitted that they were being priced out of markets and decided to wait for whatever reason instead of getting caught up in the frenzy and getting into nasty situations in houses they didn't really want in the first place. These people now have lots of choices and for pre-2006 prices and their credit hasn't been slaughtered.

When it comes to buying doing it on your terms is usually the way to go.

[Kakarat]

I didn't buy, I built ... the house is a 1206 sq ft raised bungalow. 2 bedroom and 2 bath. It is on a corner lot and the house cost me $170,000 to build. There are a few factors into it though. My dad is a general contractor(connections to lower prices). I work at Nelson Lumber, Cost +10% on materials. We estimated $60,000 in sweat labor for the Mortgage. As the only stuff I hired out was, electrical, drywall/mudding, plumbing/heating, shingles, concrete work, and carpet.

With the help of my dad and brother, we framed the house. I insulated/poly. I painted, installed the cabinets, baseboard/trim, hung the doors, laid the tile, nailed the siding. This summer, Ive got fence and yard to do.

Good luck to you on your project Moristans. I find if you do more of the work yourself, you will enjoy it even more .