Should you move or renovate?

Whether it be an expanding family or an opportunity to increase the value of their home, owners are regularly faced with the question: Should we move or renovate?

 

By Andrew Cashin - Director

 

 

As builders, naturally we fall on the side on renovating rather than moving. But when its the home you live in, it comes down to more than just figures on a page. It’s about investing in your home, your lifestyle and your family. Here’s four reasons why we believe its often better to renovate rather than move:

 

1. You end up paying everyone but yourself...

 

Let’s use a few numbers to illustrate:

  • Value of your current home: $1,000,616 (Sydney’s median house price)
  • Price of house you upgrade to: $1,300,616 (increase in value of $300,000)

Costs to move house:

  • Real estate agent’s commission (2%): $20,012
  • Marketing/advertising of old house: $5,000
  • Conveyancing fees: $2,500
  • Stamp Duty: $57,028
  • Transfer Fee: $219
  • Mortgage Registration Fee: $109
  • Administration fee: $20
Total - $84,888

That’s a lot of money to be squandered away, with little or no benefit to you.

 

2. Use those moving costs in your renovation budget instead

 

Given the above numbers, if you’re willing to move, your renovation budget can then include those costs associated with selling and moving:

 

Difference in house prices ($300,000) + Additional moving costs ($84,888)= $384,888

 

That’s your real renovation budget, if moving house is on the cards.

 

3. Build the home you want

 

There’s no doubt you need more living space, but why spend so much extra cash moving into a place that doesn’t exactly meet your needs?

 

Darryl Kerrigan nailed it when he said “A man’s home is his castle”. For many, moving house is a big deal and a huge amount of effort. This is especially true if you already love where you live, your kids are happy at school and the dog knows how to get home when he’s lost.

 

4. Furniture ain’t cheap

 

This will be another big cost item if you plan to move house. If you decide to renovate instead, you most likely have furniture that already works in your current home. You would only be left to furnish the additional rooms in your newly renovated home.

 

What else could happen? 

 

The one major drawback of the renovation-rather-than-move approach could be your bank. Securing finance to build your dream home can be a little bit more difficult than obtaining a new home loan. Mr Banker will prefer to take back a completed house rather than a half-finished house if you fall into the unlikely situation of defaulting on your loan.

 

Renovating your own home also presents its own costs. You might be able to remain at home while the works take place, experiencing only inconvenience. If that’s not possible, moving in with family may be a solution. Or you may need to rent another dwelling. But even those rental costs could work out cheaper than paying additional moving costs:

 

Median rent ($700/week) x 6 month build (26 weeks) = $18,200 + any storage costs

 

Please don’t get us wrong, there are definitely circumstances where it is more advantageous to buy rather than renovate, but always ask the question - would you rather absorb those additional costs into your own life and improve the value of your home? Or pay them to somebody else?

 

 

These are solely the views and opinions of Ambient Constructions and should not be taken as professional financial advice.