After spending years watching reality TV programs about renovating homes, most of us assume that if the location is good, but your house isn’t working for you, the only options are to renovate or move. That was us. We bought an old home and began to plan a renovation. Through that painful and frustrating process we started seeking alternatives. We eventually chose to rebuild, but considered selling and moving too.
How do you determine which option is best for you? Here are seven important questions you need to ask yourself.
- What do I need?
- What do I have?
- How much will it cost to renovate my existing home?
- What is the current value of my home and property?
- Is my home nearing the end of its valuable lifespan?
- How much would it cost to rebuild?
- What can I afford?
What do I need?
This is not an easy question. We know what we want, but wanting and needing are different. I think our overriding tendency is to want a home that’s aesthetically pleasing — and this is important. But, we also need something that is functional and promotes a stress free environment for the whole family. Do you have a space where you can be together? Do you have a space where you can be alone? Can you entertain and/or provide homework assistance easily while preparing a meal?
What do I have?
This is a much easier question. What type of property do you own? Each property type has different parameters and limiting factors. If you live in a condo, the changes you can make are very limited. Townhomes and semis provide more options, but have complications inherent with common walls and property. Detached homes provide the most flexibility because you own the entire structure and do not have any common walls.
How much will it cost to renovate my existing home?
Renovation projects vary in cost. If your needs can be met with only a few small relatively inexpensive changes, then a renovation project is probably the way to go. However, if a major overhaul is necessary to fully meet your needs– like changing the layout, moving plumbing, making substantial changes to the exterior, building additions, etc., your renovation estimates will be much larger and will require a huge contingency budget. We decided we didn’t like that kind of uncertainty (see Three Reasons Why We Chose to Rebuild). It’s important to have the project thoroughly and accurately costed out.
What is the current value of my home and property?
The best way to determine this accurately is to hire an appraiser. The value of your property is not what a real estate agent would list it for, but the combined value of the land and structures (house, garage, etc.) on the land. In Toronto, property values are high, but often the value of the structures are not. In our case, the cost of the land alone was more than five times the appraised value of our old house. The cost of the renovations we needed to make this old house work for us was substantially more than the value of the old house. This made no sense.
Is my home nearing the end of its valuable lifespan?
The valuable lifespan of a house depends on a number of factors including: the quality of the home’s materials and workmanship, maintenance and climate. In urban Toronto, a lot of houses were not built with the finest of materials, maintenance has been poor and the climate is harsh. Many have reached the end of their valuable lifespan— but we still continue to live in them. Why is that? Would you invest in overhauling the engine of a car that could not be on the road more than a couple more years no matter what you do to it?
How much would it cost to rebuild?
Rebuilding involves the obvious demolition and building costs, but also several other considerations like relocation for the duration of the build. I documented all these costs during our project. Much to our surprise, the cost of the demolition of our old house (see video) represented less than 1% of the overall build cost. The total cost of rebuilding was higher than a major renovation, but gave us so much more value: a beautiful 100% new house which requires little maintenance, and is space efficient, energy efficient and designed for modern living. It was also considerably less risky because it eliminated the risks that can crop up when you want to rely on old existing structures and are often expensive to remedy.
What can I afford?
Now that you have conducted the analysis, the final question becomes: can I afford what I need? If needs dictate a major project— renovation or rebuild, it is obviously going to be expensive. If the house is old, as ours was, you may be leaning towards a rebuild. This is where we found ourselves— and we didn’t have the necessary funds. But, after considering all the options, including moving, we decided to put our project on hold for a little longer and work towards putting ourselves in a position where we would be financially able to proceed with a rebuild. It took a little longer, but the end result was definitely worth the wait.
If your house is not working for you and you need help answering any of these questions, please don’t hesitate to contact me. I’ve been there. I know the cost of rebuilding and how it can be financed.