Whether you’re looking to buy your first home or relocate to your next one, you should first consider if you want to buy new or used. A new home is a structure that was built within the past few years, has only minor wear at most and is ready for move-in. A used home is a structure that has been lived in by other occupants for several years. However, a used home can come in a wide range of conditions, from a fixer-upper, which will require major renovations, to a barely-used home, which will require only minor projects.
If you’re considering whether it’s better to buy a new home or fixer-upper, you need to consider several factors, including cost, investment potential and personal goals. Weighing all your options can be overwhelming, especially when you add the pressure of making such a large purchase. You should always consult with a licensed real estate agent and a contractor before making any decisions, but you can still do some research on your own. To help you make the best decision, we’ve created a guide to the main comparison points between new and used homes.
New Home Vs. Fixer-Upper: Which Is Cheaper?
If you’re trying to decide if it’s better to buy a new or used house, the first factor you should consider is the cost. Assuming that all other elements of the home are the same, including size, location and style, new homes are generally more expensive than used ones. However, used homes typically require some degree of renovation. Even though used homes are cheaper, you’ll need additional money when it’s time to renovate.
To determine which of the two options is more affordable, you first have to consider all the costs involved for both options.
Costs of Buying a New Home
- More expensive than buying a used home: All other things being equal, new homes are about 20% more expensive than used homes. As with most other purchases, a home’s value will decrease over time. Significant wear and damage will also reduce the value of a home unless you make repairs.
- Moving expenses: If you decide to move to a new home, whether it’s the first home you’ve owned or an upgrade from your previous one, you’ll have to consider the cost of moving. Depending on the amount of help you need, the distance between the two homes and the number of possessions, moving could cost you hundreds, potentially thousands, of dollars. On top of the moving truck rental, you also have to pay for labor, gas and storage, if necessary.
- Transaction costs: The process of buying and selling a house comes with a plethora of fees, other than the price of the house itself. These can include agent commissions and fees, real estate fees, appraisal expenses, title insurance and legal fees. Generally, the more your home costs, the higher the fees.
Costs of Renovating
- Renovation costs: Even though used homes cost less money, they often require more investments in renovations, depending on their condition. You’ll spend less money upfront or have a smaller mortgage, but you might spend more as you update your home or fix any broken or worn parts. The renovations needed depend on the size of the home, the condition of the home and the goals of the homeowners, among other things.
- Higher interest rates on loans: If you need a mortgage to buy the used home, you’ll likely need another loan to do some of the renovations. Typically, the more loans you have and the more you owe, the higher your interest rate gets. As your interest rates increase, you can’t pay your loans back as quickly, so you’ll end up losing more money.
Which Is Cheaper?
If you know what you’re doing, it can be cheaper to buy a used house and remodel certain parts than to buy a new home. Especially when you consider the difference on a per-square-foot basis, you could increase the value of the home by renovating and add in a few hundred feet of living space.
However, if you’re not diligent and careful throughout the entire process, you could end up paying more for your used home. The best way to ensure your success is by consulting with expert contractors and realtors, doing your research and shopping around for the best deals.
New Home Vs. Fixer-Upper: Which Is a Better Investment?
If you’re trying to determine if it’s better to buy a new home or remodel a used one, you should also consider which one is a better investment. You can do this by comparing the amount it will cost to buy the home with the amount you can sell it for later. However, the results of the investment can vary depending on the size of the home, the condition of the home, the skill of the renovators, the dedication of the owners and much more.
To determine which of the two options is a better investment, you first have to consider all the financial benefits involved with both options.
Benefits of Investing in a New Home
- Easier to finance: If you buy a new home from a builder, you’ll typically have to pay less in closing costs and title fees. Closing costs usually range from two to four percent of the sales price. However, if you agree to use a specific lender, most builders will offer credit incentives to help you pay the fees.
- Move-in ready: When you buy a new home, you don’t have to worry about any additional renovations costs. Unlike used homes, you can start living in a new home right away. You likely won’t have to spend any money on renovations for the first several years you’re living there.
- Energy-efficient features: Newer homes usually come equipped with more modern technology, making them more energy-efficient. This enhanced energy efficiency means you’ll pay less in heat, water and electric bills.
Benefits of Investing in Renovations
- Cost of the home is less: Since a used home costs less upfront, you’ll have a better chance of making back your money and making a profit when you sell. If you can renovate with high-value projects and manage to keep costs low, a used home can be a better investment than a new one.
- Customizable: Since a used home is completely customizable, you can tailor it to fit in better with the surrounding market. If your home is the only one in the neighborhood without a master bathroom or an outdoor pool, you can add one to make it more competitive when it’s time to sell.
- Increases value: Since most remodeling projects increase the value of your home, you have a better chance of making back your money when you buy used.
Which Is a Better Investment?
When most people think about investments, they only consider the financial aspects. While an investment usually refers to the money you put into something compared to the money you receive back, you must consider other elements as well. If you make a profitable investment, but it interferes with other important parts of your life, like your happiness or life goals, would you still consider it a good investment?
When you buy a new home, it will only continue to decrease in value unless the neighborhood becomes in-demand or you do renovations. As you live in it, the house will get older, parts will wear, and the value will decrease. While there are ways to slow down this process, you will likely not be able to sell the home for the same price you bought it for. In terms of financial investment, buying a new home isn’t ideal.
When you buy a used home, you have the potential to make back all of your invested money and potentially more. In terms of finance, buying and renovating a used home is a much better investment than buying a new home.
However, this is where the other factors of an investment come in. Just because one option is a better financial investment doesn’t mean it’s a better investment for everyone. If you’re looking to start a family, a used home might not be a good investment because the constant construction could pose a threat to small children. If your job monopolizes most of your time, a used home might not be a good investment because you won’t be able to devote the necessary time to renovation projects.
How Much Should I Remodel?
If you do decide to buy a used home and remodel, you should only commit to projects that will add value to your home. However, it can be challenging to determine which projects are valuable and which are a waste of time. Generally, it’s better to do several smaller, less expensive projects than one major renovation. More extensive overhauls tend to cost more and end up recouping less at resale, while smaller projects add more value to the overall house.
You should always do a significant amount of research and consult with a real estate agent before you make any major renovations. To make remodeling decisions that will be the most beneficial to you and your home, you should focus on improvements that offer the highest percentage of recouped cost at resale, including:
- Stone veneer: According to a 2019 remodeling cost vs. value report, remodeling your home with stone veneer has one of the highest percentages of recouped cost at 94.9%. It’s also an affordable project at approximately $8,900 for a standard-sized home. It adds significant curb appeal and leaves a lasting first impression on any potential buyer. Stone veneer also comes in a wide range of colors, so you can customize it to look any way you want.
- Siding: Replacing the siding on your home is another remodeling project that will add significant value. Siding comes in several different materials, with vinyl and stone veneer being some of the most common. Your home’s siding is responsible for protecting the rest of your house from the elements, so it’s essential to make sure that your siding is up-to-date and functioning properly if you’re hoping to sell. Unattractive or outdated siding can be a dealbreaker for many prospective buyers if they’re looking for a move-in ready house. While replacing your siding is a moderately expensive endeavor, you will recoup about 75% of the cost when you sell.
- Entry doors: Installing new entry doors, especially those made of steel, are another low-cost renovation that will increase the value of your home. Steel doors are particularly desirable because of their energy efficiency, but any new entry door will add to the value of your home. They serve as the “face” of your home, so they massively contribute to curb appeal and first impressions. Installing a new steel door is a great way to add value to your home if you’re on a tight budget or just looking for a project that won’t take a long time to complete. A new one will cost about $1,800, recouping about 75% percent of the investment after the sale.
- Vinyl windows: Installing new vinyl windows will also increase the value of your home. Choosing the right windows for your home is an essential part of increasing your resale value, so you’ll need to know the various options and styles to make the right decision. New vinyl windows cost about $16,800 and add about $12,300 to the resale value of your home. With so many styles and colors to choose from, you can pick out the best look for your home to attract potential buyers.
- Roofing: If your roof is more than ten years old, replacing it will add significant value to your home. While some experts disagree on the specifics of when you should replace your roof and how much you’ll recoup after you sell, many agree that the project pays off if your roof is more than a decade old. Replacing your roof is an expensive remodeling project, but you’ll be able to recoup about 68% of the cost back after your sell.
How to Start Remodeling
If you decide to buy a used home and begin renovations, surround yourself with the best possible help. Always consult with a licensed real estate agent before you start knocking down walls. When it comes time to hire a contracting company, make sure to get estimates from multiple licensed, insured businesses to ensure you’re getting the best price. You should also hire contractors based on their expertise. For exterior renovations, including siding, trim, windows, doors and roofing, there’s no better option than Sunshine Contracting.
At Sunshine Contracting, we’ll make sure your home gets the most value out of its renovations. We’re a family-owned and operated exterior contracting business with over 20 years of experience, and we use the same crew for all of our installations, unlike some companies, which subcontract their work. Our installers are highly trained and certified in their trade, and we guarantee their work with our ten-year Labor and Workmanship Warranty.
To get your free in-home consultation and estimate, contact Sunshine Contracting today!