Calculating the Cost/Benefit of Moving vs Renovating

thesubmitter wrote: ↑ I have never seen this done exactly like this and I am wondering if I am missing something.

Old Home: 500k
New Home: 1m

Major Renovation on old home: 100k
Conservative ROI on Renovation: 50%
Net Cost: 50k

Moving Expenses:
3% Agent Fees on Old Home = 15k (6% split between buyer and seller)
3% Agent Fees on New Home = 30k (6% split between buyer and seller)
1.5% Land Tax = 15k
Notary Fees: 1k
------
61k

So theoretically, spending 100k with a 50% ROI on the Renovation would make more sense, no?

I guess we can factor in increase in value on a 1M property vs 500k propery and maybe the 1M property looks better.

If the renovations are good, you could expect a positive ROI as long as it stays on budget. The real question is if you want to deal with living in a house under renovation.

engineered wrote: ↑ If the renovations are good, you could expect a positive ROI as long as it stays on budget. The real question is if you want to deal with living in a house under renovation.

Statistically speaking, even the best renos such and kitchens and bathrooms usually only have about 75% ROI assuming you were to turn around and sell soon after. This said, I would assume if you did a well planned addition at good value, you can probably get 100% ROI give or take.

Also, ROI will be dependent on the location and basically upper end valuations of the area. Doing a high end renovation on a dwelling in a cheaper area is going to yield you a lower ROI vs doing it in a better off area.

As brought up here, depending on the reno, what are the costs associated with not having a kitchen or a bathroom for a few weeks or a few months. Will you have to move out and stay somewhere else? Etc etc.

Generally speaking in the GTA, if you like your location and are happy with your house size, you're probably just going to renovate. In the GTA, you're probably looking close to $100k just to move up, plus the cost of upsizing. Even more in TO with the double LTT. So if your location and size are good, that swings the decisions massively infavor of renovating. Also, if you reno you get exactly what you want, vs when you buy a house, you're probably going to have to settle for something or reno it to some degree after moving in anyways.

Lastly @thesubmitter , your comparison doesn't really make sense. A $500k house with $100k spent on renos isnt going to be close to the $1mil house. Its no where close to an apples to apples comparison. For this the value proposition comes down to probably something along the lines of.... is moving up to the $1mil house worth it for the bigger size, better location, better layout? and maybe better finishes? For an apples to apples comparision, ie not moving up, just renoing a house instead of moving into an eqivalent reno'd one, the moving costs will almost always shift it in favor of renoing, but have to factor in the hassles of dealing with a reno vs the hassles of moving.

thesubmitter wrote: ↑ Major Renovation on old home: 100k

What is considered major renovation? $100k these days can't get you far.
Just replacing your front door can be anywhere from $2k-8k.
Replacing windows is anywhere from $15k-30k.

thesubmitter wrote: ↑ I have never seen this done exactly like this and I am wondering if I am missing something.

Old Home: 500k
New Home: 1m

Major Renovation on old home: 100k
Conservative ROI on Renovation: 50%
Net Cost: 50k

Moving Expenses:
3% Agent Fees on Old Home = 15k (6% split between buyer and seller)
3% Agent Fees on New Home = 30k (6% split between buyer and seller)
1.5% Land Tax = 15k
Notary Fees: 1k
------
61k

So theoretically, spending 100k with a 50% ROI on the Renovation would make more sense, no?

I guess we can factor in increase in value on a 1M property vs 500k propery and maybe the 1M property looks better.

It's not same thing

1: if your current house is sufficient for your usage but you just want to make it nicer, then renovations make sense

2: But renovation won't give you a bigger yard, good school, more bed rooms, more convenient location...
So really depends on the reason why you think of renovations vs moving

You re trying to compare apples and oranges. Look at ur street. If u see a lot of teardowns and additions then theres a good chance you will do ok if you do something similar. Else move out.

It is not the same! $100K reno will not make your house into $1M house! It will increase in value of the house but never $1M house.

Good luck!

100k add a master bedroom suite on top of the garage being my own contractor. Would probably start planning to do it next year (avoid lumber prices) Rest of the house is already renovated. The 100k solves a complaining wife ideally.

I know i can potentially do better than 50% ROI but I wanted to be conservative especially since adding an entire master suite is a bit atypical

Obviously the 500k house isnt comparable to the million dollar home but the point is that with RE agent fees and other costs this adds a new way for me to think if its worth renovating.

You only pay real estate commission on the sale of your present home. The seller on the 1M house pays the commission on their sale. You should also be able to negotiate and get that commission down to 4-5% so now you're paying 20-25K not 45K which makes your moving expenses more like 41K. That said, there are a lot of other expenses involved in moving that should be considered i.e. movers, boxes, painting or any renos/work to do in the new home, whether that notary fee includes title insurance and ALL associated legal fees, etc, and LTT is actually calculated in Montreal as follows:

0,5 % of the first $51,700;
1 % of the next $51,700 to $258,600;
1,5 % of the next $258,600 to $517,100;
2 % of the next $517,100 to $1,034,200;
2,5 % of the next $1,034,200 to $2,000,000;
3,0 % of any portion exceeding $2,000,000.

thesubmitter wrote: ↑
Obviously the 500k house isnt comparable to the million dollar home but the point is that with RE agent fees and other costs this adds a new way for me to think if its worth renovating.

How about you do nothing instead? Now your return is 100%.

Having been a homeowner in various cities
In various types / styles of residences (apts, condos, townhouses, semis / duplexes, attached vs detached)
I have over the years done a lot of COSMETIC changes / renos … paint, flooring, decks, landscaping
Along with maintenance stuff … roof, furnace & ac, or new Windows & Doors
Even done a finished basement

But NONE of those is a major renovation
Where you GUT down to the studs & start over
Like a kitchen or bath

Let alone structural changes …
Like you’d be looking at to add a second story

All those things are BIG JOBS
Where you literally have to live with the mess & inconvenience for weeks / months at a time
Plus the CRAZY COSTS
Adding a second story … means Engineers, possibly an Architect, Drawings, Building Permits
Lots of red tape no doubt from your city
Possible grief from your neighbours etc

It would have to be one AMAZING HOUSE
For me to take on such a load
And I would probably have to live there another 10 or 20 years to justify the cost
Recoupe some of expense

As others said …
A $ 500 K house even with a $ 500 K addition
Doesn’t automatically mean it’s now a 1 Million dollar house
Could just be a $ 500 K house … where someone overspent on renovations

Cuz ask any real estate agent … never good to be the most expensive house on your street or in your Neighbourhood
Ideally you want to be middle of the road … average house compared to others for resale purposes etc

So many things go into determining the value of a house
But LOCATION remains huge
Like others have said … there are just some things you cannot renovate
Or throw money at to improve

Neighbourhood, Street, Lot, School District, etc

Sometimes it truly just makes more sense to pack it in … and move

Depends what you're trying to solve. If you're looking at this as either spending $100k or moving to a $1m house will make your wife happy, and that's the only reason you're thinking of doing something, and anything else - better location, size, etc. etc. does not matter - then spend the $100k.

Manatus wrote: ↑ Depends what you're trying to solve. If you're looking at this as either spending $100k or moving to a $1m house will make your wife happy, and that's the only reason you're thinking of doing something, and anything else - better location, size, etc. etc. does not matter - then spend the $100k.

Something like that

PointsHubby wrote: ↑ Having been a homeowner in various cities
In various types / styles of residences (apts, condos, townhouses, semis / duplexes, attached vs detached)
I have over the years done a lot of COSMETIC changes / renos … paint, flooring, decks, landscaping
Along with maintenance stuff … roof, furnace & ac, or new Windows & Doors
Even done a finished basement

But NONE of those is a major renovation
Where you GUT down to the studs & start over
Like a kitchen or bath

Let alone structural changes …
Like you’d be looking at to add a second story

All those things are BIG JOBS
Where you literally have to live with the mess & inconvenience for weeks / months at a time
Plus the CRAZY COSTS
Adding a second story … means Engineers, possibly an Architect, Drawings, Building Permits
Lots of red tape no doubt from your city
Possible grief from your neighbours etc

It would have to be one AMAZING HOUSE
For me to take on such a load
And I would probably have to live there another 10 or 20 years to justify the cost
Recoupe some of expense

As others said …
A $ 500 K house even with a $ 500 K addition
Doesn’t automatically mean it’s now a 1 Million dollar house
Could just be a $ 500 K house … where someone overspent on renovations

Cuz ask any real estate agent … never good to be the most expensive house on your street or in your Neighbourhood
Ideally you want to be middle of the road … average house compared to others for resale purposes etc

So many things go into determining the value of a house
But LOCATION remains huge
Like others have said … there are just some things you cannot renovate
Or throw money at to improve

Neighbourhood, Street, Lot, School District, etc

Sometimes it truly just makes more sense to pack it in … and move

Done a bunch of those… i know i would need drawings (ideally from an architect technologist vs architect).
I would just hire and supervise the subs and maybe have a home inspector come check on the progress at certain stages.

Because its an addition, the disturbance wouldnt be too significant, I think.

Personally, totally happy with the house 100%, just considering moving to please the wife and one of her main complaints is lack of a walk-in and ensuite bathroom. The location is excellent, the area is great. Rather have liquid cash and mortgage i can easily afford than have everything in the house

jrbb0309 wrote: ↑ You only pay real estate commission on the sale of your present home. The seller on the 1M house pays the commission on their sale. You should also be able to negotiate and get that commission down to 4-5% so now you're paying 20-25K not 45K which makes your moving expenses more like 41K. That said, there are a lot of other expenses involved in moving that should be considered i.e. movers, boxes, painting or any renos/work to do in the new home, whether that notary fee includes title insurance and ALL associated legal fees, etc, and LTT is actually calculated in Montreal as follows:

0,5 % of the first $51,700;
1 % of the next $51,700 to $258,600;
1,5 % of the next $258,600 to $517,100;
2 % of the next $517,100 to $1,034,200;
2,5 % of the next $1,034,200 to $2,000,000;
3,0 % of any portion exceeding $2,000,000.

For the commissions one way or another there is 5-6% hidden in the cost of the houses.

For the LTT, you are right, i was just approximating

thesubmitter wrote: ↑ For the commissions one way or another there is 5-6% hidden in the cost of the houses.

For the LTT, you are right, i was just approximating

Just curious how you figure that regarding the commission? We recently sold and bought and we paid 3.5% commission total on the sale of our condo. Our agent took 1% (he's well known for his low commission in GTA) and the other agent got the standard 2.5%. We paid nothing extra for staging, 360 video, pictures, etc.

thesubmitter wrote: ↑ I would just hire and supervise the subs and maybe have a home inspector come check on the progress at certain stages.

Home inspectors don't know anything about construction nor is it their job too. If you pull a building permit, a building inspector will come out in stages to make sure the work is done correctly.

thesubmitter wrote: ↑ Done a bunch of those… i know i would need drawings (ideally from an architect technologist vs architect).
I would just hire and supervise the subs and maybe have a home inspector come check on the progress at certain stages.

Because its an addition, the disturbance wouldnt be too significant, I think.

Based on this response I don't think you really understand what's involved in a significant reno. Acting as your own GC for a job of this scope will likely not go well.

engineered wrote: ↑ If the renovations are good, you could expect a positive ROI as long as it stays on budget. The real question is if you want to deal with living in a house under renovation.

Calculate in the cost of a divorce.

Jerico wrote: ↑ Calculate in the cost of a divorce.

Been there, done that too. Just common law now (still works in Québec)