My husband and I purchased our current home about five years ago. Though the house isn’t exceptionally old (it was built in the 1980s), it was built of builder-grade materials and the previous owners didn’t do a good job maintaining it. Though we’ve done a lot of work on the house (new roof, new electrical panel, new carpet, new AC unit, etc.), there is a ton more that needs to be done.
Last year we began asking ourselves if we should proceed with the updates or if we should just sell the house and buy something that is either newer or already has the updates. The real estate market where we live is incredibly hot. In our zip code, home prices have increased roughly 21% over the last five years. This means we could sell our house at a profit and afford to purchase a place where no updates are needed.
We’ve had a lot to think about. We like our current home. The size and layout really work for our family. Our neighbors are great. We didn’t flood during Harvey (we live in a suburb of Houston, so flood risk is a very important consideration). However, doing work on the house (whether we do it or hire someone) is inconvenient, particularly with three curious and active kids in residence. It takes a lot of time to make updates because we can’t afford to do everything at once. Additionally, it’s hard to know if the updates will have a good return on investment should we ever decide to sell.
What’s best in a situation like this? I’ve done a lot of research over the last several months and have compiled the following list of considerations for deciding whether to renovate your home or purchase a new one. Please keep in mind that when I say “new homes,” I’m not just referencing new construction. I’m also referencing new-to-you homes.
Remodeling vs. moving: Things to consider
Cost
Remodeling and moving both cost money, so a good place to start is to determine how much it would cost to complete the renovations you desire and how much it would cost to purchase the house you desire. Once you’ve done this, you need to determine how you would pay for these costs.
Unless you have a lot of money in savings, you will have to find a way to get some cash to pay for renovations. Homeowners often do this by refinancing or taking out home-equity loans. If you are unable or unwilling to use an approach like these, then you can still complete renovations, you’ll just have to save the money for them first.
When buying a home, most homeowners will cover the largest expense (the price of the house) with a mortgage, so you want to consider mortgage rates. You also need to consider what money you have available for a down payment. Remember to consider what money, if any, you will make on the sale of your current home because this may impact how much you have available for a down payment. Of course, there are some moving costs (minor repairs to your current home, agent commissions, moving supplies, etc.) that aren’t covered by a mortgage, so you also need to consider how you would pay for these.
Return on investment
If you are not in your forever home (i.e., the home where you intend to live out your days), then you’ll want to consider how various updates or improvements will impact the resale value of your home. This is because you probably don’t want to invest a lot of money in a project if it won’t increase the value of your home.
According to experts, improvements like adding a wood deck, replacing siding, minor kitchen updates, and replacing the garage door retain 75-97% of their value at resale. However, improvements like a master suite addition, a bathroom addition, and major kitchen updates only retain 50-60% of their value at resale (source).
Risks of over-improving
The price of any given home is impacted by its location. It doesn’t matter how large and nice a house is, it will not be worth as much as similar properties in desirable areas if it is located in an undesirable location (e.g., in a crime-riddled neighborhood, next to an airport, in a dilapidated neighborhood). Even a luxury home located in a nice, safe neighborhood won’t sell at a luxury price if the other homes in the neighborhood are mid-priced homes. Before completing renovations, you’ll want to consider if the market in your neighborhood can support the price of the home you’ll have once the renovations are complete.
What remodeling can and can’t solve
Remodeling can replace ugly flooring or fix a leaking roof, but it can’t change your neighborhood or your commute to work. In other words, you need to decide what it is you want to change. If you love your location, then remodeling may be what is best. However, if you want different things in a house and you aren’t a fan of your location, then moving may be best.
Another thing to consider is that certain remodeling projects may not be possible in all locations. For example, adding an addition may not be possible if you live in a condo or adding a porch may not be possible if your HOA doesn’t allow it. If your home needs an update or improvement that isn’t possible given your location, then moving may be the only option to get a home with that feature.
Convenience
Completing renovations and moving are both inconvenient. Renovations may require you to live with your kitchen or bathroom torn up and to deal with contractors coming and going throughout the day. If you are completing extensive renovations or completing them over time, then you may have to deal with these interruptions for a while. Moving, on the other hand, means packing up and transporting your belongings to a new place. You may also need to do a lot of small projects and cleaning to ready your home for sale. You will have to decide which of these inconveniences you are willing to tolerate.
Customizations
If you renovate your home, then you can customize the details to your heart’s content. You can choose what tile is put in, what colors the walls are painted, what faucet is installed, etc. If you purchase a new home, then you may or may not be able to customize things. If the home is new construction, then you may get some say in the floor plan or finishes, but if it is just new to you, then you may have to put up with what is available. If you want your home’s features and finishes to be customized, then remodeling may be the best choice.
Future plans
When deciding whether or not to remodel, one of the most important things to consider is what you plan to do in the coming years. It is useful to ask where you see yourself in 10 years. If you are a couple without kids, but you plan to have a few kids in the coming years, then moving to a slightly larger home may be smarter than renovating your two-bedroom condo. Likewise, if you hope to live in a different city altogether, then it may be wise to avoid renovating or moving until you are ready to make the big move to the new city. However, if you plan to stay in your area and you don’t foresee any major lifestyle changes, then renovating may be a great option. This is because you can focus on making the changes that will make you comfortable and suit your lifestyle without worrying about return on investment.
Final thoughts
A house is a significant investment, so take your time considering your options. Don’t be afraid to engage contractors and a knowledgeable real estate agent to get additional information to inform your decision. Also, I find it useful to remember that ultimately a house is just a physical structure, so whether you renovate or buy, it’s what happens inside the house that makes it a home.
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After we’ve considered all of these things, we’ve decided to sell our home. We’ve been decluttering, touching up paint, and doing other little jobs to get the house looking its best because we hope to list it in about a month. However, we aren’t going to buy a new house right away. For years my husband and I have asked ourselves if it would be better for us to live closer to family. My family is in Colorado and my husband’s family is in Florida. When we first got married, we lived in the DC metro area because of my husband’s work (his employer had a contract with the DoD). We didn’t like living there, so he took his current job when it became available and we moved here (to a suburb of Houston). Though there are things we like about the area and about Texas in general, we’ve decided that giving our girls the opportunity to grow up seeing their grandparents, aunts, uncles, and cousins frequently is more valuable to us than the things we like about living here. Thus, we’re selling our house while the market is hot and renting a home until a suitable job comes up for my husband in a location closer to family.
As you can imagine, preparing to move with three young kids is a bit challenging. I usually publish two new posts each week here on Of The Hearth, but it is possible that there will be a week or two during the next couple of months where I will only get one published. Hopefully this won’t happen, but if it does, you’ll know why.
Have you ever decided between renovating and moving? What things did you consider when making your decision?
Shared at the following:
Encouraging Hearts and Home, Over the Moon, Farm Fresh Tuesday, and Busy Monday.
Wow, that is a big decision to make! I will pray for you guys as you go through the house-selling process (I’ve heard that getting the house ready for showings when you have young kids is an adventure) and as you see what doors God is opening for you in other places. I think house renting is something that some people fail to consider (I’ve noticed that many people I’ve known have wanted the “success” of buying a house and not having the “stigma” of being a renter) but it’s a really smart move in some cases. I’m excited for you guys on this adventure!
Also, I find this topic really intriguing. It’s something I’ve thought a little bit about here and there. We love our house and its location (we live in a very walk-able area, close to my husband’s work) and unless something drastic happens, I can’t imagine wanting to live anywhere else…but with no basement, little storage, and only 2 bedrooms (we use a 3rd “bedroom” as an office/school/crafting room, and we don’t plan on changing it to a bedroom anytime soon since we don’t have a place for the stuff currently in that room), I have a feeling that someday, we may need to make alterations to fit our family’s needs. These are all good points to consider when we have to make some decisions down the road!
We appreciate your prayers, AnneMarie. We’re having a really difficult time getting things ready (I just don’t have much free time each day to work on things).
I agree that people often see purchasing a house as a “success,” while renting is seen as inferior. There are definitely compelling reasons to buy, and we will again once we a settled. However, for now, it doesn’t make sense. I actually feel like it will be less stressful for us because we don’t have to worry about repairs and such for a while!
I think a lot of people have this concept of getting into a “forever home.” There’s nothing wrong with this, but I’m realizing that it is helpful for us to view things in the short term. What we needed in a house 5 years ago isn’t what we need now (and what we can afford has changed). Likewise, it may change again in another 5 years or 10 years. Thus, I kind of like the idea of a “what we need in this season” home. This is probably how we’ll approach things when we do buy again.
Thank you for sharing at #OverTheMoon. Pinned and shared. Have a lovely week. I hope to see you at next week’s party too! Come party with us at Over The Moon! Catapult your content Over The Moon! @marilyn_lesniak @EclecticRedBarn.
Thanks, Marilyn!