Do you wonder, “We don’t want to over-improve for our neighborhood. If we decide to renovate, how much renovation value will return at resale?”
Do you love your existing location, but could use some upgrades or additional amenities or enhancements?
Have you been scouring the for-sale marketplace to find something that better suits your lifestyle needs – but can’t find something meeting your specific criteria?
Have you been debating building new vs. renovating your existing property or buying in an established location and then renovating?
Do you wonder to yourself, “Is it more economical to build new or renovate?”
These are all great questions. As a matter of fact, we get similar inquiries every day from individuals considering their options and looking for expert advice. So here we’d like to address some of the most common questions related to major renovations and renovation value.
New Build vs. Major Renovation
Generally speaking, it is often more economical to build new than complete a major renovation project.
Why? For one, you may be spending money to demolish existing value. So before starting the new renovation work, you have already spent money to reduce value to prepare for the new changes.
Also, with a renovation project, you’ll have to work around existing conditions, which takes more thought, coordination, and time. For sure, you’ll uncover some unforeseen circumstances during demolition that need attention.
However, assuming you are keeping most of the existing foundations, walls, and major structural elements, you’ll have a lot of pre-existing value that remains. So measuring purchase price/built-in equity + scope of the new renovation work vs. land + construction costs for a new build is a wise step. And of course, location is a major factor.
Return on investment is an important consideration when deciding to pursue a major renovation project.
How much of your investment will you be able to recoup at resale? How do you go about determining if the project is worth pursuing?
By all means, most of the projects included here on our website have been completed by clients who love their neighborhood/location, and intend to stay for many years. They are interested in doing something special to meet their unique needs, and the solutions normally include a degree of customization. So by nature, a thoughtful, architect-designed project with some customization is going to cost more than a generic renovation project – and recoup more value. These projects often end-up at the high-end of neighborhood comparisons. Of course by nature, these projects are also the newest, most up-to-date properties and by nature, worth more.
Would these properties recoup the full investment if resold within a year? Well, it only takes one person to love something enough to want it. The better the location, the more it’s likely. The market “comps” will be the primary measuring stick initially. And from there, does the buyer appreciate the next-level design enhancements? Or are the enhancements trendy and not to market taste?
Go or No?
How will you know if it’s worth doing the project?
As noted above, we’ll want to evaluate anticipated purchase price (or current equity) + anticipated renovation costs against comparisons in the area. Where do you fall? If you are near the top but love the location and intend to stay for many years, is it a go? What if you are over? By how much? Or will you fall lower than other similar properties, thus making the “go” decision easier?
Is the project more about lifestyle and location, or more about recouping investment quickly? Are you sure you’ll be there a long time as planned? Or could your job or other situation change unexpectedly forcing a relocation?
There isn’t a one-size fits all answer. Each circumstance needs evaluation and consideration of the options and possibilities against individual goals.
This is where the team at HAUS can help. If you are contemplating some of these questions and could use some experienced opinions and advice, please shoot us a message, and we’ll schedule a call!