Should I Remodel or Move?
If your growing family has outgrown your available bedroom space or your kitchen can't keep up with your culinary skills, you might start feeling like you're not getting enough Return on Life from your house. The choice between moving, remodeling, and renovating is never easy, especially with all the emotion, memories, and money you have tied up in where you live. Discuss these three questions with your family to unpack some pros and cons.
1. How much is this going to cost?
At the end of 2023, many experts predicted that 2024 will be a better year for folks looking to buy a home. And while there are still more prospective home buyers than home sellers, average mortgage rates have dipped slightly to start the year. An expanding economy and a pause in interest rate hikes from the Federal Reserve could also lead to more new houses being built. But even if the housing market does cool in 2024, it's likely that buyers will still be paying more for a house than they would have in recent years.
That makes renovating (generally, fixing) or remodeling (generally, changing or adding) compelling alternatives. Current homeowners who are locked into a low mortgage rate could shop around for a home equity loan or invest their cash in quality-of-life upgrades. When market conditions make a move more favorable, your improvements might make your current home a more valuable and attractive asset.
Of course, the "cheaper" option can be plenty expensive too. The average renovation project costs around $22,000. A major remodel, like adding a bedroom, could hit six figures. That's a lot of cash you could be putting to work in other ways, even if it's just earning high interest in a savings account for the next year or two.
2. How do I want to spend my time?
Contractors get a bad rap. Yes, they can be difficult to work with. But the good ones are also managing variables beyond their control: shocks to the supply chain, labor shortages, volatile material costs. Still, their problems will be your problems throughout a remodel or renovation. You might end up feeling like hiring someone else to do the work has become its own job.
So why not do the job yourself? Folks who are handy might enjoy designing and executing their own home improvement project, especially retirees who could use an extra activity to fill their schedules. Just be realistic about your capabilities, gather all available information about your house, and plan ahead. One wrong swing of the hammer and your fun renovation might turn into an emergency repair. Or, you might uncover a problem you didn't know about that could affect your budget.
3. How will the end result affect my Return on Life?
Sometimes the financial costs of a move are much smaller than the personal costs. Yes, you might spend more on taxes and living expenses in a new house. But if you move too far away from your family and friends you might have to build a new social network. You'll also have to consider if moving is going to make it easier or harder for you and your family to do things you love doing, like playing sports or going to the theater. And what about work? Will you still be within driving distance of your current employer? Or does your new home have a WFH office?
Upgrading your existing home might create smaller but more welcome changes. With an extra bedroom, you might be able to accommodate more visiting friends and family. Maybe a beautiful new deck and swimming pool will turn your home into a neighborhood social hub.
Or, maybe the value of these improvements will fade with time and you'll start thinking about moving again.
No matter where you live, home will always be a major line item on your Life-Centered Financial Plan. Let's meet to discuss the ROL you’re getting from your house and any changes you’re thinking about making.