The Challenges to Upsizing in San Carlos.

There comes a time in many homeowners' lives when their dwelling is just not the right size for them anymore. It may have been adequate when they purchased it, but because of life-altering changes, they are suddenly facing the prospect of changing their living footprint.

There are different hurdles to overcome depending on whether one is moving to a larger home, versus if they are downsizing to a smaller one. In this post, I'll address the challenges of the first scenario (upsizing), and then I'll tackle the hurdles to downsizing in a different post. I hope you find this useful!

Need More Space? You've Got Two Choices.

From a personal perspective, I faced this exact dilemma. A few decades ago, I purchased my very first home in San Carlos. It was as cute-as-a-button 2BR/2BA rancher on a huge, flat lot in the Oak Park neighborhood. At the time, it was perfectly adequate for two people, especially with the huge backyard. But as the family started to grow, we totally outgrew the house, and I was faced with only two logical options to solve this problem:

• Stay put and add on to the existing house, or
• Move to a larger home.

Even though 25 years have passed since I was at this fork in the road, the same two options are virtually identical today, although the meteoric rise in home prices since then adds a bit of a twist to the analysis. Below, I will outline the pros and cons of both ways in which a family can upsize their San Carlos living experience.

#1. Staying Put.

If I asked 100 people who decided to stay put and remodel as opposed to moving out, the most common reason would probably be this: Familiarity. When you've lived in a home for any significant period of time before you decide to remodel, you've likely established roots — you know your street, you know your neighbors, you know the route to Town Restaurant with your eyes closed, etc..

Moving to a different house in a new neighborhood means developing those roots all over again. That's not to say that it's not a good option. I lived on a very busy street, and I would have loved nothing more than to be closer to downtown on a quieter street — but that meant leaving behind everything I knew and felt comfortable with, and that's even if I could find that next dream home somewhere else in San Carlos.

Here are the pros and cons of staying put and remodeling:

Pros:

• Familiarity: As I noted above, this option keeps you in your ‘hood, close to neighbors and friends that you cherish. (If you have lousy neighbors, then this doesn't apply!). But you know what you know, and that is important to a lot of people.
• Customization: Staying put and remodeling your home allows you to design the exact home that you want to live in, and not be saddled with the layout and flow of someone else's larger home.
• Property Taxes: If you take the route of a “remodel” — i.e., building around the existing house by expanding the existing footprint, and not just bulldozing the entire lot — your property taxes won't likely be as high as they would be if you just outright purchased a new home. Why? Because the County has an algorithm that roughly taxes just the improved portion at a higher rate, and preserves some of the original structure at the old rate.
• Finished Value Versus Cost: Depending on how much you purchased your home for originally, the market value of your new home may be MUCH higher than the cost of the remodel, even when you add in the original purchase price. If you read this blog with any regularity, you know that there is a huge demand for newer construction 4BR and 5BR homes in the flats of San Carlos, and consequently, the few that do hit the market are snapped up well north of $4,000,000.

Cons:

• Time: If you're considering a large-scale remodel of your existing home, you need to expect that the timeframe from when you first engage an architect to when you get the keys to your new home is about 2.5 years on average. That's a loooong time.
• Distraction: During that 2.5-year timeframe, you can expect to burn a LOT of time working with your architect, the various city commissions, and then your contractor. Dedicating that time can be difficult for people with very demanding jobs with inflexible hours.
• Moving Twice: Tearing down your existing home means you will likely need to live somewhere else while the construction is underway. It takes about a full year from the time your home demolition starts until you can move back into your new home, so finding alternate arrangements for that time can be tricky. IT also means moving ALL of your belongings twice in one year.
• Costs: When you combine the skyrocketing prices for building materials with the shortage of quality contractors, you may be stunned at how expensive just the construction portion of the project turns out to be. You're also paying double living expenses during this time — the current mortgage on your home plus the temporary rent during the construction, and if you've been paying attention to rental prices lately in San Carlos, that's not a pretty picture.

#2. Moving Up.

Sometimes it makes more sense just to uproot and move to a new location rather than staying put and remodeling. Perhaps the existing lot is too small to accommodate your dream home, or you are potentially overbuilding for the street that you're on, or you just want to be in a different neighborhood.

There are probably dozens of reasons why people choose to move out, but the biggest is probably this: Convenience. But as you'll see below, that convenience comes at a cost.

Here are the pros and cons of moving out:

Pros:

• Expediency. Moving from one house to another is obviously much quicker than the 2.5 years it takes to build a new home, and it's far less disruptive to your lifestyle.
• Less Stress: You get to skip all of the fun of arguing with the City and/or your contractor. If you ask anyone who has built their own home, those two things usually happen.
• More Land Options: No matter what you do to your home, you can't turn a 4,000 square foot lot into a 10,000 square foot lot (unless your last name is Zuckerberg). If having a larger lot is high on your priority list, then moving is usually your only option.

Cons:

• Cost. You're likely paying full market value for your move-up property. As we discussed above, sometimes the cost of staying put and remodeling is far less than the market value of the finished property.
• Property Taxes. Unless you qualify under Prop 19, your property taxes will be fully reassessed at the purchase price of your new home, and that can be a significant jump from your existing property.
• Less Design Flexibility: Unlike designing your home from the ground up, you're somewhat limited to the characteristics of the home you are purchasing — the bedroom count, the layout, orientation on the lot, etc.. However, it's not out of the realm of possibility that you can completely gut the new home and build your dream home — essentially getting you the best of both worlds. It's just money, after all.
• Not New: Unless the house you're purchasing is brand-new construction, you're getting a house that likely doesn't have all of the modern bells and whistles of a new home.
• Tight Inventory: The whole premise of moving up relies on your ability to actually find that larger home, and that's not a guarantee. I've documented in numerous analyses on the blog that the number of listings and sales in the City of Good Living is hovering at 30-year lows right now.

It's worth noting that a penalty you'll likely pay in either scenario — remodeling or moving — is that you'll lose that magical, COVID-era 3% mortgage that most people locked into…. unless you're fortunate enough to be paying cash.

What's the Best Option?

This is obviously a subjective question, since everyone's situation is going to be different. What did I end up doing 25 years ago? We stayed put and remodeled for many of the reasons I stated above — we had a huge flat lot, we liked our neighborhood, and we were able to design the house we wanted. But that was our specific situation, and it may not apply to you.

Was it easy? Absolutely not. I could write an entire book on the mistakes I made and the lessons that I learned during the remodel process, including how to pick the worst contractor in the world. But those were valuable lessons that I am able to share with my clients who are remodeling so that they don't make the same mistakes.

What are your thoughts? If you've upsized recently, I'd love to hear which path you chose and what your experience was. Tell your story in the comments below!