Remodel or Move?
How to decide between remodeling your home or relocating
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On This Page: Read the Pros & Cons associated with "How To Decide Between Remodeling Your Home or Relocating".
Sometimes, it may make more sense to move instead of remodel. Find out what to take into consideration so that you can make the best choice for your specific situation.
Need Help On Deciding Whether To Remodel or Move?
Knowing the Pros & Cons can help in deciding whether to remodel or move.
The situation has finally presented itself. You've begun to realize that you want or need more space or perhaps a different layout in your home living environment. By now, you've begun to wonder whether you should remodel or move. Keep reading because you'll discover important considerations for making your choice.
The Need To Make A Change
For my wife and I, we were living in a cozy, older ranch-style house. The rooms were small, and the layout & flow were just off when it came to positioning couches, TV placement, etc. The kitchen was small, and there was only room in our house for a kitchen table or dining room table - but, not both.
Then, our baby arrived on-scene. Not too long afterwards, we started tripping over the large plastic toys that were multiplying seemingly weekly. That's when we realized it was time for a change.
What's Driving Your Change?
Unfortunately, the idea of moving up is currently under threat due to the recent economic downturn and massive slump in home prices. Today, the decision to sell your property and trade up is no longer as clear cut as it once was. Homeowners are now left wondering whether to stay or go.
So, what is it that's driving YOUR desire to change your living environment? Is it a new child? Do you want a bigger kitchen? Want a master suite & bathroom? A room addition? Or, do you want to change everything?
It's just a fact of life - things change over time. Most of us tend to collect things along the way, and we find places to store them in our homes. Children are born. Sometimes, our jobs provide nice financial bonuses along the way. Sometimes it's because we've gotten ideas from a home remodeling ideas show or website.
OK, so you've got ideas on want you want to change. Now, what are your options to get what you desire?
The Options To Remodel or Move
Renovating your home - or moving to another house - is a big step in life. And, there are a number of things to consider in making your decision.
One of the initial things to assess is how the economy in general is doing - and more specifically how the economy in your local area is doing. Are the overall - and local - markets in an uptrend or a downtrend? Is the job market strong - or, is it a little dicey? Are homes in your area - or the ones in another area that you may be interested in - increasing in price or decreasing? Does it seem to be a good time to make a big change - or would it make more sense to you to just stand pat for now?
If things are generally looking good - or you happen to have the financial wherewithal to proceed, let's take a look at the option to remodel your home.
Remodeling
Naturally, an initial plus for remodeling your home is that won't have deal with the hassle of moving elsewhere - at least on a permanent basis. And, if you happen to really like you're current neighborhood and/or location, you get to remain there.
Also, you'll be able to have bigger spaces, a better layout, that kitchen for entertaining, etc. - all while living in the same neighborhood. This is the option my wife and I chose.
Let's take a look at the pros and cons.
Pros
- Less Expensive - The cost of remodeling can be decidedly lower than the retail price of a new or preexisting house purchased elsewhere. Find the real cost for your remodel project and compare it to the retail price of buying a different house.
Cheaper: The cost of remodeling is considerably lower than the retail price of an existing structure on a per-square-foot basis.
- Return On Investment - This could actually be a Pro or a Con depending on the extent of remodeling you're considering for your home - and what the home values are in your neighborhood. Typically measure when you go to sell your home, remodeling a kitchen typically provides a good return on investment. Same for bathroom remodeling. Renovating your entire home may provide a good return, too. Experts recommend that you don't make your house so nice that it's worth 2x the value of the other homes in the neighborhood. You may have a problem trying to sell a $600K house in a $300K neighborhood. See the Real Estate Agent Tip below.
Customizable: You will hardly ever find everything that you desire in a property even though it is new. With remodeling, you can customize your property as you see fit.
- Get "Your" Design & Layout - You may never find all of the things you desire in another house. With home remodeling, YOU can customize your layout to your heart's desire. For example, you can design that kitchen layout exactly the way you've dreamed about. You can knock walls down to open up spaces. You can increase ceiling heights. And, you can add custom features you desire to your living environment.
Customizable: You will hardly ever find everything that you desire in a property even though it is new. With remodeling, you can customize your property as you see fit.
- Comfort Factor - Remaining in the same neighborhood means you keep the same neighbors, the same local stores, the same the same commute, the same schools for your children, and the same proximity to everything else. Remodeling your home allows you to hold on to your comfortable surroundings.
Stable: If you stay put, you will still have the same neighbors, shop at the same stores, and your children will go to the same schools. Remodeling allows you to live in comfortable surroundings.
Tip - Check with one or more Real Estate Agents that you trust to get their opinion on the home remodeling you have in mind for your house. Find out what they think about your project specifics, and ask them about estimated resale value for your neighborhood.
~ Don Roberts
Cons
- Remodel Financing Challenges - Home remodel loans are typically financed using a home equity loan or a home improvement loan (basically, a second mortgage loan). Home equity loans typically require a higher credit rating, can carry a higher interest rate, have a shorter payoff term, and require sufficient equity having been built up. It's possible that a lender may want to roll your primary mortgage loan & a home improvement loan into a construction loan to refinance a home remodel. That's what our mortgage lender did. We did a re-fi at the end to convert it back to standard 30-yr mortgage loan.
Financing Difficulties: Remodeling projects are usually financed using a homeowner’s loan that usually requires a higher credit rating, carries a higher interest rate, and has shorter payoff terms.
- Trauma During Construction - If you will be staying in your home during a smaller remodel project, it can be quite a hassle with strangers walking though your house frequently and you having to deal with the loud power tools throughout the entire duration of the project. Remodeling typically entails a lot of construction materials lying around, work trucks filling up the street, loud music being played by crews, some off-color banter, lots of dust, and possible temporary exposure to excessive heat or cold. During demolition & construction, assume you may have minimal privacy - sometimes even no privacy. If you have infants, toddlers, or day-sleepers, assume there will be days where none of you get the rest you need during the work day. Prepare for feeling frazzled from time to time.
Construction Hassles: Remodeling can be quite a hassle with strangers walking though your house and having to deal with the high-pitched sound of power tools throughout the entire duration of the project
- Temporary Housing Cost & Hassles - Depending on the extent of your remodeling project, you may want to relocate temporarily to rental housing because some or all of your current home may simply become uninhabitable or unusable. Even if you think you "could" still live in your home during demolition & construction, would you really want to put up with all of the challenges mentioned above, as well as disruptions in your electricity, natural gas, water, and/or sewer? Of course, rental housing is an extra expense, and there would be some level of moving things to the rental, then back. And, you may need to move & store some furniture & other possessions.
Construction Hassles: Remodeling can be quite a hassle with strangers walking though your house and having to deal with the high-pitched sound of power tools throughout the entire duration of the project
- Unrealistic For Downsizing - Naturally, you would not want to choose remodeling if your desire is to downsize your home. Obviously, making your home smaller would reduce the value of your home - since homes are typically valued on a price-per-square-foot (PPSF) basis. For example, if the PPSF of homes in your area is $500 and you decide to remove 500 square feet of living space, you've just reduced the value of your home by $250,000 ($500 x 500). That would not make any sense.
Construction Hassles: Remodeling can be quite a hassle with strangers walking though your house and having to deal with the high-pitched sound of power tools throughout the entire duration of the project
Tip - I've heard from multiple General Contractors that homeowners typically end up spending 25% more on a home remodel project than they had expected to. On my home renovation, we shot well past 25%.
~ Don Roberts
Moving
Moving is a great big step. For some people, moving is no big deal. But, if you've comfortably settled into your current neighborhood over the years, it can be stressful to move. Be sure to have a clear understanding of the pros and cons of your situation. Here are some to consider:
Pros
- Get Your Desired Environment Quicker - Moving to another home is about getting to that living environment you seek - more quickly. A full home renovation project can take over a year from beginning to end. Other factors aside, relocating can expedite the process of you getting to the living environment you want faster. Get quotes from local moving professionals.
A Fresh Start: Moving to a new home is all about being able to build the life of you want. You will have new social circles, new neighbors, and new surroundings.
- Dream House - You may end up finding the perfect house for your needs or desires. And, you may finally get to live in that city, neighborhood, or ZIP Code that you've always wanted to live in.
Favorable Tax Consequences: A married couple may exclude up to $500,000 in gains from the sale of the initial property if they meet certain conditions.
- Favorable Tax Situation - Naturally, tax laws vary by area. But, generally a married couple may exclude up to $500,000 in gains from the sale of the initial property - if they meet certain conditions. Consult with your local tax professional.
Favorable Tax Consequences: A married couple may exclude up to $500,000 in gains from the sale of the initial property if they meet certain conditions.
- Real Estate Sales & Mortgage Loan Professionals - Property selling and buying is a well-known practice with multiple sources of professional assistance at every turn. Find local real estate agents and local mortgage loan agents.
Financing Options: Property selling and buying is a well-known practice with multiple sources of professional assistance at every turn.
- Reinforces Family - Moving means a lot of unknowns - new neighbors, new stores, new driving routes, new schools, etc. And, while that can be uncomfortable to some, you can take comfort in just being with your family unit.
A Focus on Family: Moving might be exciting, but it is usually tempered by the fears of the unknown. During this period of adjustment, family will benefit by retreating into the comfort of known relationships.
Cons
- High Real Estate Transaction Costs - With today's home prices, property selling and buying typically involves paying expensive Real Estate Agent and Broker commissions - and all kinds of fees. That can really add up.
High Transaction Costs: Property selling and buying usually involves paying agent commissions, one on the sale and one on the purchase.
- Mortgage Loan Rates & Fees - Depending on how well the economy is doing (or not), interest rates on a new mortgage loan may be significantly higher than your current mortgage loan. Typically, the higher the loan, the higher the fees.
Logistical Hassles: Moving is always a hassle since you have to deal with years of accumulated stuff. The more the people in a household the more the hassle.
- Higher Cost Desirable Neighborhood - You may find out (as I did) that moving to that city, neighborhood, or ZIP Code you've had your eye on could mean that you would not be getting a better set-up for the price you can afford. I thought about moving to a nearby desirable ZIP Code - only to find out that because the area is so expensive, my current house (prior to the remodel) was nicer than the house I could afford to move in to. And, it wouldn't have any of the design or layout features I wanted.
Logistical Hassles: Moving is always a hassle since you have to deal with years of accumulated stuff. The more the people in a household the more the hassle.
- Commute - You may find that you have to drive farther to work or spend more time in traffic. In the new location, would you be farther away from friends or other local family members? Are your favorite stores farther away?
Logistical Hassles: Moving is always a hassle since you have to deal with years of accumulated stuff. The more the people in a household the more the hassle.
- Emotional Attachment - If you have become emotionally attached to your neighborhood, moving may be something you may really want to think twice about. When I was a kid, we moved to a new development in the next city over to move up to a much nicer house. But, my mother ended up spending the next 35 years regretting the decision to move away from the neighborhood that she loved. For her, remodeling may have been a much better choice.
Logistical Hassles: Moving is always a hassle since you have to deal with years of accumulated stuff. The more the people in a household the more the hassle.
- Moving Hassles - Moving is always a hassle since first, you have to deal with years of accumulated possession. The longer your family has been accumulating things, the more stuff you'll have to go through. and either box, donate, or toss.
Logistical Hassles: Moving is always a hassle since you have to deal with years of accumulated stuff. The more the people in a household the more the hassle.
Tip - Do you want more room - or do you want more rooms? Asked another way, "Do you want to have more space in a given room, or do you actually want more rooms in your house?"
~ Don Roberts
How To Determine Whether To Renovate Or Relocate
The following questions will help you determine whether to renovate or relocate:
Do You Love Where You Live?
If you love the area you live in, have an easy commute to work, love your neighbors, and/or want to keep your children in the same school district, then you may decide to simply stay put. If you don’t like your neighbors, have unbearable traffic and/or crime in your current neighborhood, and the neighborhood you are moving to is in a better school district - and it is nearer to your place of work, then relocation may be the best option.
Do You Want to Change Everything or Just Some Things?
If all you need is a little more space, such as a larger kitchen, a nice master bath, or an added family room, then renovation may be a much better alternative than relocation. It does not make much sense to spend a lot of time, energy, and money moving to a different house while you can make a few home improvements to your existing house to make it your dream house.
Is Renovating Economically Sensible?
You need to consider several different factors when it comes to this question. It's not just about the cost of renovation, but rather associated costs such as temporary accommodation while the property is being renovated. It does not make economic sense to renovate if it will lead to a significant increase in the value of your property relative to neighboring properties. In other words, it's probably not a good idea to over-build in your neighborhood and have a house that is worth 2x the value of the other houses in your neighborhood.
What About the Taxes?
Numerous tax laws affect the calculation of taxes upon the sale of a property and the purchase of its replacement. It is possible for a married couple to exclude up to $500,000 in gain from the initial house and tax credits might be available depending on when you buy the property. And, there may be specific state or local tax situations to consider. For example, in California, with some recent changes, you may or may not lose out on the special treatment that Proposition 13 affords homeowners. That would be a very important consideration to take into account.
Seek professional advice to learn more about the tax implications of selling a property and buying a new one.
The Decision Is Yours
It's easy to tell when you need a new configuration or additional space in your home. The question is in how best you can achieve it. Remodeling and renovation are both used to accomplish the objective, and each can be effective and satisfying if you do it with the information presented above.
Making the right decision for your specific situation can help reduce your stress and ensure many years of good living for you and your family.
Don Roberts
It is easy to tell when you need a new configuration or additional space. The question is in how best you can achieve it. Remodeling and renovation are both used to accomplish the objective and each can be effective and satisfying if you do it will all the knowledge that you glean here. Making the right decision will reduce your stress and ensure many years of good living for you and your family.
How to Determine Whether to Renovate or Relocate
