So you’ve purchased beautiful piece of land that came with a not-so-beautiful home. Or maybe your existing home needs significant work, to the point where you’re thinking about a brand new construction.
Which path should you take?
This depends on a number of factors specific to your case. Large-scale renovation is generally less expensive than starting from scratch, but may not be the best option for your long term goals. Demolishing an existing structure, and building a new one in its place, will save you the trouble of buying land—but this adds the cost of demolition to your bill.
The amount of time you plan to continue living in the property (if at all) is one of the most important considerations when deciding whether to renovate or start fresh. If you like the location of your house, and would live there for years to come if only the house were better suited to your family, then renovation may be the way to go. Since you don’t intend to sell the house in the near future, and your main goal is improving functionality and/or aesthetic, renovating will allow you to reach your goal in a cost-effective way.
On the other hand, selling in the next few years may be on your mind. In this case, putting your resources into a brand new house becomes a more sensible option. With your choice of up-and-coming neighborhoods, you can find a property where housing prices are following an upward trend. This may allow you to sell your relatively new home in a few years’ time, earning a nice return on your investment.
There is another situation in which starting over may be the most economically sound decision. Let’s say your existing house is valued at $300,000, but most of the other houses on your block are in the $700,000 to $1,000,000 range. Since your existing house is obviously holding the value of the property back, tearing it down and building from the ground up could put you on the upper-end of your neighborhood market, resulting in a big return.
Taxes are another thing to consider. If your existing home is located in an area where property taxes are high, your home may result in even higher annual dues. Discovering this after the fact is not pleasant. Building a new house again offers the advantage of strategic placement in areas where property taxes are lower.
Along those same lines, consider how you would finance a new home versus a large-scale renovation. Banks may offer different packages depending on which way you go, and interest rates can be a significant cost factor in the mid- to long-term.
Finally, don’t forget your own stress-levels and lifestyle changes when deciding whether to renovate or start over. Large-scale renovations are more liable to go over-budget due to unexpected problems and workarounds. On top of that, your ability to live in the house may be compromised for long periods of time while work is being done. Building a new house is certainly not without its own set of problems, but the process is sometimes less stressful.
Home renovations and new builds can both yield fantastic results. Your individuals goals and economic situation will ultimately dictate which path is right for you.
If you’d like additional insight on the advantage of renovation versus building, feel free to get in touch with us. We also hope you’ll leave your questions and comments in the space below.