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To renovate or to build new construction.  The debate is endless and we could give evidence to support either view.  There is no standard answer because like snowflakes, no two homes are the same.  The only way to come to an answer is to first determine what options best suit you, your situation, your home & your finances.  So let us begin this discussion with talking about the factors and what your options are.

Options
Remodeling can be a big or small undertaking depending if you want to make small changes and updates or if you are gutting every room and knocking down walls.  The cost of remodeling versus building also depends on the location of the home. Remodeling a home in a community with high property tax rates may mean a much higher annual tax bill.  If walls are coming down expect a more expensive remodel because now you’re looking into whether those walls being removed are load bearing.  Replacing plumbing isn’t cheap, same goes for electric wiring.

Building a custom new home  is generally the more costly way to go, considering you have to buy a lot & if there is an existing structure demolition is going to be an added expense.  At the same time, building a new home gives the homeowner a choice of neighborhoods, making it possible to buy in a low-tax community or buy inexpensive land in an area where home values are low but likely to increase.  Does the new location have an Home Owners Association?  If so you are looking at building guidelines and standards and that could severely slow down the building process.

It comes down to deciding what issues you currently have with your home.  Is it fixtures that need updating or is the floor plan inefficient and walls need to be removed?

Interest Rates
One of the biggest factors in deciding whether to build or to renovate is how you decide to pay for it.   Homeowners who choose to remodel may fund the project from savings, but a home equity loan or line of credit is a more common option.  The cost of this sort of borrowing depends on the borrower’s credit, the terms of the loan (such as a fixed-rate or adjustable-rate loan) and interest rates elsewhere in the economy. The same factors impact rates for a new mortgage.

Sell-ability
Is your current home in selling condition or do you need to remodel it just to get into a home that would suit your needs more?   Is your current home in a good location that would generate a profit for you.  In this market it’s truly a buyers market & buyers at this time can pretty much ask for anything so don’t bank on selling your current home to finance the build of a new one.

Factors outside of the home
Location, location, location.  It’s all about location in real estate.  Is your current neighborhood quiet, is it visually attractive, do you like your neighbors, what is your commute to work currently like?  If you have kids, how far would the commute to friend’s home be or to any organized sports they belong to.  Permits for a new house are more expensive usually then the permits for renovations because of ever increasing development fees for all new buildings.

School Districts
As we all know, getting your kids into a good school is important and that’s what most parents look into first when determining location.  That can be the deciding factor in whether moving is an option for you.  The cost of private school isn’t cheap.

Look for part 2 where we will discuss and compare remodeling to demolition/new construction.