Should You Renovate an Older Property or Invest in New Construction?
When it comes to maximizing long-term property value, the debate between renovation and new construction is pivotal. We’ve gathered insights from nine industry experts, including CEOs and a building inspector, to illuminate this complex decision. From aligning with long-term goals to evaluating structural integrity, discover the key factors that shape today’s real estate investment strategies.
- Align Decision With Long-Term Goals
- Assess Unique Property Value
- Gauge Market Demand
- Identify Neighborhood Value Trends
- Preserve the Time Capsule Effect
- Create Cultural Fusion
- Consider Potential Sweat Equity
- Design for Appeal and Functionality
- Evaluate Structural Integrity
Align Decision With Long-Term Goals
When faced with the choice of renovating an older property or investing in new construction for long-term value, it is crucial to carefully consider your long-term goals. If your goal is a quick ROI, renovating an older property may be the better option, as it typically has a lower upfront cost.
However, if you’re planning to hold onto the property for many years, investing in new construction may be more beneficial in terms of long-term value and potential rental income. It’s important to align your decision with your long-term goals to make the best investment choice for your specific situation.
Before making a decision, assess your future plans for the property and determine which option will help you achieve those goals most effectively. Besides, consider factors such as location, market trends, and potential maintenance costs to further inform your decision.
Ryan Nelson
Founder & CEO, RentalRealEstate
Assess Unique Property Value
With regard to long-term projected value, one vital factor would be to consider the existing value of an older property and how its value can be increased through renovation.
If an existing property is already in good repair or has unique features (e.g., if it’s a farmhouse, barn, or historic property) and could benefit from a more modern interior or some overall TLC, then the returns on these investments can be huge.
Unique properties like this can be bought at auction for a fraction of their market value and then “flipped” for a handsome profit.
However, where the key advantage of the property is its location or land, it may well be worth starting from scratch and building from the ground up. It all depends on the project and your experience as a developer.
Luka Ball
Property & Real Estate Editor, Clifton Private Finance
Gauge Market Demand
I recommend considering the current and projected demand for housing in the area. If there’s a strong demand for new, modern properties, investing in new construction may provide better long-term value as you cater to the market’s preferences.
On the other hand, if there’s a demand for unique, character-rich homes in established neighborhoods, renovating an older property may be the way to go to capitalize on market trends. Conducting market research and consulting with local real estate experts can help you gauge market dynamics and make an informed decision.
Ryan Zomorodi
COO & Co-Founder, Real Estate Skills
Identify Neighborhood Value Trends
It’s easy to say cost when answering the question of what influences the decision between renovating an old property versus buying a new one, but there’s much more to it. While related to cost, I actually recommend looking at the town, neighborhood, and surrounding property values in the current and recent years to identify a trend before sinking money into an older property.
If you’re seeing an upward trend in home value, town population, and property value, you can likely safely renovate and know that you’ll get your money back when selling. If you’re noticing depreciation, decreasing or stagnant population levels, and decreasing or stagnant property values, you may want to consider getting more bang for your buck by buying a new nest.
Either way, you have to determine how much money you will get back when you sell. Just because you’re looking for a new home doesn’t mean you don’t look at the same trends you do before deciding to renovate or not. This is a big fiscal decision, and you should always look at the value of your surrounding area before tying yourself to a space.
Marty Zankich
Owner, Chamberlin Real Estate School
Preserve the Time Capsule Effect
One distinctive factor that has influenced my decision between renovating an older property and investing in new construction for long-term value is the “time capsule effect.” Older properties often hold hidden treasures, like vintage architectural elements, period-specific craftsmanship, or unique artifacts from a bygone era.
When renovating, I’ve focused on preserving and showcasing these hidden gems, creating a property that serves as a living time capsule. This approach not only adds a sense of nostalgia but also offers a unique selling point, attracting those who appreciate the blend of history and modernity for long-term value.
Adam Seguin
Owner, Myrtle Beach Home Buyers
Create Cultural Fusion
An unconventional factor that has guided my decision between renovating an older property and investing in new construction for long-term value is the concept of cultural fusion. I’ve found that combining the architectural styles and design elements of different eras can create a truly unique and captivating property.
By marrying the historical charm of an older building with modern construction techniques and contemporary aesthetics, I’ve been able to offer a one-of-a-kind living experience that appeals to those seeking a blend of heritage and innovation. This approach sets the property apart in a competitive market, ensuring long-term value through its distinctiveness.
Gil Clark Jr.
CEO, GH Clark
Consider Potential Sweat Equity
Sweat Equity: Are you willing to put in the sweat equity on renovating an older property? If so, a homeowner can significantly increase the value of their home and feel the satisfaction of doing the work themselves. Take into consideration that a typical remodeling contractor is shooting for margins of 30+% which means they are marking up all costs by at least 50% to hit their profit margins.
If you are able to take on a portion of this work, you can stretch your dollar further. However, you must ensure you have the know-how to do this work. TV makes these projects look easy, but if done improperly, doing it yourself could cost more money than hiring it out from the start.
Andrew Mosman
Owner, HomeWorx
Design for Appeal and Functionality
When deciding between renovating an older property or investing in new construction for long-term value, a key factor is which option yields a more appealing and practical design. The design and aesthetics of a building significantly impact the experience of those using or visiting it. High-quality finishes can create a sense of comfort, while a modern, minimalist design might convey efficiency. The layout is also crucial for functionality.
When designing a new building, generally, new construction offers more control over the final appearance and functionality. With a new build, you can tailor everything to your specific requirements—from the building’s size and layout to its energy efficiency and parking solutions.
On the other hand, when redesigning a renovated building, you face more constraints due to the pre-existing structure. Although you can modify walls, expand the building, and adapt it to your needs, you’re not starting from scratch as you would with new construction.
Remember, beauty is in the eye of the beholder, and functionality depends on your organization’s specific needs for the space. New construction typically allows greater control over the design. With a renovation, while you’re limited by the existing structure, older buildings can offer a unique and attractive charm.
Henry Brook
Founder, The Page
Evaluate Structural Integrity
One key factor that significantly influences the decision between renovating an older property versus investing in new construction for long-term value is the structural integrity of the existing property.
As a building inspector, it’s crucial to assess and evaluate the foundational strength, quality of materials used, and the overall condition of the older property. This includes inspecting the quality of electrical wiring, plumbing, foundation, roofing, and potential presence of harmful materials like asbestos. If the cost of addressing these issues outweighs or comes close to the expense of new construction, it might be financially more prudent to invest in new construction.
This is especially relevant when the long-term value is considered, as a newer property typically demands less maintenance and is more energy-efficient, adhering to the latest building codes and standards.
Daniel Massey
Building Inspector, Precise Building Inspections
Submit Your Answer
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