Should You Remodel or Buy a New Home?
For most people, the "dream home" they purchased when they were in their 20s falls short of qualifying as a dream home a few years down the road. If you purchased your home before you had children, for example, you may quickly find that you need more space. The question then becomes “Do I buy a home or remodel the home I have?” The answer is not an easy one and depends on your unique circumstances; however, there are some common considerations when deciding to pick up and move or invest in your current real estate.
- Motivation – ask yourself what your motivation is for buying a new home. Is it solely based on the need for additional space or are there other reasons as well? Do you want to be in a better/different neighborhood? Are you concerned about the school district your current home is in? Are you simply unhappy in your current home? If your only motivation for moving is that you need more space then remodeling may be a viable option.
- Cost – consider, for example, the basic cost of adding space to your existing home. Expect to find pricing variations for home remodeling projects depending on region. For example, adding a master suite to a home in Indianapolis might cost you about $104,000, while the same addition in San Francisco will cost you about $20,000 more. Sit down and figure out what all the renovations you want will cost in terms of dollars and cents.
- Time – remodeling also comes with a cost in terms of time and energy. Major renovations can take weeks, even months to complete – all the while you are living in the real estate under construction. Get some firm estimates on the amount of time your renovations will take and then add on at least an additional ten percent to decide if you can live with the distraction (and hassle) for that long.
- Value – along with the up-front cost of remodeling, you need to consider the return on your investment. Most homeowners do not get anywhere close to 100 percent of the money back that they spend on renovations. Homeowners who add a master suite to their homes will only see, on average, 60 percent of their money back if they sell the property. There are cases where the homeowner is willing to take a loss from their remodeling investment because it will be beneficial to their everyday lives and will eventually pay off in the long run; however, for home sellers, more often than not, major home remodeling projects don't make financial sense (unless it is for the purpose of fixing some sort of structural problem. Although determining the value of any reconstruction project is highly subjective, it recommended that you carefully consider its market value prior to making an investment.
- Market Conditions – in the real estate business, the market conditions dictate whether it is the best time to buy a home or sell a home. If your home suffered during the recent recession, you may owe more on your mortgage than the home is worth. If that is the case then selling your home at this point might not be wise.
- Long term plans – where do you see yourself and your family five or ten years from now? Are you planning to have more children? Will your children be leaving the nest? Are you counting the days until retirement? Be sure to take your future plans into account when deciding to remodel or buy a home.
Once you have considered all of the relevant factors you should be ready to make an informed decision regarding whether it’s in your best interests to buy a new home or remodel the home you own right now.