This article was originally written by Gill South for Trade Me Property. It has been copied here for sharing, but you can still find the original here.
If you’ve been trying and failing to buy your next home, you may be weighing up renovating instead.
Does this scenario sound familiar? Your current house isn’t big enough for your expanding needs so you’re out househunting most weekends. But the market is highly competitive and you keep missing out on homes leading you to think it might be easier to renovate your existing house.
It’s an extremely common quandary for frustrated buyers at the moment. Do you stay and renovate or do you move on, and pay an aggressive price for a home that will, in theory, cater better to your needs in the coming years?
What’s going to offer you more certainty and an end goal you’re happy with?
Renovating vs. relocating: what to think about
For many, there’s a strong argument for renovating – you get to stay in the community you chose a number of years ago, you know the schools, your route into work and the chances are your house has appreciated in value since you bought, so adding value shouldn’t be a problem.
It’s likely, though, that there are a number of issues which may make you hesitant about taking this route. Will a renovation mean you’re over-capitalising the home you have? Is the site the right one for your needs or are there still things about your home and land which you don’t see working for you in the coming years. At the same time, how do you find a good builder? It may be you don’t know any and the good ones are pretty busy right now.
Ray White agent, Ben Stevens says first off, you’ll be looking at how much it’s going to cost to do the work to transform your current home. If it’s say, $500,000, then you’ll be figuring out what it’ll cost to service the debt. Then you’ll be asking, does this give you everything you want?
One downside, says Mr Stevens, is that a renovation doesn’t give you instant gratification like a new house will. But on the other hand if you go and buy something that you settle on in desperation, you might have some regrets.
Think hard about what’s triggering the need for a move. Is it really necessary to have a big flat site for your next home?
“We tend to live in the now. Five years down the track will you need a big piece of land for the kids?” he asks. People don’t use these big sites as much as they think they will. If you’ve got a school nearby where the kids can go and kick a ball, that can be a better solution.
Getting a realistic estimate on what the renovation will cost is crucial, says Tim Hawes, a Ray White agent in inner Auckland.
“There’s often a discrepancy between what you think you’ll be paying and what the project will cost,” he warns.
“If you’re pushing out the back and redoing the kitchen you’re not going to be spending less than $500,000. If you think it’s going to cost $200,000, you’re not going to be able to do it for that,” says the agent who sells in Kingsland, Western Springs and Grey Lynn.
Rebuilds have the potential for unknowns to pop up, he adds. Remedial work often needs to be done, re-piling for instance, so your budget has to factor these costs in.”Rebuilds have the potential for unknowns to pop up.”
When finding out how much the renovation will cost, don’t get an architect to do drawings as a first step. A draughtsperson might be able to help, says Mr Hawes, or there are intermediary project management companies who can help give you an idea of the scope of a project.
Asking for help early on
Jen Jones, from Nine Yards Consulting, helps people considering the dilemma of renovating or moving on, all the time. For a consultancy fee, she helps look at what you can achieve for your budget and your timeline for the project. She’ll want to know how long you’re planning to be in your current property and she’ll also make sure that the renovations you make will work well at resale. She’ll be gauging your appetite for the whole process too.
When it comes to budget, she’ll always offer the client the option of designing something for the money you have in mind or designing to your wishlist and then pricing that. Mrs Jones, who has a background in commercial development and has done a number of her own residential developments, calls it a high-level estimation exercise.
“99% of the time the clients want to design to their wishlist and then be given options,” she says.
The Nine Yards consultant helped some homeowners recently who had a starting figure in mind for what the cost of their project would be and her estimate at concept design phase was $200,000 over their initial budget. So it’s well worth getting help on cost estimates.
An extension will cost around $5000 per square metre excluding the interior fitout, she says. “So by the time you add a kitchen, hardwood floors, and a large timber bifold along with the rest of your renovation and all the professional and council fees, you can see how it quickly adds up to $500,000 plus.”
718c Beach Road, Browns Bay, North Shore City, Auckland
Mrs Jones will often get questions from people anxious that they might be over-capitalising or over-spending with a renovation. She helped a homeowner with this question recently, after giving her costing estimate, bringing in two experienced local agents to help answer the question. The conclusion was that if the homeowners were staying for 10 years, then they would be fine.
One of the pieces of information the project consultant always looks at with clients is the purchase price and the project cost – in other words the total investment a client is making in the home.
For one project recently, the couple found the purchase price and the renovation cost was a total of $2.1 million and they knew they would have to spend anything from $2.6 million to $3 million to buy something comparable to achieve their end result. So staying and renovating was “a no-brainer,” says Ms Jones.
“I think this is an angle a lot of people don’t consider when weighing up the options,” she adds.
The Nine Yards consultant, who writes free ebooks and resources for people getting started on a renovation, says the bulk of people who come to her do end up taking the renovation route. For some, she’ll simply help them cost up the renovation, for others she’ll run the project from beginning to end. Mrs Jones has pre-qualified builders who she works with consistently and a network of associated contacts nationwide.
What do you love and what do you hate about your current house?
Ann Woolston, co-director of Smartway Builders in Wellington, has her own team of builders on staff and a crew of trade people to help give an end to end service. Smartway helps people with their initial ideas and will then help homeowners through the consent process, managing and carrying out the daily building work, right through to sign offs. The company does anything from new builds to renovations.
“We’ve had more calls and inquiries daily since Covid. When everyone was locked down, they found what worked and what didn’t, and how much space they didn’t have,” says Mrs Woolston.
Her firm likes to get involved when the client is just starting to think about doing something at their home, says Mrs Woolston who runs the business with husband Howard.
Their starting conversation is always about, what do you love and what do you hate. “We try and get into their head about what works for them and what doesn’t work, and what’s the end result they’re looking for,” she says.
Whether people decide to move or renovate depends on understanding what they like.
718c Beach Road, Browns Bay, North Shore City, Auckland
“We say: “Do you love your location, your neighbourhood, the schools?” Right, let us help you love your house.”
Often people don’t want to buy another house or move, they choose to extend because they love the location, the neighbours and the schools, says the Smartway director.
If it’s not your forever home and you’re just going to be there another two years, $400,000 may not be a wise investment. If you’re planning on being there 10 years and you’re enjoying the way it’s done, it can be well worth it, says Mrs Woolston.
She adds:“You can do anything to your house, it’s just about getting permission, you can open up any wall, it’s just a matter of what structure or beam or piece of steel you put in there.”
The director will usually offer a couple of scenarios in floor plans to homeowners, before an architect is involved. These floor plans cost between $1500 and $2500, a bit cheaper than the $30,000 or $40,000 an architect might charge.
This floorplan gives them an indication of what that extension will cost them and the stop or start points, says Mrs Woolston. Smartway can give lenders a fixed price of the project which is what they tend to want.
A message Mrs Woolston tries to get across to new clients is that it might be a two or three year journey.
Will the home you buy need renovating anyway?
The Smartway director points out that, if you’ve gone looking to buy, as well as paying current market rates, chances are, it’ll still not be perfect, so it’s likely you’re going to be renovating the next home anyway.
“What they’re finding is buying isn’t giving them what their ideal is even if they’re prepared to pay $300,000 to $400,000 more, it’ll still take $200,000 to $400,000 to get it to work for them,” she says.
That’s often when clients come in to her, says Mrs Woolston. “They’ve done that research, they realise they don’t like what’s out there for the money and because they love the neighbours and the area, it’s another driver of why they decide to renovate rather than move.”
With a house renovation you have a much bigger level of control over what the ultimate cost is going to be, she says.
But if you see the dream house in the dream location, go for it
Tommy Real Estate’s Rob Black is marketing a big family home in Boulcott, Lower Hutt, on a beautiful flat site likely to appeal to buyers wanting more space.
566 High Street, Boulcott, Lower Hutt, Wellington
He says a senior colleague at work has said the golden rule used to be about location, location location, now it’s more about accommodation, accommodation, accommodation. Extra space is a popular requirement.
And while people may choose to stay for their community, every area has a community, it’s just about becoming part of it, he says.
Also, with the trend for grown up children to return home after university, having a spacious home may be something people want for longer than they may be anticipating.
Points to think about when choosing between renovating or relocating:
- How much do I love my current location?
- How long do I plan to live here if I decide to renovate?
- How much will a renovation realistically cost?
- Am I prepared to put up with the disruption of a renovation and do I have a timeline for how long the project will take?
- How much did I pay for the home plus the renovation cost – and what would I get for this money in the current market?
- Is it likely I will end up buying a less than perfect home which I would have to renovate anyway?