Should I renovate or sell? 10 things to consider
It can be a tough call to make - renovate or sell up and move on.
Humans are by nature a sentimental species, and we are also creatures of habit, so leaving a place we call home - especially after many years - often ends up with us staying put. But if there are strong push factors at play - like not having enough room for a growing family, then we sometimes have to make the tough decision to pack up, sell and move on.
With this in mind, here are 10 things to consider before you make the call to renovate or sell.
1. What are the pros and cons?
Start by working out the pros and cons of each option and ask yourself the big questions. Like how much you like your local area and what the implications of moving are for practical aspects of your life, like your children's schooling or commute to work.
The latest annual Houzz and Home Australia survey found a generational divide when it came to decision drivers, with Baby Boomers and Gen Xers 'wanting to stay in the current home', while Millennials chose to stay put and renovate 'because it is more affordable than moving'.
You may not have a choice though if you live in a one bedroom flat and are expecting twins. Here life has made a decision for you, and moving is inevitable.
2. What is your timeframe?
If you think renovating is the way to go, take a moment to work out how long you are likely to live in your home. Take a medium/long-term view, as the expense and investment may not be worth it if you are not committed to staying put.
A general rule of thumb is that it is not worth renovating if you are going to move within five years, particularly if you are going to be spending hundreds of thousands of dollars.
"A general rule of thumb is that it is not worth renovating if you are going to move within five years"
3. Beware of overcapitalising
If you do decide to renovate you need to be careful not to overcapitalise. This essentially means spending too much on your renovation, with little hope of recouping your outlay when it comes time to sell. This is easy to do because we do become emotionally attached to our homes, and don't always think clearly when it comes to how much we spend and what we spend it on.
An example is installing a high end kitchen in an entry level unit, where you are unlikely to be able to work your outlay into the sale price. Overcapitalising is also somewhat related to your timeframe, as the longer you live in the property you are benefiting from the investment.
4. Renovate smart
If you are going to stay put and upgrade your home - and avoid overcapitalising - then you need to renovate smart. This means choosing projects that add real value to your lifestyle and property. You also need to keep an eye on the market, and what features potential buyers want in a home.
If you want to know what your neighbours are spending their hard earned cash on, the same Houzz and Home Australia survey has some pointers. Unsurprisingly kitchens - with a median spend of $20,000 - are the most popular rooms to renovate, followed by living rooms, bedrooms, bathrooms and laundries.
Renovate smart by choosing projects that add real value to your lifestyle and property, and what features potential buyers want
5. Who is going to do the work for you?
Tempted to DIY your reno? Chances are that a pro can do a better job than you, which is unsurprising given that they have been trained. Unless it is something relatively simple, or you are particularly handy, get in a licensed tradie or professional. In many cases it could be a legal requirement, including any building, electrical and plumbing jobs or any project involving gas.
6. How are you going to fund your reno or move?
What could be more important than money, and it is particularly relevant for this conundrum.
If you are renovating, most of us use savings or draw down on a mortgage to fund it all, while others choose to take out a loan (construction loan) or use a credit card. Just be aware of what the interest is on the latter two lines of credit, and that you are likely to be limited to smaller projects if you choose these.
Similarly there are significant costs related to selling and buying, so it's best to budget for these in advance so you are prepared for the expenses involved.
7. The (hidden) cost of selling
If you have made the decision to sell then beware the costs involved, some of which are not obvious. You will have to budget for stamp duty, legal fees, estate agent commission - which are in the region of two per cent of the sale price - and marketing costs, including any pre-sale repairs or renovations you do.
Then there are the so-called hidden costs like hiring removalists, staging your home and cleaning - or storing your possessions before you move into your new home. You will also have to get used to the fact that you are not going to be near your children's school or all the local amenities - shops, cafes and parks, that you have grown to love. Of course, in time you will get to know your new neighbourhood and settle.
"If you have made the decision to sell then beware the costs involved, some of which are not obvious"
8. The cost of buying
This brings us neatly to buying your new home and the material cost of this. Here you need to budget for a whole range of costs including title transfer fees, new loan application fees, lenders mortgage fees, valuation of a property and a deposit payable to the seller. Then there are the lawyers or conveyancers fees, building and pest inspections and strata search.
Yup - there are a bunch of things to budget for, and we haven't even listed them all here. Do your research and spreadsheet it all out.
9. What is the market doing?
The housing market is not static and property prices can grow, stagnate and even shrink. This is why you need to keep an eye on the state of the current market, as it could determine if you sell or stay put.
If you are selling in a 'hot' market you might get a great price for your property, but equally you are likely to be paying a premium for another home.
10. The final word...
Renovating allows you to upgrade your home and give you the physical space and lifestyle you want, but it is hard graft and you need to keep a careful eye on the budget. Selling up and moving also allows you to upgrade your home and your neighbourhood, but it is stressful and many people don't factor in all the costs involved.
Ultimately the decision to sell or renovate is a personal one, and should be made with regard to your circumstances.