Help Us Decide - Renovate or Build New?

PiggyBoo on 25/07/2024 - 08:06
Last edited 25/07/2024 - 08:21

We are in a dilemma and need some help in deciding between renovating existing home versus buying a new land and building.

We (my partner and I) bought a small house (roughly 30-40 sq mt? single storey freestanding granny unit) for 630k in the heart of the town (regional VIC). It is very close to all the shops and amenities but small for our needs. Since it was our first home, we didn’t mind.

It is a bit run down. Since owning, we have installed solar panels, upgraded all the lights and fans and installed split system. We have enough savings to do basic renovation (bathrooms, kitchen, flooring and a fresh coat of painting) out of pocket (which is what we were planning to do initially) and we are already making almost double than the minimum payments towards the mortgage.

We were talking to our real estate agent who sold this house and he was advising it’s best to buy a land and build a new home and move there. Then renovate this house as this now becomes an investment property and we can claim some.
There is no more new land close by and everything is 10kms away from the town. We have never bought a land or built here so it feels overwhelming (right estate, lot, builder, timelines, choices, more mortgage, overall process etc) and not sure where to even start. But the idea of a bigger home and customising to our needs is something we always wanted. We both do not have any family or relatives we can rely on for this information or stay there while we build. We do not plan to build a property portfolio or anything. We just want our family home fully paid off and mortgage free.

Before we reach out to our financial planner and mortgage broker, we wanted to be a true ozbargainer and ask this community for your feedback, experience and suggestions.

Seriously, anything to help us is greatly appreciated.

Home & Garden

Comments

  • 87percent on 25/07/2024 - 08:42
    +2

    Is there much of a rental market where you are?

    • PiggyBoo on 25/07/2024 - 09:35

      Pretty good as it’s a small town (Warrnambool) that’s growing exponentially.

      • oscargamer on 25/07/2024 - 10:06
        +1

        I'm about 10k's from you. You won't have any problems renting, as you've already said.

        What you are talking about is a change in how you live. Currently, I guess you walk everywhere. If you move 10k's, then you'll be driving everywhere. You work in Warrnambool?

        Not knowing your budget, I wouldn't suggest a new build . Buy an existing place out of town. I like Winslow, Bushfield, Woodford, Koroit.

        Where is the land you are looking at? And which builder?

        • PiggyBoo on 25/07/2024 - 10:52

          Hello neighbour :)
          My partner wants within Warrnambool. Lands are still available around Hopkin Heights but we were waiting for a new estate to open which will give us time to plan and be prepared.

          When we last spoke to our mortgage broker, they said we can buy another property for around 700k (that was in Jan) but we have got more savings since then and should be in a better position.

          We both work in Warrnambool and walk to most places. Have a car to travel outside town and it’s just the two of us. So no big expenses.

          I have dealt with Bolden, Owen, smith and sons, James Taylor, Form and Function before as part of my other work. So might contact them first but most have years of wait time.

          • oscargamer on 25/07/2024 - 11:19
            +1

            @PiggyBoo: If you are dealing with James and Donna, then you are already on the right track. May I also suggest Simon Knee or Malone , both from Port fairy. Yes, years of wait time.

            Yes to Hopkins Heights, but your budget might be a bit light, particularly if you want a designer and decent builder…

            Good luck

            • PiggyBoo on 25/07/2024 - 11:31

              @oscargamer: Can I dm you as I have a few more questions?

              So should we talk to the builders and architects first before we lock in the land?

      • HeWhoKnows on 26/07/2024 - 14:39

        "We bought a small house (roughly 30-40 sq mt? single storey freestanding granny unit"

        Thats so tiny mate…. like a studio unit.
        As the old saying goes - you cant even swing a cat in there.
        Most apartments are way bigger than that.

        Dont waste any more money on it.

        Time to get a bgger place.

    • 2esc on 26/07/2024 - 17:30

      Houses are hard to get pretty much everywhere now to rent.

  • geekcohen on 25/07/2024 - 08:48
    +1

    in the heart of the town (regional VIC)

    What town?

    There is a new land release near my place and it is like $1.1m for house and land (2,200sqm block). Then you need shed, garden, etc. I bought my place for $615k (3.5 years ago) with 1,200sqm block, worth $800k now and it was fully completed. Yes, we have done some upgrades since then, but a majority was done.

    If we were to do anything, we would buy elsewhere and get more land and move a little further out of town. Whilst being close to town is great, it is getting busier and busier and want things a little quieter.

    So renovation might work out better. Increase the value, stay where you are and not have the headaches of building in the up and down times right now with builders going under.

  • Dollar General on 25/07/2024 - 08:50
    +11

    Of course the real estate agent said that

    It’s like asking your barber if you need a haircut

    • PiggyBoo on 25/07/2024 - 09:39

      That’s why I’m talking to the financial advisor and mortgage broker and of course the community.
      But in all honesty, being a very small town - everyone knows everyone and everyone’s very honest. During our first home hunt, he gave very honest opinion and helped us above and beyond.

  • barge-in hunter on 25/07/2024 - 08:53
    +5

    We’ve gone through a similar thought process - knock down rebuild vs Reno vs buying or building something else.

    Ignoring interest rate rises, Imho the building industry is scary at the moment - still builders going under, hard to get trades and labour, costs blowing out… and poor/rushed workmanship when your project eventually gets finished

    So we’ve landed on “do just what we need, and just a little extra”. It’s a much smaller Reno, but at least we’ll pay it off sooner and be exposed to a lot less risk.

    What we end up with will still be a big improvement for us to live in, worth more if we choose to sell or rent out, and we can reassess in 5 years

    • PiggyBoo on 25/07/2024 - 18:10
      +2

      This is great and honest. I really appreciate that.

  • sumyungguy on 25/07/2024 - 08:53

    Assume you'll need to borrow to do either. Comes down to capital gain. What will your renovated/extended cottage be worth in ten years time compared with a McMansion in reclaimed swamp not even in the same town? How will you be positioned If you had to sell for work/family reasons in five years time? If I assume mortgage rate 7% paid from post-tax earnings at marginal rate vs superanuation growing at 8% with 15% tax on entry, which is a better use of your money? Paying off your mortgage rapidly may not always be the best strategy.

  • redfox1200 on 25/07/2024 - 09:15
    +6

    realestate agent doesn't know what he's talking about. depreciation would be higher on the new build. so its actually better buying house and land and using that one as the investment

  • netjock on 25/07/2024 - 09:42
    +1

    dilemma and need some help in deciding between renovating existing home versus buying a new land and building

    Horses for courses isn't it.

    Your new house and land would be like on 500m2 and 250m2 (maybe even 300m2) and price is? $800k for a standard build with a few small changes.

    Your current property, how big is the block? If it is pretty much at land value and you enjoy the convenience knock down and rebuild.

    Alternatively. Buy a bigger house nearby and have the existing as investment property. If it is a big block then build a two story unit for say $400k 150m2 (if you can live with that) and rent out the front Airbnb or privately

    Lots of options. More research is required only you know what you would put up with. I assume you work centrally rather than further out where all the new house and land is.

  • Benoffie on 25/07/2024 - 10:01

    I dont know your local market but:

    • REAs have their own barrow to push and cannot be trusted 99% of the time
    • factor in buying and selling costs
    • substantial builds are running at $2500-3500/sqm atm
    • build times are conservatively 2 years for a house
    • you should seek independent financial advice

    Personally, I wouldnt do it. I wouldn't be renovating either until I had a clearer long term plan. Too many people renovate then sit in the house and dont realise the $$ from that work. Unless you understand and accept renovating for lifestyle improvement, then does it need to happen?

  • will05 on 25/07/2024 - 10:18

    sell it and grab another
    walk towards debt free economy

    • PiggyBoo on 25/07/2024 - 12:57

      As it’s a run down unit, we will need to do at least some basic fixing and painting before we can sell it.

  • Euphemistic on 25/07/2024 - 10:27
    +2

    Location location location.

    If youre hapy where you are, renovate. Block plus new build is only very rarely the best decision IMO. New blocks are usually 'out of town', which inevitably leads to more commuting (and vehicle costs) and less amenity around home.

    Maybe talk to an architect or builder to see what could be done for a major renovation.

  • JimB on 25/07/2024 - 11:16
    +1

    "My partner wants within Warrnambool"

    "We both work in Warrnambool and walk to most places"

    No brainer. Stay were you are and renovate.

    Maybe look for an extension, I'm sure you have the land being in a regional town.

    FYI- I'm certain it's not 30-40 sqm. Most likely double that.

    You can check on realestate.com.au

  • Ponsonby on 25/07/2024 - 12:05
    +1

    Conventional wisdom has long been that (1) land is what appreciates not buildings (some would query that given the trajectory of building costs in recent years) (2) land value is about location and amenity. If you have enough land near town AND you can put up with the substantial inconvenience and risk of knock down/rebuild, then this is probably a good solution - when you emerge at the other end, you will have a nice house to live in and can continue to enjoy your centre of town lifestyle.

  • Downvoter on 25/07/2024 - 12:35
    +1

    Love it or list it

  • ForkSnorter on 25/07/2024 - 15:09

    What is a granny unit?

    • PiggyBoo on 25/07/2024 - 15:21

      This is not our house but it is very similar and in our town. Small and simple home designed for older couples with less rooms and maintenance. There isn’t much land to do expansions. Most of the neighbours in our street are old retired people.

      https://www.domain.com.au/10-maycarn-court-warrnambool-vic-3…

      If we spend 150k+ in renovating, either we rent or sell, it’s hard to get that ROI as it is still a very small space for a regional town.

      • ForkSnorter on 25/07/2024 - 15:24

        OK, kind of a townhouse. I doubt it is 30-40 square meters. I've never heard of a townhouse or duplex that small. Even most 2-bedroom apartments are far bigger than that. In fact, a lot of 1-bedroom apartments are bigger than that.

  • ForkSnorter on 25/07/2024 - 15:15
    +1

    I would renovate it. Nice house in the middle of town would be worth something one day. You may enjoy the lifestyle there too.

  • dtc on 25/07/2024 - 15:47

    I wouldnt build, but a built house so you can see what it looks like. Building today is $$$$$$$ and risky as well.

    Think about the tax situation if you turn your current home into an IP

    Can you afford 2 x mortgages. Sure a tenant will contribute to one, what happens if your tenant doesnt pay rent for 3 months

  • lgacb08 on 25/07/2024 - 18:24
    -1

    Sound like you don't have a clue about anything. First of the house if not so much difference to the link shown then there's nothing wrong with it, if you're ocd about having brand new everything then expect to burn money non stop for ongoing renovations or upgrades. From your description the place sounds like a derelict weatherboard 19th century Edwardian in need of repair but it's far from it. You probably have no clue about square or square metre because 30m2 is shoebox home in Tokyo or Hong Kong, but they do cost more.
    I suggest you reset your expectations, do some necessary upgrade to the home and be happy. If you are a bit of handy person or having some hobbies taking space then you can look at moving to somewhere bigger but I don't see any of that in there.

  • Wazzawiseone on 26/07/2024 - 07:39

    New build !!!!
    Not so sure given the parlous state of the building industry.
    You would have to have nerves of steel after checking this out. This guy is good.
    https://youtu.be/DXafnJY4jJI
    Cheers

  • Lastchancetosee on 26/07/2024 - 09:15

    Lots of good advice so far.

    Would just add that there may be state government incentives at the moment fornew builds which coukd be worth consideration.

    There's liads in SA.

  • panos on 26/07/2024 - 09:53

    Bloody townhouses get out of it and buy a house and land…..How can you stand living like that when you don't have to and can afford it….

  • defaultess on 26/07/2024 - 11:43
    +1

    I would definitely caution against new build.
    The building market is crazy and from an 'investment' perspective the building is the depreciating asset. There's a reason why you can pick up an existing house for cheaper than building the same thing new.

    If you can get away with a small reno and eventually a small extension to provide you with the space, you can retain your lifestyle and minimise your financial exposure.
    Depending on what you need the extra space for, you could always look at a granny flat or something similar.

  • 2esc on 26/07/2024 - 17:31
    +1

    Renovate first for yourself see how it fits if it doesnt then build.

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