A Case Study: Moving vs Extending with a Sunroom Addition

Conservatory Addition / quinju.com





Soaring home equities and low interest rates have many people considering whether it is the right time to move. To see if you are catching this bug, look for the symptoms: paying more attention to “For Sale” signs; browsing real estate flyers; taking detours through nice neighborhood. Before you know it, you have the moving bug.

But, is moving the right economic decision or is it smarter to enhance your existing house? There is no easy answer. Everyone is different, every house is different, every situation is different.

Start by answering these 5 questions:

  1.   Are you emotionally connected to your current home, neighbors or neighborhood?
  2.   ​​​​Will adding a room addition or sunroom solve what your house is missing?
  3.   Can your house / property effectively support a room addition or sunroom?
  4.   Is your current home in a good location in relation to work, school, family, etc.?
  5.   Would the stress and time required to move negatively affect your work performance   and/or personal relationships?

If you answered “yes” to all these questions, maybe considering an addition is right path for you and your family.  If you answered “no” to one or more of these questions, maybe moving is the right decision.

Since everyone's situation is different--different wants and needs, different budgets, different housing marketing--we thought providing a Case Study on one specific yet common situation might provide some insight that can be applied to your specific situation. The case study provided is all based on a true situation, although the names have been changed.

Case Study:

Homeowners:       Gus and Ellen are a middle-aged couple with an 18-year-old daughter and a 21-year old son, both are still living at home.

Home:                  Gus and Ellen own an 1800 square foot semi-attached house with 3 bedrooms and 3 bathrooms. This has been their home for the past 15 years, during which time they have completed many renovations, including: installing a new kitchen, new windows, new flooring, new furnace and air conditioning unit, finishing the basement and re-painting the entire interior.

Their home is located on a quiet street in Thornhill (Toronto).  It has a good size yard, for that area, which contains a beautiful maple tree. A similar house on their street was listed for $769,000, which means their equity has experienced significant growth over the 15 years.     

Situation:              They very much like the home they have created. They like the neighbors and the neighborhood in which it is located. The only issue is that with grown kids still at home, they could use some more space.  The additional space would be used for multiple purposes: relaxing, entertaining, homework / office work, etc.

Just like many people, Gus and Ellen were not sure whether they should move or add an addition to their existing house.

sunroom addition /before / quinju.com

Argument for Moving:

After weeks of driving around their area looking for “For Sale” signs, Gus and Ellen decided to talk to a local real estate agent.  He advised against a home addition saying,

For Sale / quinju.com

"If you extended your home by around 300 square foot (about 28 square metres), that might cost you around $60,000 to $70,000. And, at the end I would say your house would be worth around $820,000, so at best, it's cost-neutral. Unless you are sure you are going to stay for a long time, it might not make sense."

The real estate agent also added,“Sunooms tend to be poor investments as subsequent buyers may view them more as liabilities to be torn down than quality spaces.”

Based on that advice, they went into house hunting mood.  After reviewing the real estate listings for their area and visiting several open houses they concluded that, while they would get a very good price for their home, their entire equity would need to go back into buying the new house.

Gus considers himself a very astute person, so after doing some research, he did his own number crunching and calculations.  He discovered that the real estate agent missed some numbers that need to be considered when moving:             

  •  Real Estate Fees (4%)                         $  30,760
  •  HST on New House                             $  91,400  (approx. after Gov’t Rebates)
  •  Moving Costs:                                      $    5,000
  •  Upgrade to a bigger house:                 $  60,000  (minimum)
  •  Cost of Making It Home:                      $  10,000                                                                                       TOTAL:                                 $197,160  

The real estate agent did point out that adding an addition could increase your property taxes, but buying a bigger house will increase the property taxes. No doubt about it.

He also pointed out that by increasing the size of your house would increase your heat, cooling and home maintenance costs…but wouldn’t buying a bigger house also increase these?

CONSIDERATIONS FOR ADDING A SUNROOM ADDITION

Maybe just by fate, Ellen went to get her hair cut.  Her hair stylist works out of the basement of her home, and although Ellen has been going there for years, she had never been upstairs in the house.  After Ellen described their moving / staying dilemma, her hair stylist took her upstairs and showed her the fantastic, year-round sunroom she had added a couple years earlier.

Ellen was blown away by how nice the sunroom was.  It was a good size room with a nice sitting area, an office desk and some exercise equipment.  The room had a glass roof, which provided amazing natural light to the sunroom and adjacent kitchen, yet it was surprisingly very comfortable despite the direct exposure to the sun and warm outside temperature.  The room had a wood interior finish, a gas fireplace, and was open to the kitchen, which truly made it feel like part of the house. It was perfect!

Ellen's hair dresser said they absolutely love their sunroom and are in it all the time. She felt it was a great investment to their home and lifestyle.

Ellen immediately called her husband and booked an appointment with company that built the sunroom on her hair stylist’s house.  This was a very reputable sunroom company, well known for building quality, year-round sunroom additions.

After going through the design process for a proposed sunroom addition, learning all about the company and the high quality products used in the construction of their sunrooms, and even seeing fantastic drawings of their home with the proposed sunroom attached, Gus and Ellen loved everything about the sunroom addition except, of course, the price. 

Sunroom Concept Rendering / quinju.com

The overall budget for the sunroom addition was $102,000, including the permits, foundation, heating and cooling, electrical and floor covering.  Now, this number could have been significantly lower, but Ellen did not want to compromise…it was the wood interior or nothing. 

Again, Gus did his research and crunched his own numbers.  He discovered that, while low quality or 3-season sunrooms offer very little to no return on your investment, high-quality sunrooms containing the right glass and professional workmanship, are actually a very good investment, providing anywhere from 90% - 120% return of investment.  The key word missing from many of the sunrooms built over the last 30 years is quality.

Properly insulated, year-round sunrooms not only add square footage to a home, they also offer the “wow” factor that many home buyers are looking for.  If there is anything our current housing market has taught us, when people find something unique that they want, they will pay more to get it.  (Consult a local professional sunroom company to ensure your sunroom is a good investment and not a poor purchase)

Sunroom Image 1 / quinju.com
Sunroom Image 2 / quinju.com
Sunroom Image 3 / quinju.com

The chart below demonstrates the potential changes to the value of the house, with and without the sunroom addition, over a 10-year period.  The chart is based on a 80% return on investment and a 5% annual growth.  The 5% annual growth is a very conservative number considering that in 2016 the actual increase in house values in Ontario were 16.5%.

            Current Home:                                 Home with Quality Sunroom Addition   

  •  Estimated Value     $769,000                        Estimated Value:      $850,000
  •  1 Year                    $807,450                        1 Year                       $892,500
  •  2 Years                  $847,822                        2 Years                     $937,125
  •  3 Years                  $890,213                        3 Years                     $983,981  
  •  4 Years                  $934,724                        4 Years                   $1,033,180
  •  5 Years                  $981,460                        5 Years                   $1,085,839
  •  6 Years               $1,030,533                        6 Years                   $1,140,130
  •  7 Years               $1,082,059                        7 Years                   $1,197,137  
  •  8 Years               $1,136,162                        8 Years                   $1,256,994  
  •  9 Years               $1,192,970                        9 Years                   $1,319,844
  •  10 Years              $1,252,620                     10 Years                   $1,385,836

The result is that the sunroom would add significant value to your home immediately, however that investment would grow over time to more than $130,000 compared to the same house without a sunroom (based on the 80% return and 4% annual growth).  This ROI (return on investment) is more than $250,000 when using a more realistic 12.5% annual growth rate.

 Conclusion:

The moving versus addition decision comes down to one thing…if adding a beautiful sunroom or room addition to your current home will enhance it enough to stay for another 5+ years, stay.  An addition will always be less costly than moving.

If adding a beautiful sunroom or addition will not satisfy your upcoming needs and desire, move.  In the end, your goal should be to achieve balance in your life, that usually starts with your home.

If moving is in your cards, be sure to check out our article: 6 IMPORTANT THINGS TO HELP SELL YOUR HOUSE


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