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Should you consider moving instead of renovating?

Now is the time of year that many homeowners are starting to think about renovation projects. However, maybe they should consider moving instead of renovating.  There are a few key questions to answer that can help you make the best decision for your situation. 
 
These important questions include how long you intend to stay in your current house; how costly is the renovation; how does the cost renovating compare to getting what you want in a new house; and, the type of homes in your current neighborhood.
 
Why is the length of time you plan to stay in your home an important consideration?
Most renovation projects have a pretty long return on investment time line.  If you are planning to move in the next two to three years, you probably won’t increase the value of your home enough to recoup your costs on major renovations like kitchen remodels or room additions.
 
What is the rule of thumb to use in renovation decisions regarding how long you should stay after a renovation?
A good rule of thumb to use is five years.  If you plan to stay at least five years or more, you have a better chance of recouping a high percentage of your costs associated with major home improvements, especially on home improvements that cost more than $25,000 to complete.
 
Why might moving make more sense than renovating?
Sometimes, what you want to accomplish, such as a room addition or basement remodel, you can actually accomplish less costly by moving to a home that already has the features you want versus the cost to complete these items in your current house.  And sometimes you might get several  upgrades in a new home that you wanted without spending as much as you would have for one renovation to your current home.
 
What else should you consider in the “renovate or moving” decision?
One other important factor is neighborhood trends, for example if no other house has a swimming pool in your neighborhood, it probably won’t be as valuable as it would in a neighborhood that is more likely to have pools.  However, if your house is missing something that every other house has, then that renovation might have a better financial return on your investment.
 
In the end, the best way to make the “renovate or move” decision is to base it off of sound financial research that includes the cost of your renovation, your expected length of staying in the home and the potential cost of moving to a new home.  This research will not only help you understand exactly the value of your proposed renovation but also ensure your renovation isn’t more costly than you think. 


Posted: 3/11/2014 with 1 comments

Categories: Homeownership, Money Matters



Comments
Whittney Murphy
As a current homeowner, this was very helpful. What really helped was the "how long do you plan on staying after you renovate?" Me and my partner plan to stay for at least 10 years, so I'm ready to rock and roll! Thank you as always.
3/13/2014 at 10:10 PM

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