When The Clash wrote the song, they must have been talking about real estate, right? If you own a house, I’m guessing you’ve asked yourself this more than once. Based on the number of TV shows dedicated to the topic, I’m guessing almost everyone has. In a vacuum, it’s a nearly impossible question to answer. There are just too many variables. So let’s try to break it down to help decide if you’re going to renovate or move.
Let’s start macro. Do you like your current neighborhood? If you do, then you should consider staying. Unless of course the perfect new house is for sale right down the street.
When we decided to sell our house last year, it felt like an impossible decision. We LOVED our neighborhood. We designed a whole stack of potential additions to make the house something we could grow with. We also LOVED our…
Good neighbors are hard to find. If you’ve found them, consider this another check in the stay column. Not so much? Well then maybe it’s time to find some.
Your current house
So what is it about your house that doesn’t quite fit the bill? The ease and cost of the renovation will play a big part in your decision. Would a new kitchen solve all of your problems? You should probably stay. Are you bursting at the seams and need more space? This one is harder to quantify without professional advice.
The total cost
Let’s say you think you could sell your house for $800k. You bought it for $650k, and owe $550k on the mortgage.
Let’s also say that if you sell your house, you’re doing it because there is some deficiency you’re trying to get away from. Typically this means that you’re not looking for another house worth $800k. So let’s assume you’re searching for a $900k new home.
When you sell your house for $800k (congrats!), you’ll pay something like $50k in settlement costs, which would net you a healthy profit of $200k. You’ll still have to pack up your whole house, move everything, and then unpack it at the new place though (ugh, moving).
So if you move, your total investment has increased by $350k ($900k-$550k), but the value has only increased by $300k because of the closing costs from the sale.
If you took that same additional $350k, and put it into your existing house, could it be perfect? Maybe. I tell my clients all the time that a design on it's own is fun, but not a particularly useful decision-making tool. A budget on its own is the same.
To make a decision on whether you're going to stay or go, you need to put staying in context. And the only way to do that is to design something you'd love to live in and understand what that new space would cost. If your hypothetical addition would cost $450k, and that new house you found would be an additional $350k, then maybe you should move (unless of course you need to update the new house).
Make a decision
When we decided to sell our house we knew we loved the neighborhood and neighbors. We knew we loved our house. But we also knew that as our kids grew we would need more space. So when we took that stack of potential additions that we designed (which were really fun to think about), and put some numbers to them, we realized we needed to at least test the market.
So think about the area your house is in and the people that surround you. Think about what doesn't work about your current house. After you've done that, give me a shout and I'll help you figure out the rest.
Bye for now,
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