01 Jun The Great House Debate: Build or Buy?
Both options examined, taking all into account
You’ll get conflicting opinions as to just how good of an investment owning a home is. Obviously a strong economy is usually the first influencing factor to consider. But what if you are considering either building your home or buying an existing one? Does either option have a definite advantage over the other? Like the majority of the population, you’re probably of modest means. It’s important that you carefully weigh the pros and cons of buying a fixer upper. Your down payment is just the beginning of these considerations. Here is a breakdown of the comparisons detailed between an existing home and a new one…
Run The Numbers
Obviously your first consideration as stated is your upfront cost. Recent data indicates that the average price of an existing single family home is $223,000. However, if you reside in the Greater Los Angeles area, you could be looking at more than double that cost. If you were looking at a 1500 square foot house that’s over sixty years old, it would work out to be around $148 per square foot. Be aware that exact costs will vary depending on your location, but this should give you a ballpark figure on a home that is hardly new.
On the other hand, recent figures indicate that buying or building homes of new construction will commonly run around $289,415. So, we’re looking at a $66,415 difference, right? That may seem pretty steep, but you can do pretty well for that money. New homes, for the most part, have more room. Generally they are around 2467 square feet. Do the math – at $103 per square foot it’s actually cheaper than that of old homes. Plus, when building, you’re basically only paying for what you want exactly. You may not care for some of the more pricey features in an existing home but you’ll be paying their additional costs. You may even decide to do some home remodeling. If you are lucky enough to find a home that you find entirely perfect, that’s a blessing that should be accepted.
It’s More Than It Seems
Now it’s a given. When buying an older home you are also inheriting the wear and tear that comes with its age. It could have excellent interior design, but the kitchen cabinets might be too battered. On the other hand, its exterior design could be entirely dated and worn. Either way, pre-owned homes will most certainly need more attention. Some items may have even reached the end of the road for their usefulness. Such maintenance can be expensive. You’ll want to know how old everything is before buying. After all you don’t want to move in and discover the furnace needs replacing – that’s a $4000 expense! Or what if the roof has seen better days, that’s a potential cost of five grand! Do a complete inspection.
Meanwhile, new homes need considerably less work. Plus, everything including new appliances are under warranty. Often an entire new home could be guaranteed, protected up to a decade (assuming the builder offers a construction warranty).
Fixing it Up
Another factor to consider is the state of the landscaping. Many consider this area to often be of great advantage in terms of older homes. Large trees and aged plantings provide a sense of history and character. While it may be of little consequence to others, when taking into account that the US Forest Service says that a well-placed mature tree can add tens of thousands of dollars to a property’s value, it’s a pretty good deal. The trees may even provide enough shade to cut air conditioning bills by as much as half – factors all worth considering.
Plus, if you build a new home you might be looking at thousands of dollars and maybe even a few years to finally establish a yard that is to your liking. On average, the cost of a complete landscape overhaul could run towards four thousand dollars. Planting trees yourself (six to seven feet tall) could cost about $140 each. When doing anything, and yes we mean ANYTHING to modify your home, you have to make sure you’re in compliance with the city’s ordinances.
Take a look at three of our blog articles that go more in depth:
What of energy efficiency? According to the latest census the average age of homes is thirty seven years. You’ll find antiquated windows and appliances in older homes which could account for wasted energy that equates to spent money. Newer construction will always have the edge in this department. In fact, homes built post millennium use up to twenty-one percent less energy for heating than the homes that predate them. This is due to the developed technology of heating gear and building materials. Naturally, the people who own these newer homes almost certainly enjoy lower heating bills.
And, what of value appreciation – does one have an advantage over the other? With an older home there’s an established trend. Its past sale prices can be accessed as well as those of similarly identical homes in the area (aka “comps”). It’s easy to determine if costs are on the rise or falling in the area. If collectively, asking prices remain on the rise, that’s a good sign as it’s likely a trend to continue.
Meanwhile in successfully growing new neighborhoods, there’s a little more risk involved. There is no established record of sales to judge from. There’s no solid way to estimate what the future holds for a fledgling community. The jury may still be out even for some of the homes’ new amenities. It’s always best to avoid anything that is obviously of the flavor of the month variety. If you’re looking at a neighborhood of mostly empty houses, it might not be in your best interest to buy there.