Here are some things to consider along the way:
Think about your ideal location
One of the most important aspects of any home is its location. If you love your current neighborhood, then you should strongly consider renovating. On the other hand, if you have concerns about the area (long commute, bad school district, disagreeable neighbors) you may be better off moving.
Consider the emotional value
Do you have strong emotional ties to your current home? It pays to be financially savvy, but don’t discount the weight of these ‘soft’ factors. As long as you’re being financially responsible and working within your budget, choose the house that brings you the most joy. If that is your current home, then don’t let it go without considering a renovation. If it’s not, then you may be better off looking for a new house in which to create new memories.
Consider your ROI
Renovations are investments in your home, but don’t expect to recoup the full cost when you sell. Remodeling magazine’s Cost vs. Value report says the average homeowner recoups just over 70% of the renovation costs. Pay attention to your budget when planning a renovation and be prepared. Some projects will have a better return on investment, but you may need to stay in the home for another 7-10 years to recoup the most from your investment.
Understand the time commitment
Both renovating and moving have major hassle factors. Consider what they could be before you decide your path. If you’re planning a major remodel, you could be without a kitchen or a bathroom for several months. The dust and noise can also be problematic. Look at your family situation and decide if living through a remodel will work for you.
Pay attention to what your neighbors are doing when considering big improvements. If your dream home is a 5-bedroom palazzo, you won’t get the same value if your home is situated among 2-bedroom starter homes. Keep your home in line with the size and value of others in your area. If your planned remodel will end up over-improving the house, it may be a better financial choice to move instead.
Consult an architect
If you’ve decided that you’re interested in renovating, the next step involves consulting with a professional. Start with a residential architect to see if you can reasonably make your home into the one you want. An architect can help you determine the best use of space and set realistic expectations. If you’re expanding your footprint or adding a second story, you will want to ensure that the foundation can support the weight of the addition. A consultation with a professional can keep you out of trouble and put your mind at ease.
Check the regulations
Local neighborhood associations and municipal codes may restrict your plans. It’s important to get familiar with your local regulations before you get too far down the road. Check to see if your planned improvements are allowed in your area. You will need to check any setback and easement requirements and confirm that your addition won’t encroach too closely to property lines.
Check your budget
Renovating or buying a home are both big investments. Which one will be less expensive depends on your personal situation. Assess the size and scope of your renovation with your current mortgage scenario. Compare your current mortgage with market rates to see how a new home loan would impact your budget. Look at the strength of your local housing market to determine if now is a good time to buy or not.