By Roy Rasmussen
62 percent of homeowners planned to spend money on renovation in 2016, up 9 percent from 2015. This trend is projected to continue into this year. But renovation isn’t for everyone, and homeowners and prospective buyers often struggle with whether to renovate, build from scratch or buy the house of their dreams outright. If you’re a construction professional, part of your job is helping clients make this decision. Here are some factors to consider when clients are deciding to renovate, build or buy.
One of the most fundamental things influencing your client’s decision is location. If they don’t like where they live, building or buying a home become more attractive options. If they do like where they live, renovation options take priority, but a number of other questions arise.
How long do they plan to stay? If they’re not expecting to stay long, renovation may not make much sense. How would their location impact the cost of renovation and their return on investment? High local tax rates may raise their taxes if they renovate their home. And improving a home in a neighborhood with low property values may make it harder to recoup their investment if they sell their home later.
Location may also have legal implications that bear on your client’s decision. Certain renovations may not be permissible under local building codes. Others may require permits or professional contracting services to bring outdated electrical equipment up to current standards.
Which Option Is Most Expensive?
Cost is another major consideration. Some renovations may be expensive enough that they ultimately cost more than purchasing a new home. Online publications such as REALTOR and Remodeling provide regularly-updated annual cost vs. value reports to help homeowners determine their potential return on investment for renovating their home. Clients should consult a remodeling expert to discuss costs before embarking on any major renovations.
Mortgage values also play into the decision to renovate or move. Depending on conditions, moving may result in a lower mortgage rate. Someone with a high mortgage may be better off buying a new home with a lower rate.
Another consideration is technology. Making energy-saving renovations can impact the long-term cost of home ownership, while new or recently-built homes may already have energy-efficient technology built in.
What Can They Afford?
Once cost comparisons have been made, clients should consider questions about their financial situationand how it impacts their options. Is their financial situation stable enough to pay for the cost of renovation, or would a new home be more affordable for them? Does their job situation lead them to anticipate a raise in pay in the near future?
Financing questions also impact affordability. What is their credit rating, and how does it impact their ability to obtain financing? Current interest rates should also be accounted for.
Handling the Inconveniences of Renovating or Moving
Practical and emotional considerations are also significant. Both renovating and moving are potentially stressful options. If your clients plan to do a renovation to their bathroom or kitchen, how much will this inconvenience their lifestyle? If they plan to build or buy a new home, are they up to the chore of moving? Lastly, clients with children will need to factor them into their decision-making.
Roy Rasmussen, co-author of "Publishing for Publicity," is a freelance writer who helps select clients write quality content to reach business and technology audiences. His clients have included Fortune 500 companies and bestselling authors. His most recent projects include books on cloud computing, small business management, sales, business coaching, social media marketing and career planning.