Renovate or Move?
The Key Points to Consider
Are you craving a change in your home? Do you need more space, an extra bathroom, or a different layout? You’re probably asking yourself the question, “Do I renovate or move?”
We have this conversation with our clients time and again. Below are the important points we encourage them to consider when deciding whether to renovate or move.
First Things First.
The Costs of Both Options
Start by seeking estimates of your planned renovation. Ask friends and neighbors (or us!) for builder recommendations. Plan to get at least three estimates for your project.
What can you expect to spend? The short answer is – it depends. The cost will depend on the scope. For example, according to Home Depot, a minor kitchen remodel will cost about $20,000, a major one, approximately $62,000, and an upscale remodel will run upwards of $120,000 (national averages for a 200 sq. ft. kitchen).
Adding square footage can run anywhere from $200 – $600 per square foot according to the local Case Design/Remodeling. Adding a bathroom or bedroom could run from $25,000 to $50,000. Larger rooms, such as a family room, could run as high as $100,000 (CostHelper.com estimates). Keep in mind: the more you build, the less it costs per square foot.
Be sure to check out our comprehensive guide to the costs of common home improvements.
If you need a construction loan to undertake the renovation, that is another significant cost to include. This short-term loan is used to finance construction projects (prior to any long-term funding). Because these loans are considered relatively risky, they usually carry higher interest rates than traditional loans as well as a steep down payment, usually 20 – 25 percent.
When renovating, there are many factors to consider beyond the actual construction costs. Other costs that are often NOT considered include hiring an architect and/or designer, moving furniture in and out, storage, unexpected problems that arise during the renovation (such as needing to upgrade the electrical or discovering foundation issues), and quite possibly short-term housing/rental.
It can be harder to evaluate the total cost of moving. Start by assessing how much money you’ll get out of your current home and your budget for a new home. Remember you’ll need to factor in home improvement costs to get your home ready to list, Realtor commissions, closing costs on a new home, and of course, packers and movers.
Once you have all of your numbers, compare the costs of moving with the cost of remodeling. Be sure to add in the non-tangible costs of moving such as:
Your Emotional Attachment to Your Current Home
This is a big one. Consider your emotions. Do you get teary thinking about leaving your home or neighborhood? Are your kids in the local schools and activities? Would you maintain relationships with friends and neighbors?
Will a Renovation Solve the Problem?
Consider what you dislike about your current home. If it’s the style, location, yard, or neighborhood, no renovation is going to fix the problem. However, if it’s the layout or outdated fixtures and appliances, those can sometimes be fixed with a renovation. Consult with an experienced architect to see what your best options are.
The Nuts and Bolts
While a six-month renovation may seem like an eternity, it may be just as long before you’re in a new home. Consider the time it will take to prepare your home to sell. Also, talk to your Realtor about the current real estate market in your area and how long you should expect your home to be on the market. Also consider how long it may take to purchase a new home, especially in our current, ultra-competitive market with low inventory.
Return on Investment
Once you have your renovation estimate, consider how long you plan to stay in the house. Will it be long enough for you to recoup your investment and enjoy the changes? If you envision downsizing or relocating in five years, a major renovation probably isn’t a wise choice.
Also, consider the projects you plan to undertake. There is a wide range of ROIs in home improvements. If your dream is to have a home with a pool, adding one to your current home probably isn’t worth it (see #2 here). That said, some projects are definitely worth your investment, such as a minor kitchen remodel (80 percent ROI) and replacing your garage door (a whopping 97 percentROI). At a 59 percent ROI, a master suite addition may not be worth it.
Be sure to check out our related post on the Top 5 Home Improvements to Add $100,000 in Value.
Also, avoid the urge to over-improve. You may love your neighborhood but dream of a luxury home with all of the bells and whistles. If you’re leaning towards staying put and renovating, it’s very important to remember not to over-improve your home. You don’t want to have the most expensive house in the neighborhood. These homes are always among the toughest to sell.
The Bottom Line
There is no clear answer to the “renovate or move” question. The decision will be different for everyone, based on a variety of factors such as timing, costs, and emotions. Be sure to enlist the help of a trusted Realtor and an architect or designer that can help you think through all of the options.
If you’d like to talk to us about your decision to renovate or move, please reach out. We’d be delighted to help!