Renovating vs New Construction
You have been in your home for years and you’ve decided it no longer meets your basic needs. What you’re having trouble determining is if you should consider an extensive renovation or rebuild the home from scratch. There is a financial difference in these two projects so before you decide which option is best for you, it’s important to determine the cost of renovating versus building a new home. While it may initially seem renovation is the least costly option, it’s important to remember there are many variables that can balance out either making new construction more cost effective in some situations.
Suitability and Condition is Crucial
If it isn’t broke, don’t fix it. When applied to real estate, if a home meets all of the owner’s needs and the desired updates are only cosmetic, a renovation is recommended. However, if the qualms are with the overall floor layout and available space, a rebuild may be the best option. Starting a new home from the ground up allows far more flexibility than the complexity of trying to renovate an existing space with the possibility of encountering unknown nuances.
When deciding the best path, it is important to keep certain aspects in mind: when was the home built and is it structurally sound and whether there are any issues with termites, mold, asbestos. In these cases, a rebuild is often more cost effective, as the overall price-tag of eliminating these problems could be cost prohibitive. During a renovation, a tip to saving costs is preserving certain features like fixtures and flooring. Selections drive the budget, and on new developments it is easy to go overboard with flooring and high-end finish selections.
Additionally, with the changes in zoning laws and restrictions, often times it is more beneficial to renovate in an effort to grandfather in laws such as set backs. Retaining certain structural walls may allow a renovated property to adhere to a decades old setback of 5 feet, whereas tearing down all aspects of the previous structure and building new might push the home to a new 10 foot setback. This seemingly nominal change can cost owners valuable square footage which could translate into $100’s of thousands of dollars on resale.
Understanding the Real Costs
Permitting and Bidding Process – the best way to find the right person for the job is to request competitive bids. This means working with an architect to develop a vision, determining the design, layout, and finishing selections for the home. They will also help look into local zoning laws to determine what permits are needed and what zoning requirements must be met. These will be the first, or “soft” costs; along with the time it takes to meet these requirements.
Once plans and permits are in place and a project is deemed “biddable”, identify up to three contractors to estimate the project. This allows for a competitive bid process and ensures the full scope is identified and accurate pricing is reflected. Once a contractor is signed on to the project and begins, this is considered “hard” cost.
Interest Rates and Loans – unless a project is paid in cash, homeowners should determine the overall costs of borrowing money. In some cases, taking a home equity loan for a renovation may be more expensive than taking a construction loan for a new build. Make sure these costs are factored into the decision.
After Construction – some of the most overlooked costs occur after a new home is built. Insurance premiums and tax rates could make or break a project. However, updated home warranties can save value dollars in the long run. Make sure all aspects are taken into consideration when considering the best course of action.
There are other costs as well as cost-savings you should be considering. For example, renovating an existing property to be more energy efficient could save thousands of dollars over time. Consider the costs associated with temporary housing if it is required to relocate during construction, and the timeline for a new build vs renovating. Overall, it is important to remember, limitations are only set by the amount one is willing to spend and the length and price tag of the wish list. Think practically and with return on investment in mind.