Should I Remodel or Rebuild My Home?

Unlike a kitchen or bathroom remodel, a gut renovation involves significant demolition as it takes the home completely down to its studs. In some situations, it takes more time and more money to gut and renovate a home than to rebuild it. The age and condition of the house, complexity of local building codes and availability of labor and materials can all impact the cost of a gut renovation. Because estimated budgets and timelines vary widely between projects, choosing whether to rebuild or renovate remains a highly personal decision. In his article “Should I Be Renovating My Home or Tearing it Down and Rebuilding?” for EcoHome, Mike Reynolds explains. He writes that “there is a dialogue that you need to have with yourself first, then with the appropriate professionals, to reach the right decision for you.” Among many other “emotional and logistic factors,” homeowners should consider if the layout of their home meets their present and future needs, if the home is well-positioned to take advantage of the build site and how well the home’s current design would perform at market if listed for sale. Homeowners should also consider how easily they can secure financing for their new build or gut reno project and for how long they can afford to live elsewhere. Below, we help homeowners answer whether they should remodel or rebuild their homes by answering myriad cost, efficiency and ROI questions.

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What to Consider When Deciding Whether to Renovate or Rebuild Your Home

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When trying to decide whether to renovate or rebuild one’s home, homeowners should think about how it suits their current needs. To this end, they should first consider if the size and layout of their home is appropriate for themselves and for their family. Is the 19th century closed floor plan of your historic home really appropriate for the many indoor-outdoor parties you host year-round? Is your two-story home accessible for the aging parents who currently live with you and your children? Quoting real estate curator John Brown, RAIC In her article “Deciding to Remodel or Rebuild Requires Knowing What Both the House and the Client Want” for Architect Magazine, Cheryl Weber writes “‘if the task is to make dessert, there’s no point in starting with meat and potatoes.’” In other words, it is probably not the best idea to renovate a home that neither suits your current lifestyle nor supports your future needs.

Next, homeowners should call on experts -- like a structural engineer and/or inspector -- to determine the safety and efficiency of their home as is. Was the home sited to take advantage of views, sunlight and natural ventilation? Is the foundation salvageable? Weber notes that to be worth saving, “the house must be “stoutly built, with good siting, massing proportion and detailing.” Lastly, homeowners should consider the costs -- both of the initial construction or renovation and of continued operation -- involved in either project. While renovating your home might cost less in the short-run, both resource efficiency and return on investment might be higher for a new build. Below, we outline the average costs of both gut remodeling and constructing a new custom home.

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Similarities Between Rebuilding and Gut Renovating a House

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Mike Reynolds explains “if you like the shape of the house and the supporting walls are in relatively good condition, [renovating] is a great option to choose.” Oftentimes, those who opt to renovate their house “will save demolition costs, and save the material and labour costs of framing a new structure.” However, gut renovations share many steps and expenses with building a new home from the ground up. For example, both gut renovations and new builds require the homeowner to consult with a design team and draft new plans before applying for the necessary permits. In both cases, this phase usually involves hiring a civil engineer, structural engineer and architect.

Because there are so many moving parts, homeowners might choose to hire a design-build team to cut down on cost, timeline and miscommunications. Before permits are approved, an inspector may arrive at the build site to survey the viability of each project. Once permits are approved, an inspector may reappear to monitor the project’s progress. After the renovations or rebuild are complete, final inspections will occur. As with new builds, gut renos often require some sort of demolition so this phase should be accounted for within the project budget. Both projects also share most material and labor costs and may qualify for similar financing and/or rebates.

Timeline for Rebuilding Vs. Fully Remodeling

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The timeline to rebuild or remodel is usually shorter than the timeline to build a new home on raw land. However, timelines can vary significantly depending on the difficulty of the build or renovation, the experience of the design and construction teams and the complexity of local building codes and permitting processes. homeowners should expect a gut renovation to take anywhere between seven and ten months for a smaller structure to between nine and fifteen months for a larger structure. In her article “How Long Does it Take to Build a House?” for Realtor.com, Margaret Heidenry writes that “a ballpark average time for building a new home is four months if you have the pedal to the metal.” Those who hire an “experienced new home builder will typically take less time to complete your new home.” However, experts often recommend that homeowners include off-site living expenses for around seven months in their budget, just in case the project hits a few speed bumps.

Cost to Rebuild Vs. Cost to Fully Remodel

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Overview

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In his article “Home Renovation Costs in 2021 + Estimation Template” for Rocket Mortgage, Dan Rafter writes that “depending on the square footage, the average cost to gut and remodel a house can be anywhere between $100,000 – $200,000.” The cost per square foot of a modest gut renovation ranges between $60 and $150 and includes “new plumbing, appliances, structural improvements, a new roof and an HVAC.” However, many gut renovations also include alterations to the layout and/or overall size of the home. Those who want to “structurally alter the home -- by adding a room or switching up the layout -- are looking at a much more expensive renovation.” The cost of adding a single room to an existing home “ranges between $135,000 to $282,000.” In her article “Pros & Cons: Renovating vs Buying a New Home” for Coldwell Banker, Andrea Davis writes “it costs less to renovate your home -- almost 50 percent less -- when you don’t change the structural elements.”

With this in mind, Allen and Abraham write that “the average cost to build a house is about $300,000, not including the cost of land,” with a cost per square foot between $100 and $500. While homeowners can generally disregard the excavation costs outlined in Allen and Abraham’s estimate, they must budget for demolition. Demolition usually ranges “from $6,000 to $20,000.” Below, we outline exactly how much each element of gut renovations and rebuilds costs.

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Gut Renovation

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Though the two terms are often confused, gut renovations and remodels are not the same.  In her article “How Much Does it Cost to Gut a House” for Million Acres, Tara Mastroeni explains that gutting a house actually refers to “bringing the entire interior down to the studs” while remodeling simply “means redoing certain aspects.” Mastroeni outlines the true cost of a gut renovation in this article. According to Mastroeni, installing new plumbing generally costs $14,745 or about “5% of new home construction costs overall.” Electrical adds another $13,798 on average -- not including the fixtures. Renovating a kitchen costs about $68,000 on average, but changing the location of the kitchen could tack on an extra $25,000. Updating a bathroom costs $35,000 while installing a new bathroom could cost as much as or more than $60,000. Adding a new master suite to your home “costs a total of $150,000 on average.” Constructing another type of addition to the home -- such as adding a sunroom or expanding the living room -- could cost anywhere between $20,000 and $70,000.

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Replacing the home’s roof usually tacks on an extra $10,000 or more. Lastly, converting the basement of your home “into a livable space” costs about $46,900. Homeowners should also budget for architect and structural engineer fees, permitting costs as well as variable costs of materials and labor -- all of which depend heavily on your area’s building codes and local availability. The age of your home could also impact the overall cost of a gut renovation, as your contractor might have to bring existing elements up to current building codes. In addition, homeowners conducting gut renovations must budget for off-site living costs, which average $1,700 in the US per person.

How Renovations Impact Property Taxes Owed

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Homeowners should also keep in mind that major changes to their existing home could increase their property tax burden. In their article “How Home Improvements Can Increase Your Property Taxes” for NerdWallet, Kate Wood and Marilyn Lewis note that “your tax bill will grow even if the tax rate stays the same” when the home’s assessed value increases. According to Wood and Lewis, “tax assessors monitor building and demolition permit applications to find changes affecting home values.” Even if the assessor does not make a note of your home’s recent improvements, the higher tax bill will eventually come due. Wood and Lewis write that “assessors track sale prices when homes change hands [and] use those sale prices in reassessing tax values.”

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When is a Gut Renovation the Right Decision?

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Andrea Davis writes that “some remodels and changes increase a home’s value while others are just money down the drain depending on your local market.” Though gut renovations can be the right choice for some homeowners, Davis notes that “if your home needs a complete do-over, then a remodel isn’t for you.” According to Davis, “it’s not worth the investment to spend thousands of dollars to change every single room in your home when you could build or buy a new house with all of the updates.” From a financial perspective, conducting a gut renovation can be burdensome or even impossible. Davis writes that “remodeling requires a homeowner loan, family loan, payments to contractor or vendor loans.” Because homeowners need enough equity in their homes to leverage for a loan, “if you haven’t lived in your home for a long time it could be hard to get approved.”

Rebecca Baldridge supports this in her article “Will Your Home Renovations Pay Off?” for Investopedia. Baldridge writes that “the return on investment of any given renovation project is a function of local market characteristics, the condition of the real estate market when the property is sold and the quality of work performed.” While some remodeling projects like adding a wooden deck, upgrading windows and updating the kitchen have high ROIs, others do not. According to Baldridge, renovations “generally must fix a design or structural flaw to earn back the cost of construction.” Furthermore, “bigger renovations are not always better” because “spending more does not always ensure greater value creation.” Regardless, return on investment is rarely 100%.

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New Build

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As with the cost of gut renovations, the cost of rebuilding projects varies significantly based on how easy it is to build in your area and how many permits are processed each year by the assessor’s office. The cost of a new build is also impacted by how high in demand services and materials are and how available these services and materials are. Allen and Abraham note that “labor and material costs make up the bulk of home building expenses, and these depend heavily on supply and demand in your area.” In this article, Abraham and Allen identify twenty-eight different costs and fees associated with new builds. Readers can disregard plot purchase price and may be able to disregard water and sewage inspection costs denoted in their list of fees.

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Cost Breakdown for a Demolition and Rebuild Project

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The cost to rebuild a house begins with demolition. According to the 2021 Cost Guide from Homelight, “the cost to demolish a house per square foot ranges anywhere from $2 to $17 per square foot, with an average between $4 and $15.” Homeowners can expect to pay between “$3,000 in a rural area to $18,000 in a densely-populated city” to demolish their existing structure. Following demolition, homeowners will pay for inspections and permitting applications. Together, these will cost around $7,500 -- though permitting costs vary based on the size of the structure and the regulations of each municipality. According to Samantha Allen and Rachel Abraham the foundation of your new home will cost around $9,000 while framing could cost as much as $30,000. Homeadvisor estimates a much lower framing cost of between $1,376 - $6,308 on average. Countertops, a new HVAC system, plumbing installation and electrical are the remaining high-ticket items -- each costing around $10k. Drywall could add an extra $15,000 depending on the cost of materials and labor in your area.

In her 2021 article “Here’s How Much Money You Need to Build Your Dream Home” for Homelight, Kaitlynn Copinger references a Construction Cost survey conducted by the National Association of Home Builders. In their assessment, the NAHB determined that the “average construction cost of a typical single-family home was $114 per square foot [making] the total average construction cost is $296,652.” Of course, this amount increases significantly when customizations are introduced. As of the second quarter of 2021, the average sale price of a home in the United States was far higher at $374,900.

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Final Thoughts on Gut Remodels Vs. Rebuilds

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Unfortunately, writes Emma Diehl in her article “Total Makeover: What’s the Cost of Gutting a Home and Remodeling?” for Homelight, “it’s not guaranteed that renovating an existing structure will cost any less...than building from scratch.” Custom features and “unexpected problems” like old repair work that was not done to code “can quickly push your budget into ‘new build’ territory.” In the end, those who choose to conduct a gut renovation on their current home are still faced with high costs and left with older elements in various stages of aging or disrepair.

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Rebuilding Your Home with Element

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Home to a multidisciplinary team of architects, engineers and designers, California’s premier custom home builder Element understands the unique challenges posed by building a home in California. Element has worked with all kinds of California homeowners -- from those who wish to upgrade their space to others who are rebuilding after wildfires. From deciphering complex local building codes to submitting all necessary permit applications, Element knows the ins and outs of our state’s custom home building process. Furthermore, the design-build team at Element can help homeowners upgrade their new homes by implementing passive and efficient features that protect the planet and their property. Schedule a consultation to learn more!

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