Deciding whether to sell or renovate is a dilemma most families with growing pains will wrestle with. For some, it will be a finance-driven decision, for others a question of location.
Assess your current house
Is it viable for renovation? Would you be making repairs before beginning renovation works? If so, your renovation costs could be higher than anticipated, says Rob Caulfield, director of Archicentre, the building design and advisory service of the Australian Institute of Architects.
Many older weatherboard homes will cost $300,000 to $400,000 to renovate.
“An appraisal of the existing house is the number one step you need to do,” he says.
“You need to ask, ‘If I renovate this, what other things do I need to do to bring it up to standard?’
“As soon as you renovate more than 50% of a home, then the home has to be made to comply with current building regulations. So that’s possibly new wiring, plumbing and new energy rating, so a whole part of the house may need to be insulated and the cost can be quite significant.”
Better buying: Old vs new properties
Is it cheaper to move?
Older homes are more likely to need a bigger cash injection to achieve quality renovations, so selling can seem a tempting option.
Today’s cost-effective building techniques can mean buying a new home may be a cheaper option, says Caulfield.
“If you’ve got a very old weatherboard requiring a lot of maintenance and upgrade work before you do anything, then maybe in that situation you’re better off selling it and moving somewhere else or knocking it down, renting temporarily and making a new home.
“The reality is over the last forty-fifty years the Australian construction industry has got more and more efficient.
“What that basically means is many older weatherboard homes, to renovate them, you’re talking about a renovation of $300,000 to $400,000. Getting into that realm, which a lot of people will do if it’s an old home and doesn’t have a lot of historical merit, it’s probably better to start looking at one of the other options.”
The price of selling up
With real estate agent fees and stamp duty expenses, selling costs are another important consideration. Daniel Carini, financial advisor from YellowBrickRoad Wealth Management, advises comparing these with potential renovation bills.
“On a sale of $600,000, you’re looking at stamp duty of $30,000 and then real estate agents fees of 2% to 3%, which is $10,000 to $15,000,” he says.
“And that’s before moving costs and any refinancing fees. So if you’re looking at renovating for under $100,000, it can be a better option.”
Aside from the numbers, there are the emotional decisions. How much does your family enjoy the area they’re currently living in? Would the children have to change schools? Do you enjoy renovating? If you renovate, does your family need to move elsewhere or could you reside in the house?
Perhaps it’s time to call a family meeting.