Last September, Brian and Jean Machart found out they were having twins. With a 4-year-old daughter already in the family, they looked around their 2,000-square-foot, three-bedroom home in Lakeville and realized they were going to need more space. Like a lot of families who buy a starter home and then realize that their family is no long starter-sized, they faced a big decision: add on or move on.
"We took a look around at other houses, to see what we could get in our price range," Brian says, "But to get the house we wanted, we would have to really go up in price. And we were always giving something up: some had a smaller yard, some were on a busier street."
In the end, they decided to finish their walkout basement, adding not only a bedroom, but a bathroom, family room and office, for a total of about 650 additional square feet of living space.
Susan Denk, of White Crane Construction, says she talks to a lot of families who have decided that to get the house-and the location-they want, they need to stay put. "We've been telling people, 'Keep the neighborhood, remodel the house,'" she says. "With the housing market as robust as it has been, you'd be making a potentially expensive trade-off [by moving]."
When you're deciding between remodeling and moving, Denk says, you not only have to compare the cost of the remodel and the cost of the new home, you also have to add in transaction and moving costs. And you have to take into account the intangibles, like additional commute time, changing schools, and moving away from friends.
Scott Hayne, principal Realtor at New Home Store Realty, says you should take your long-term goals into account as well. "If finishing a basement or adding a family room is only going to be a Band-Aid for a couple of years, then it's critical to examine your return on investment," he says. "You may be spending a lot of money you will not get back."
That means don't price yourself out of your own neighborhood. "If you already have the largest or nicest home on your block, you may be in danger of overbuilding and not being able to recoup the equity investment in your remodel," he says.
How do you figure out how much of your investment you might recoup? Ask a real estate agent about the value of similarly sized homes in your neighborhood. Then talk to a builder about the average return on investment for the type of work you're considering. According to Hayne, homeowners in the Twin Cities tend to get a better return on their remodeling investments than the national average. Remodeling magazine publishes an annual survey of returns on investment.
"Ultimately, the decision is more subjective than financial," Hayne says. "If the house is meeting all your needs-with the exception of space-and the addition will solve the space problem for a minimum of five years, then it most likely makes sense to remodel. Well, assuming you want to brave the sawdust!"
