In a hot real estate market, many homeowners wonder if they should make a change: should they renovate their existing home or sell and buy something new? Either choice is potentially expensive for its own reasons. And not every home is a good choice for selling, nor is every home a good choice for a renovation.
Major Upgrades or Minor Fix Ups
Recouping your investment shouldn’t be a reason to renovate your home. While some upgrades, like new kitchens and baths, can net you very close to the cost of the renovation, most upgrades will not repay you when the house sells. Renovate if you’re planning on staying in the house for the long term. If you are fixing it up to sell, do the minimum amount needed to get the best sales price with the least investment.
Check Out the Neighbors
Do the homes in your neighborhood have similar features, like square footage and number of bedrooms? If your house is already the nicest or biggest on the block, it may not make sense to renovate. If you do decide to expand, make sure the comparable properties in your area support your renovations. For example, if other homes with an extra bedroom sell for $20,000 more, the money you spend on adding the extra bedroom doesn’t exceed that cost. If your renovations force you to sell your home for more than the market could bear, your house might sit on the market longer than expected.
Get Financial Help
For some people, selling a home makes more sense when they can use a significant amount of equity in their current home as the down payment for their new home. For homeowners who want to make improvements to their homes, they can apply for a loan program that allows them to add renovation costs to their home loan. For example, 203k loans allow a homeowner to refinance (or purchase) what is owed on the home and add an additional amount for repairs and improvements. Be sure to find a lender who is experienced with 203k loans and who can help you walk through the renovations so that you don’t find yourself running out of money midway through the project.
Do Your Homework
If you’re having trouble deciding, ask a local realtor to complete a market analysis for your home in both it’s pre- and post-renovation state. Pull your credit report to see if your credit score will get you the best interest rates. Go to open houses in your neighborhood, within a mile of your house is best, to see what other homes are like inside and out. And get bids from multiple contractors before you decide. Rising material and labor costs, especially in some markets, may price you out of the renovations you wish for.