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Some of our clients live in their “destination” homes and have no intent of moving until they are “carried out”. Others are in their first or second home and are not so sure if they want stay put or if they are thinking that a move might better fit their needs. When I meet with potential clients who are considering a major remodeling project, I always want to discuss this topic early on. Some people put ROI (return on investment) as the primary consideration for their move or remodel decision and this makes total sense if you only plan to live at a home for a short while. Bigger investments make more sense when people want to stay where they are at and also consider non-tangibles such as I want to love my home and I like having friends and family over, or I don’t like working on home projects, etc. I have listed below some things to consider that might go beyond what the realtor, contractor or “know it all brothers-in-laws” typically would mention. I hope it helps you.
- It costs to move. Conservatively you can budget 10% to maybe 15% of the value of the home you are selling to cover realtor fee’s, financing costs, the final “honey do list”, accessorizing, not including time to change addresses for banking, credit cards, school registration etc., etc. In the ROI equation – you get a “Zero” for these expenses as measure in dollars.
- Maintenance vs. improvements. Unless you are buying a new home, you might have to budget up to 2% of the price of a home annual for maintenance/improvements. These are items that there is typically no big ROI.. mostly a negative return if you don’t do them. Similar to car maintenance with oil changes, filters, tires etc. The reality is, you might have very nominal maintenance costs for the first 10 years of owning a new built home, and then .5 to 1 % of the value of the home from years 10 – 20 and 1-2% or more thereafter. The 2 % or higher number is realistic when it is time to replace kitchens, baths, siding, windows etc. So when doing a larger remodel project, in addition to adding some real ROI space, or practical features, you might be taking care of 2 – 10 years of maintenance costs in one bigger bite, with the advantage of paying for them in today’s dollars instead of whatever the costs inflate to in the future. That being said, buying a different “used” bigger house will just mean that those maintenance costs will rise proportionally. Buying new might be worthwhile but there is very little affordable new housing that isn’t a town-home or way out of town.
- Buy a bigger existing house. Pluses are 1)You can target the right neighborhood and 2) the right school district, 3) favorable lot features 4) home styles you want 5)decor that you are attracted to and if you are really lucky you will get 2 or 3 out of 5 that you want. You can of course always change your floor plan and decor, but then you might just find yourself doing the remodeling project at your new address that was the reason for selling your existing home and moving in the first place.
- Moving farther out to get more house for the money. Moving 20 miles out of town adds 80 additional miles a day for 2 people commuting separately or an additional 20K miles per year at a very conservative .40 cents per mile that is $8000 per year or $667 per mo. additional that could go towards your home… not including lost time.
On the other hand, if you are in the wrong house, in the wrong neighborhood, are not fond of your neighbors, too close to the highway, too far from work or have a home that has too many issues or not enough potential… definitely start house shopping!