Do you spend your money on moving costs or invest it in a renovation?
Your house is dated, it feels cramped and you know if you start looking hard enough, it’s likely starting to show it’s age under the hood. You dream of a new open kitchen where you can freely visit with your company while you add the finishing touches to your dinner party entree, where you can sit comfortably in the warm sun next to your new french doors reading your morning news and own a bathroom whose old linoleum isn’t peeling at the tub and where the vanity doesn’t look like it’s ready to crumble on itself.
You want change. You want new. You want to move. But wait. Should you move? Or should you consider a renovation?
Both are life events that take their toll on your time and require you to spend money. While moving can sometimes seem easier, and can be necessary, the perceived convenience comes with an out of pocket cost. What if you took the cost of moving, and invested it instead into your home?
Assuming your current home is valued at $500,000:
1) Your first significant expense is the realtor fees required to sell your current property. In BC, 7% is charged on the 1st $100,000 and 3.5% on the balance of the sale price. Therefore, if you were selling a $500,000 property the commission would be $21,000, and since this is a service, 5% GST is also applicable making the total commission charged to the seller $22,050.
2) Despite the near doubling of the median home sale price over the last decade, the BC government continues to apply its lavish Property Transfer Tax fee to each property sale. Once again, if you are buying a $500,000 property the tax would be 1% on the first $200,000, 2% on the remaining value bringing the total tax payable to $8,000.
3) To draw up the paperwork on the sale and purchase of your new home you can expect to pay between $1000 and $2000 in legal fees. Now this example assumes you did not actually upgrade your residence and bought on par with your current home value. For a young couple or family, you usually are spending more to get more space. Did you buy new? If you did, there will be another 5% GST on the sale price ($25,000) of your new home. If it was the older residence you purchased, you will likely want to put some work in to modernize it for yourself. What you need done and what you are willing to live with is anyone’s guess here, thus I will leave this issue for now and hope that you are satisfied that we at least made you aware of this potential need. So you have not even stepped foot in the door of your new home and your costs are just over $30,000 if you bought an older residence and moving past $55,000 if you decided to buy brand new.
4) Now for the move. Depending on what you own, the number of rooms your current home has, how far you need to move and how much time you have on your hands this can cost anywhere between a few days labor together with 3 large pizzas and a 24 of beer, to upwards of $20,000. But lets be more realistic, even if you really don’t value your time very much and consider $15/hr a good rate of pay for you and your spouse and it takes two weeks to move the goods from your 3 bed/2 bathroom home using a U-Haul truck on moving day. This approach would cost roughly $3000, but really, is the above scenario realistic? It would be more prudent to assume the cost to be closer to at least $5,000-$7,500?
To tally this up, the out of pocket cost is between $35,000 and upwards of $75,000 to just to make the address change. Given a budget of $35,000-$75,000 to invest, what could do to improve your current home and actually make it a dream home, or at least have it function better to suit your needs. Here is a rough list of cost estimates for home renovation services from Craftsmen Contracting Ltd. (NOTE: Cost will vary based on finishing material selected and these are just average cost estimates based on previous client requirements):
- A complete kitchen renovation: $25,000+
Þ Ikea cabinetry, stone countertops, under mount sink/faucet, tile backsplash and floor, electrical including pot lights, plumbing, painting and finishing carpentry
- 3 piece bathroom $14,000+
Þ Bathtub or shower stall with glass enclosure, vanity with stone top, mirror, lavatory, tile floor and shower area cove, plumbing, required electrical, painting and finishing carpentry
- 4 piece bathroom $18,000+
Þ Bathtub, shower basin, glass enclosure for shower, vanity, mirror, lavatory, tile floor and shower area cove plumbing, required electrical, painting and finishing carpentry
- Powder room: $6,000+
Þ Lavatory, vanity with stone top, painting and finishing carpentry
- Hardwood floor installation: $16,000/1000sqft
Þ A nicely graded, and styled nail down 3/4” hardwood can be installed in place of a wood floor that was taken up and subfloor re-secured, and new quarter round installed I use the word invest because most smart home renovations that increase functionality and appeal will increase the value of your home. You are not out of pocket the money, you’ve turned into increased equity in your home.
There are certainly some reasons to consider moving: you have 5 kids in a two bedroom home, your neighbour’s waged war on your property, you live somewhere that gets 8 months of -10 to -40 degree weather and think it’s time for a break (that was ours). We work with some fabulous realtors that we’d recommend to take good care of you. But if your house isn’t quite working for you or you wish it had an updated exterior or fresh functional interior, seriously consider a home renovation. By investing in a renovation, you’ll retain the renovation costs by increasing the value of your home.