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Decision Engine

Should You Build New, Renovate, or Extend?

NAHB Cost of Constructing a Home Survey and Remodelers Cost vs Value Report research consistently show that when renovation cost exceeds 60-70% of new-build cost on the same lot, the rebuild path typically produces better long-term value. Weigh property condition, scope of needs, budget tier, timeline, lot feasibility, location attachment, and cost comparison to lean toward renovating, extending, or building new.

Last updated: May 2026

A build-new-renovate-or-extend decision weighs whether to renovate the existing structure, build an extension or addition, or tear down and build new. Best Path = (Property Condition) + (Scope of Needs) + (Budget) + (Timeline) + (Lot Feasibility) + (Location Attachment) + (Cost Ratio). Renovation cost as percent of new-build cost (decision threshold) typically target Under 50% favors renovation strongly.

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What is Build New, Renovate, or Extend Decision?

A build-new-renovate-or-extend decision weighs whether to renovate the existing structure, build an extension or addition, or tear down and build new. The framework considers existing property condition, scope of needs, project budget tier, timeline preference, lot and zoning feasibility for new build, attachment to the current location, and the cost ratio between renovation and new build. The decision is structural rather than cosmetic; small-renovation decisions belong in the home-services pillar.

The Formula

Best Path = (Property Condition) + (Scope of Needs) + (Budget) + (Timeline) + (Lot Feasibility) + (Location Attachment) + (Cost Ratio)

Worked Example

A homeowner has an aging 1960s home in poor structural condition, wants total reimagining with substantial footprint change, budget $600,000, can wait 18 months, lot is clearly feasible for new build with supportive lot value, strong attachment to location, renovation cost estimated to approach new-build cost.

Property Condition: poor (lean toward new build)
Scope of Needs: total reimagining (lean toward new build)
Budget: $600K (workable for new build)
Timeline: 18 months (accommodates new build)
Lot Feasibility: clearly feasible plus supportive lot value (lean toward new build)
Location Attachment: strong (lean toward staying which both paths support)
Cost Ratio: renovation approaches new build (lean toward new build)

📌 Strong signal toward tear down and build new. The combination of poor existing structure, total reimagining scope, and renovation cost approaching new-build cost points to the rebuild path producing better long-term value at this budget. Next step is engaging a custom-home builder or design-build firm for feasibility and budget calibration.

Why This Matters

The build-vs-renovate decision is the most consequential pre-build choice

NAHB and Remodelers Cost vs Value Report research consistently show that the structural choice between renovating, extending, and building new produces fundamentally different long-term outcomes that no design or contractor quality can compensate for. Getting the path right is more important than executing the wrong path well.

The cost ratio is the most underweighted variable

Many owners default to renovation because it feels like the smaller commitment, even when the cost approaches or exceeds new-build cost. Comparing renovation cost to new-build cost on the same lot is the single most clarifying analysis; when the ratio crosses 60-70%, the new-build commonly delivers better value.

Common Mistakes

❌ Defaulting to renovation without comparing to new-build cost

Renovation feels safer and smaller, but when the existing structure is fundamentally compromised the renovation cost commonly approaches or exceeds new-build cost without delivering equivalent long-term value. The cost comparison upfront is the most important analysis.

❌ Underestimating addition complexity and cost

Additions sound simpler than new builds but commonly require existing-structure modification (foundation tie-in, MEP reroute, structural reinforcement) that closes the cost gap versus new build. For meaningful additions, get specific estimates rather than assuming the addition is materially cheaper than equivalent new construction.

Industry Benchmarks

Category	Good	Average	Poor
Renovation cost as percent of new-build cost (decision threshold)	Under 50% favors renovation strongly	50-65% renovation often still favored	Over 65-70% commonly favors new build for long-term value
Typical timeline by path	Renovation 3-9 months, addition 6-12 months, new build 12-24 months	Standard timelines plus permitting and design ahead	Compressed timelines on any path compromise quality
Cost per square foot benchmarks (typical US)	New build $150-450, addition $200-500, major renovation $200-500 per square foot	Standard mid-tier project pricing	Under-budgeted or premium pricing without scope match

Source: NAHB Cost of Constructing a Home Survey, Remodelers Cost vs Value Report, and Custom Home Building Industry Reports

Benchmark data sourced from NAHB Cost of Constructing a Home Survey, Remodelers Cost vs Value Report, and Custom Home Building Industry Reports.

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One of the most common mistakes we see when working with clients: defaulting to renovation without comparing to new-build cost. Renovation feels safer and smaller, but when the existing structure is fundamentally compromised the renovation cost commonly approaches or exceeds new-build cost without delivering equivalent long-term value. The cost comparison upfront is the most important analysis.

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Frequently Asked Questions

When does it make more sense to tear down and build new versus renovate?

Industry guidance from NAHB and custom-home community resources consistently identifies a tipping point when renovation cost approaches 60-70% of new-build cost for the same square footage on the same lot. Above that ratio the new-build commonly delivers better long-term value, broader design flexibility, and modern systems efficiency. Lot value, zoning, and emotional attachment to the existing structure also factor.

Is an addition or extension always cheaper than building new?

Additions and extensions are typically cheaper than new builds for the same added square footage, but the gap narrows as the addition gets larger or requires substantial existing-structure modification (new foundation tie-in, MEP reroute, structural reinforcement). For meaningful additions (over 500 square feet or requiring structural changes), the cost difference versus new build often becomes smaller than expected.

How long does each path typically take?

Major renovations typically run 3-9 months, additions 6-12 months, and new custom builds 12-24 months from groundbreaking, with permitting and design adding months ahead in each case. Renovations and extensions can usually be completed faster than new builds because they preserve foundation, roofing, and exterior shell rather than rebuilding them.

Can I live in the home during a renovation?

For minor renovations, often yes with some inconvenience. For major renovations involving kitchen, bathroom, or whole-floor work, most contractors recommend moving out for safety, schedule efficiency, and stress reduction. Additions and new builds typically require alternative housing for the construction window. Plan the housing transition as part of the project budget.

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