5 Key Factors to Consider Before Deciding Whether to Remodel or Build New

            There are many important factors to consider when making the decision to build a new building or remodel an existing structure. Some of the factors to consider include: financing, use of the property, competitive bidding for construction costs, the pros and cons of new construction versus remodeling, and cost effectiveness. The analysis to remodel or build new will be in a business context wherein a building is used to generate income, whether for the use of the owner or to be leased to another party. Many people think that newer is always better, and ultimately they rush into building new when they haven’t examined the costs and other factors. There are many different aspects that should be examined before a decision is made to remodel or start from scratch.

            The first factor that ultimately may decide which option is chosen is the amount of financing available. Interest rates and a business plan will have a lot to do with the amount of money that can be borrowed. At a time when interest rates are low, the borrower would obviously be able to afford a greater loan amount to finance the project versus a period of high interest rates. Also, some banks may have a preference when it comes to financing a remodel of an existing building versus building a new one.

            The second factor to determine which type of construction is most wise would be to consider the use of the property. Depending on the type of business that the person is in, a new building might be more desirable than an old one that needs remodeling.  Some older buildings are less adaptable to modern uses than others. For example, a multi-story building does not match well with current manufacturing and warehouse operations. Also the need for environmental clean-up or to upgrade the energy and electrical systems to meet modern needs is an important factor. Another aspect to reflect on is can the building be extended if required. Furthermore, whether you will be using the building for your own use or renting it out. Leasehold improvements to be made by the tenant may substantially reduce your investment and could be a major factor in your decision.

            The third factor consists of getting construction bids from multiple contractors.  Contacting a number of builders gives one the ability to review many bids from low to high and to possibly negotiate on prices depending on the current economic situation.  Also, try and get bids from contractors that specialize in remodeling of buildings as well as those who do new construction only. Choosing the low bidder is not always the way to go. Check a contractor’s prior customers to make sure that they were satisfied with the work and that any problems were fixed to their satisfaction. In the decision to remodel or build new, you should take into consideration that in remodeling there will probably be the need for changes from the original plans due to some unexpected work that will need to be done. This work will require additional money. Therefore, you will want to weigh all possible scenarios before you can be assured that your final decision was the right one.

            The fourth factor is one that looks at the entire picture which is the pros and cons of remodeling an existing building versus building new.  Before a final decision, it makes good business sense to consider the cost difference between each cost option and to consider other financial and non-financial factors as well.  Each factor should be given a weight based upon the priorities of the person making the final decision. Therefore, if the cost estimates for remodeling versus new are close enough that cost difference is no longer a consideration then the other factors will be key in the final decision.  

            The fifth major factor to consider is cost effectiveness or the most bang for the buck. This issue is crucial to properly evaluate which option will maximize profits. Typically, an older building will have features that will have to be modernized to bring the building up to current codes or may even have environmental problems such as lead or asbestos that will need to be removed. Also, the heating and cooling units are less efficient and the electrical systems may need upgrading to handle modern demands. In most cases older structures will probably require more maintenance because building materials may not be as durable as modern materials.  In these rapidly changing times it seems that a new modern building will have a longer useful life and result in a more efficient and profitable operation.

            There are many key factors to take into consideration before making that difficult decision on whether to remodel or build new; however, only the top five factors that seemed most pertinent are mentioned above. Overall, these five key factors can assist one in making a valid choice which could ultimately lead the business owner on their way to a successful operation.