Rennovate or Find a New House?

A common quandary is whether to improve the home you're now in or move to more desirable quarters.  Whatever the outcome, this is an expensive and difficult decision that merits careful consideration.  

Times have changed.  While owning a home has long been the American dream, the way we view home ownership has changed over the generations.  In the old days, our forebears bought a home, raise their families, retired, and then passed on the property to their heirs at death.  The homes were maintained, but substantial improvements were rare.  Living in a house that has been passed down for generations is the exception these days, rather than the rule.  But we're no less attached emotionally to the family home, so the decision to make major home improvements or to move is one that needs to be carefully deliberated.  A move or a home improvement project are time consuming and take a lot out of you and your loved ones.  Mistakes are costly and not easily undone.  Here are some matters to consider.

General considerations

  • Evaluate the physical layout of your current home.  Are there limits to how much can be added to the house without running afoul of zoning regulations or greatly diminishing the size of your yard?  If an addition is out of the question or very difficult, can you work within the existing dimensions of a home?   
  • Obtain a cost estimate for the remodeling project and add at least 10% to the estimate because that's reality.  Then add the cost to what you think your home is worth now.  Will the total still be in line with neighborhood housing prices?  You never want to live in the most expensive home in the neighborhood.  On the other hand, if the proposed remodeling cost still results in a house that is modestly priced by neighborhood standards, the project could be sound financially.  As unpleasant as it is, one scenario to always keep in mind is what kind of return you would receive if you had to sell the house right after you finish the remodeling because of, say, a job change, illness, or other event.

Matters that favor remodeling

The most compelling reason to stay put and remodel is that you really like the community and neighborhood in which you live and plan to live their indefinitely – five years at least.  

  • Remodeling is expensive, but it may pale in comparison to the substantial costs of moving over and above the cost of the new home, including real estate commissions, closing costs, moving costs, draperies, and endless other costs associated with whipping the new home into shape.  Property taxes may also be considerably higher.  In contrast, well thought out home improvements could add almost as much to the value of your home as they cost.

 
Matters that favor moving

Although you may like your current home, the remodeling you envision may still not make the house as livable as you would like.  If you can afford it, moving into a new manse may be preferable.

  • If you're in an older home that's beginning to require a lot of maintenance, moving into a newer structure may well trump remodeling an old house, particularly if you are retired or nearing retirement age.  
  • Living in the midst of a construction site is a dreadful way of life, one that you and your family may not be prepared to endure.  You'll be sharing your house with strangers, things will go wrong, and your home life will be disrupted.  

The best home remodeling projects

If you do decide to improve your home, you need to balance your own needs and desires against how much the improvement adds to your home value.  In the best situations, most of the money you invest in your remodeling will be recouped when you eventually sell the house.  That doesn't necessarily mean that some elements of the project that are important to you may not be of much value to the next buyer.  But you need to consider this in planning the project.  For example, spending $10,000 on a sauna may not add any value to your home, but if a sauna is important to the comfort of the family and you expect to stay in the house indefinitely, this may be a small price to pay, particularly if the alternative is to move into a house that already sports a sauna.  Here is a list of the best home remodeling projects based upon the expected percentage of cost they will add to the value of your home.  Each is estimated to recoup at least 80%, but regional and other variations may affect the percentage.  

Siding
Bathroom remodel
Kitchen remodel
Bedroom remodel
Deck addition
Basement remodel
Window replacement
Bathroom addition
Roofing replacement
Family room addition
Master suite addition