Should You Build or Renovate Your Ann Arbor Home?

When your current home no longer meets your lifestyle needs or fits your design aesthetic, it can be difficult to decide between remodeling your home or building a new one. A house is more than an economic asset—it’s a sacred space for your family to live, love, grow, and create lasting memories. We are connected to our homes in ways that are difficult to express, and the decision to build a new home or to renovate your existing home is no small matter.

The housing market in Ann Arbor adds its own unique wrinkles to the decision. It’s important to understand the current property landscape of the area, and to consider several factors as you settle on your choice.

Let’s explore some important factors we recommend our clients consider as they determine whether to renovate their current home or build a new one.

When to Renovate

When we price out an expensive addition, it’s often a good idea to talk to a realtor to learn if the resale value of your home will be worth the investment. Sometimes, there’s more value in building a new home outside of town. Yet, time and again, clients come back to their current neighborhood—especially if they live in the Old West Side or Waterhill district. Why? They might be able to get a better deal on a home, but they’ll never get a better deal on the neighborhood.

Resale value isn’t always the most important concern when deciding to build or renovate.  You may find that your neighborhood is one of the biggest factors. It has a certain charm and personality that you may not be able to replace. There’s also the consideration of schools, proximity to shopping and dining, ease of your daily commute, and other intangible factors.

A more practical concern is the availability of property in the Ann Arbor market. With property in high demand and short supply, it raises the value of undeveloped lots to a surprising cost. You should be prepared to pay in the neighborhood of $150,000 for the lot alone.

If you already have property in Ann Arbor, you’re sitting on a gold mine. You have something of value that makes renovation a more attractive, tenable position.

However, there may be very good reasons to build a house rather than renovate, and we have many clients who choose that route.

When to Build

While building a new home in the Ann Arbor area may be an expensive proposition, there are several attractive reasons for building new. Let’s take a look at each of them in turn.

Costs of Renovation

If you’re considering a major renovation, you may be surprised by the cost comparison of renovating versus building new. Some of our clients want to build an addition to the first floor that includes a kitchen and pantry area. On the second floor, they plan to add a master bedroom suite.

Those sorts of projects can exceed $200,000 pretty quickly. Depending on the value of the home, they may realize that they’re spending more on the house than they can immediately recoup if they were to sell the house the day after they finish the renovation.

Usually with a new build, the square-foot costs are lower. Typically, a new build is in the neighborhood of $250 to $400 per sq ft. For a renovation, it can get up to $450 to $500 per sq ft. This is consistent across design-build companies in the Ann Arbor area.

A renovation, by its nature, is a more expensive proposition. You have to work with an existing structure, so the tie-in is expensive. You usually have a small, cramped lot with an existing building. Often, the builder has to bring large equipment through tight openings, and there are very few places to set up equipment.

It’s also more expensive to demolish existing structures and fixtures, because you need to be careful to preserve certain elements that are remaining in place. It’s essential to be careful to protect everything that needs to be salvaged or saved.

If you’re taking on a large remodel project, you may want to weigh your costs and consider building new.

Complete Design Control

Some of our clients are less concerned about costs than they are about realizing the home of their dreams. When you build new, you get to choose the size and layout of your home completely from scratch. You can tailor your home to your exact aesthetic and functional requirements. Much like a tailored suit, your new home will fit you perfectly.

If this is your main driver, building a new home may be your best option. You will have more creative control and fewer frustrations with existing structures that can’t be changed.

Latest technologies

Some homeowners are motivated by updating their home to the latest technologies and finest construction possible. A new home will have a better thermal envelope, more durable materials, and more energy-efficient windows. The foundation will be straight, square, and level. Greater sustainability is more achievable with a new home.

A lot of times, when you’re renovating an Old West Side home, you have to deal with a foundation that’s no longer plumb and square. There’s a fine line between defective buildings, and charm and character. If that line is important to you, then a new home may be the best decision.

A Third Option

One option that you may not have considered is something of a hybrid between renovation and new home construction. If you own a house in Ann Arbor that isn’t particularly valuable, you can tear down the existing structure and build a new home on your current property. Because the square-foot costs for a renovation typically exceed the costs for a new building, you may be able to enjoy all the benefits of building a new home without leaving the neighborhood you love.

Giraffe designer Joel Beals chose this option for his house. He and his wife Patricia, owned a small home in the Waterhill area, but they wanted a completely different design that would fit the lifestyle and values of their young family. So they tore the house down to the foundation and began building a new home using the same footprint of the original structure.

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Pitfalls to Watch Out For

Before you commit to a renovation or a new home build, be sure to avoid common pitfalls. Here are some best practices to consider while you’re weighing your options.

If you’re considering a renovation, talk to a trusted friend who is a realtor. Ask how much value the renovation would add to the home. Many people choose to renovate, realizing they won’t recoup the costs in the short term, which is fine. But it’s important to understand what you should expect—especially with larger home renovations.

If you’re planning to get a home equity loan or construction loan for a large renovation, find out how much you can borrow up front, before you begin engaging with the design-build firm. This will save you from paying for a large design, only to realize afterwards that no one will loan you the money to build it. At Giraffe, we always make a point of asking about this before proceeding with a project.

If you’re building or rebuilding, be sure to check comparison costs (“comps”) in the neighborhood. You don’t want to spend nine months designing a $600,000 house in a fairly depressed neighborhood. You will likely have a difficult time securing a loan, and you’ll need to rethink the design of your home.

Make the Decision with Confidence

The decision to build or renovate your current home is an important one. Taking the time you need to consider what’s best for you, and talking with professionals in the industry, can help you make an informed choice.

Giraffe Design-Build understands that this decision extends beyond economics. Our team can help you think through the various considerations to achieve a solution that will bring the greatest delight for years to come.

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Let us walk with you through the decision. Start a conversation with us today.