If you’re in a position to buy a home or remodel your home, which is the better use of your money?
The Case For Remodeling
Considering a remodel is usually the first step whether you end up moving or not. Even adding on an addition could be more cost-effective than moving depending on how much it would cost.
- Low-interest rates: If you already have a low-interest rate loan, or can qualify for a one, you will spend less than you would on fees associated with selling and buying.
- Get what you want: You’ve lived in the space, so you know what works and what doesn’t. While that kitchen looked a bit dated when you moved in, it may also have a poor layout. Buying a new place means you have to live in a bit before you truly know if it works for your needs.
- Cheap labor & cheap materials: With the decline of remodeling, and building contractors are eager to work and will often discount their rates as much as 30%. Building supplies are cheap too. Drywall alone has gone down nearly 30% in the last 5 years.
- DIY: If you do some jobs yourself you can save thousands of dollars.
- Live with it!: You get to live with the changes you make for years to come, meaning the lower rate of return can almost always be made up for by your personal enjoyment of the space.
- The mess: There’s no way you can get around the fact that remodeling is a messy business. Dust, dirt, and grime are only a few of the problems you face.
- Time: It takes a ton of time to remodel even if you do very little DIY. It also takes time to organize appointments, stay on top of contractors, and source materials. It can be close to a full-time job!
- Unexpected expenses: However small your remodeling job is it is highly likely you’ll run into unexpected expenses. Once you start taking down walls or pulling up carpet you may find expensive problems along the way.
- The cost: Remodeling isn’t cheap. A kitchen averages around $50,000 and a bathroom about $10,000 (prices vary state by state and based on labor costs vs. DIY). Have a few projects on your list? You could be looking at a daunting cost for all the remodeling you want to do.
The Case For Moving
- Find exactly what you want: No making due with a shared office/bedroom. No more tiny kitchen. You can find exactly the qualities you are looking for when you’re shopping for a new home.
- Spend less: With foreclosures, and huge changes to the market you may be able to find a better house for cheaper than your current home.
- Lock in a low-interest rate: With good credit, you can score an amazing interest rate on a new-to-you home. Some rates are as low as 3%!
- Selling: You have to sell, which in some markets could be tough. You also have to consider if someone would buy your home with a dated bathroom, meaning remodeling may be necessary anyway.
- Moving: It’s a big expense, and time-consuming.
- Cost: Realtor fees on both ends, hiring movers, and furnishing a new place all cost money.
- Longer mortgage: If you’re 3 or 5 or even 10 years into your current mortgage it might be tough to start at the beginning again. Think about how long it would take you to realistically pay off your home.
- Remodeling may be needed: With so many short sales and foreclosures in certain areas, you may find a home that hasn’t been well cared for. Consider the costs of painting, flooring, or anything else you might consider. An inspection may show the need for bigger items as well, so be sure to factor in replacing that ancient water heater, or the 30-year-old roof.
Undecided. In many cases, this will be up to the individual, the current local market, and the costs of remodeling. The best thing to do is take your time to make a decision by weighing the costs versus the stress and hassle of moving or remodeling.
Most importantly do all the math, don’t just assume one is better than the other. Get quotes from contractors. Figure out the total cost of a remodel. Talk to a realtor about selling your current home, and find out what you could expect to make a sale. Look at your local market to see what’s available in your area. Do the math on mortgages, remodels, and realtor fees.
It may even help to make a list of what you love and hate about your current home, and what you want for a future home or remodel.