Renovating your home could be just the thing you need to make it truly yours. But be careful: This decision could lead you down a never-ending (and stealthily expensive) home improvement rabbit hole. Once you’ve turned your kitchen from drab to fab, for example, your family room now seems out of place, the living room looks dated, and so on. In many cases, tearing down an old home is more affordable than a top-to-bottom remodel, with or without addition. But not always. It depends on the home, your location, and your situation.
The proliferation of home renovation shows on television today has many people fascinated with the idea of renovating their home or buying a fixer-upper. Just what are the real costs of renovation and moving? What is the best option for your family? Here is a rundown of factors to consider when choosing whether to renovate or remodel your current home versus moving into a new home.
The Benefit Of Renovating And Staying Put
Renovating can be a hassle — but so can moving, and perhaps even more so. When you buy a new house, you’re signing up to pack up your existing home and move to a new one. And there are consequences to doing so.
For one thing, living in a new neighbourhood can be less convenient — you don’t know your way around, the stores aren’t the same, and the adjustment is potentially lengthy. Moving also means giving up the neighbours you like and the school district your children are enrolled in. That’s a big deal.
Another good reason to renovate? You’ll have a home that caters to your specific needs. Say you’re unhappy with your outdated kitchen and want a new one. You could find a home with a brand new kitchen, but you may not love the colour of the cabinetry. When you stay in your home and renovate, you call the shots with regard to improvements.
Furthermore, you may find that renovating is more cost-effective than moving. When you sell a home, you need to pay a real estate agent a commission for facilitating the sale. Then, when you move, you need to cover the cost of moving, plus pay closing costs on your new mortgage. Renovating, meanwhile, can be done quite affordably if you have equity in your home because that opens the door to a home equity loan or line of credit that gives you access to the money you need to make those improvements.
Also, the right renovations to your existing house could give you a great return on investment so that when the time comes to sell it, you’re able to command top dollar for it while getting to enjoy those updates yourself in the meantime. And, in some situations, renovating could make it possible to turn your home into an income source. For example, if you finish a basement, there could be the option to rent it out to a tenant.
The Benefit Of Buying New
On the other hand, there are plenty of good reasons to buy a new home rather than renovate. First, you’ll avoid the annoyance of having to live in a construction zone for some time. You’ll also get out of dealing with the logistics of renovating, from securing permits to reading up on building code requirements.
Furthermore, if your renovation cost is substantial, you may find that moving to a new home makes more financial sense. Though you will need to apply for a new mortgage, interest rates are relatively low right now, and if your credit is strong, there’s a good chance you’ll score an affordable mortgage.
Finally, moving to a new home gives you a chance to enjoy different amenities that may not be available in your neighbourhood. And if you find an area with a superior school system, you may find that moving is a positive thing for your children.
Should I Renovate or Move? What Are the Costs Involved?
Now that we’ve covered the intangibles let’s look at the real costs of renovation vs moving. In addition to cost, we’ll also look at timelines and the return on your investment.
The more you build, the lower your cost per square foot will be. This means that new construction is inherently cheaper than renovations. Plus, the financing for the two types of projects is different. Few homeowners have the kind of equity in their existing homes to cover the cost of major renovations. This means that they will need to obtain a new construction loan that has interest rates that are significantly higher than their first mortgage rates.
The remodelling timeline can be challenging to manage. Most of the time, you will need to move your belongings out of the home and into storage. Then, you will have to find alternate housing while the renovations are being completed. That means just as much moving in/out as if you moved from one location to another.
You are also not in control of when the renovation is completed. There are no guarantees when it comes to contractors. Plus, you never know what kind of issues may be lurking behind your walls, ceilings, or foundation. Unanticipated problems will add time, as well as money, to your project. Planning for a new look for your house? Look no further! MJS Construction Group is here to help in your home builders.
Return on Investment
When renovating a home, you have to consider if the money you are spending on your home can be recouped when you sell your property. This means looking at the initial purchase price of the house and the cost of your renovation. It is effortless to overcapitalise a remodelled home. This means that the money you have invested in the home brings its value far above the neighbourhood average.
It is not wise to own a $500,000 home in a neighbourhood of $300,000 homes. You will find it difficult to sell later on down the road. This is something you seldom have to worry about with a new home. New homes are built in neighbourhoods of similarly priced homes.
Things To Consider Before You Decide
Both moving and renovating can be stressful, costly, and time-consuming. Consider your answer to the four questions below before deciding what the best decision is for your family.
Cost: Is it cheaper to renovate or move?
For many Americans, the cost is a significant factor in home improvement decisions. Whether or not it’s cheaper to renovate or sell depends on your current mortgage situation, as well as how much money you have in savings. Renovations come with immediate, out-of-pocket expenses, whereas moving can put money in your pocket now but cost you a lot more down the line.
Emotional attachment: What will you miss about your home?
You and your family maybe even more attached to your home than you realise. It may be the place your daughter took her first step or the last place you saw an ailing grandparent. Consider these emotional implications, both on you and your other family members, before deciding whether you are ready for the stress of moving (and it will be stressful!).
Real estate market: Is it a good time to sell?
Even if it is cheaper for you to move as opposed to renovating, will you be getting the most out of your investment? Do some research about market conditions before you list your home. There are also seasonal house selling trends to consider. Homes typically sell faster in spring and summer, and they’re more likely to sell at or above the asking price.
Timing: Is the timing right for you and your family?
It is not only moving stressful, but it also isn’t always feasible or rational given other life events happening to you and your family members. Consider that moving may mean changing school districts, commute routes, and mortgage costs.
Keep in mind that renovating your house comes with immediate expenses, with the average home remodel costing $46,503. If you are setting money aside for college savings or other finances, can you afford a costly renovation right now, or would it make sense to take advantage of your equity and sell for extra cash?
Buy New Or Renovate: What’s Right For You?
There are pros and cons to remodelling a home you’re not happy with, and there are also pros and cons to uprooting your life, selling your home, and buying a new one. To figure out what’s best for you, ask yourself:
- Am I emotionally attached to my current home? If so, that’s reason enough to stay.
- Do I love my neighbourhood? Again, a good reason to renovate.
- Do I hate dealing with construction projects? If so, moving spares you that hassle.
- Do I have the patience to deal with packing and moving? If not, renovating it is.
- Will my renovations increase my home’s resale value? A real estate agent can help you determine how likely you are to get your money back on any improvements, and if you’re looking at a good return on investment, renovating makes sense.
- Do I have affordable financing options for my renovation? If not, then a move could be more cost-effective.
there’sThere’s no easy answer. But if you address these questions honestly, you’ll hopefully arrive at the best decision for you. Looking for dual occupancy? Look no further! MJS Construction Group has you covered.
When Should I Sell Up And Buy?
Deciding whether you should buy a new property or renovate should align with your financial objectives. It can be more cost-effective to renovate your existing home if you intend to make some minor upgrades. A significant deciding factor can be if you’re already living in the location of your dreams and intend to live there long term, staying put and making some changes to your current home can be more sensible than buying a new property.
As well as that, if the value of property in your area is growing, it may be worthwhile to renovate now as capital growth occurs for future investment. If you do decide to move, you can use this as an investment property. However, with renovations, you need to consider your costs carefully to ensure you do not overcapitalise.
When Should I Stay Put And Renovate?
On the other hand, it can be more cost-effective to renovate your existing home if you intend to make some minor upgrades. Furthermore, if you’re already living in the location of your dreams and intend to live there long term, staying put and making some changes to your current home can be more sensible than buying a new property.
As well as that, if the value of property in your area is growing, it may be more worthwhile to renovate now as capital growth occurs for future investment. However, with renovations, you need to consider your costs carefully to ensure you do not overcapitalise.
This is the golden rule of renovating. Overcapitalisation occurs when the property’s value does not increase by the same amount you spent on renovating the property. For example, if your property was worth $800,000 and you spend $150,000 on renovations but find that when you attempt to sell your home, the property’s value only increased by $100,000, you have now lost $50,000 due to renovations.
How Do I Avoid Overcapitalisation?
Get your property professionally valued.
Be sure to ask an agent for a figure regarding how much your home is worth and let this be a starting point to dictate how much you should be spending on renovations. Your local property manager or real estate agent should also be able to tell you which features add value and which ones don’t.
Check the value of properties nearby.
It’s a good idea to find out the average sale prices of other properties on your street and suburb – primarily houses with comparable features to yours – and use this to determine whether it is worth making renovations to add value to your property. By establishing a ballpark figure, you can place a limit on the amount you spend on renovations to avoid overcapitalising. At MJS Construction Group, we offer a wide range of duplex build.
Have a clear budget
Rather than approximating figures of how much each move will cost you, make sure you get specific quotes from people you plan to hire or costs you know you will need to pay to decide which is the least costly endeavour, particularly in the case of renovations. While averages can be good, it is easy to overcapitalise when you are working on approximations.
Is It Better to Remodel or Buy a New Home?
Ultimately, whether you remodel or move is a personal decision. It comes down to your budget, your timelines, and your risk tolerance. For most people, buying a custom-built new home is more affordable and less risky and will get you into your new home much more quickly than a renovation.
What’s the best decision for you as a homeowner? Is it time to make a move into a new home, or is yours just in need of a few fixes? Whichever you choose, get the finances, paperwork and appropriate professionals lined up before you proceed.