Are you tired of your living situation or do you want to invest in some real estate? Perhaps you’re fortunate enough to be in the financial position to buy a second home to rent out for extra income, or you own some land and you’re considering building a brand new building. If you’re trying to decide whether you should build a new house or remodel a fixer-upper, take a few considerations to heart. There are pros and cons for remodeling and for building new homes, and you might be surprised to learn there are good reasons to build new instead of remodel.
1. How much do you have to spend: Remodeling can often — but not always — be less expensive than building a brand new home. It might be cheaper to fix up a home, especially if you’re comparing the cost of building a new house on the fixer-upper’s old lot because you’ll have to pay to demolish the old house before you even build a new one. And if you don’t own a lot already, then you’ll have to find a lot where new home construction is permitted and buy it, as well as pay for construction (not counting all the associated permits, local regulations and taxes). But you might be surprised that remodeling a new home could cost as much or more if you plan to make dramatic changes.
2. Where will you live? If you’re thinking about remodeling a place, your plan must include more than the changes you’ll make to the fixer-upper and the cost of those changes. You also need to think about where you’re going to live while the work is being done. Think about the inconvenience of waking up to hammering in your kitchen and coming home from work to exposed frames and plaster dust all over your living room. In addition, it may not be safe for you and your family to spend the night in your house during some stages of an extensive remodel. In that case, you’re going to have to find some place to live during those parts of the project. That could get expensive, fast. The cost of paying rent, or hotel fees, to live somewhere else can really add up, especially if you’re still paying the mortgage on the fixer upper, too.
3. What about renters? If you have renters, you might still have issues. You might have to wait until their leases are up to start a remodeling project. Or you might have to wait until you’re done with the project to find renters, which means no return on your investment for some time. You’ll also probably have to wait until the work is done to show the space. You may lose a significant amount of money that you could have earned in rent, depending on how long the project takes. This is a good time to mention that remodeling often takes longer than you expect and costs more than your budget. I’ll talk more about reasons for this in #5.
4. What will the house be worth after the remodel? Remodeling a house may not add significant value, especially if it’s an older place. On the other hand, building a brand new house means you’ll be able to invest in all the latest fixtures, materials and other features from the ground up. These investments may pay off whether you decide to sell the house down the line, or if you want to command high rents from tenants.
5. Keeping up with codes: If you decide to remodel a fixer-upper, you or your contractors may discover problems with your house during the work and find things that aren’t up to code. If that happens, you’ll have to spend more money bringing the house up to code before further work can be done on your original remodeling project. Meanwhile, if you’re building a new house you’ll be able to build it directly to the current code. And you’ll be able to ensure that the house is built to the most efficient standards, which might save you money in the long run in other ways. An additional note on unexpected costs, though: the cost of building a new home typically exceeds the budget by 10% or more. You’ll have to keep close watch of the cost of little extras and unforeseen problems.
At first glance it seems like it makes more financial sense to remodel a fixer-upper, but that’s not always the case. You may want to consider building a new house instead of remodeling a fixer-upper if your goal is to own a modern house.
Larque Goodson is a real estate writer at Reply! with over 15 years of experience in journalism and marketing. To learn more about homes on the market and building a house, see her article onthe factors other than house price and size that determine your perfect home .