When it comes to real estate investing, your priorities can vary. But with real estate investments, money is usually at the top of everyone’s priority list. If the project isn’t financially viable, it’s not viable — simple as that. Looking to make a real estate investment in the near future? There are so many factors to consider. But here’s a question…Should you build a house to save money?
Let’s break down the financial pros and cons of building a property from scratch versus buying a turnkey home. It may appear obvious on the surface, but you may be surprised.
Is it a good idea to build a house right now?
According to HomeAdvisor the average cost to build a house in 2021 is $298,432. Going into 2022, we can assume that the rates are roughly the same.
With the average home size of 2,100 square feet, this means that the typical cost per square foot for a new home build is $140.
So, if you want a 2,500 square foot house, you can expect to build a new house for approximately $350,000.
What if you want a 4,000 square foot house? Then how much does it cost to build a new house in 2022? The price tag…$560,000.
(And FYI, before you get too excited at the thought of building a house, if you live in San Francisco or New York, expect to pay more….like double or triple.)
Is it cheaper to buy an existing house or build one?
At this point, it may be cheaper to build vs. buy depending on your location and what you can get for your money. Keep reading to see how it all breaks down.
The Pros of Buying a Pre-Built Home
Buying a pre-built property is one of the more popular real estate choice. But is it the most financially viable in 2022? Let’s take a look at the pros of buying a pre-built property rather than building on empty land.
There’s an old phrase you’ve probably already heard: “time is money”. The longer a sale takes, the more money you will need to dish out. If you buy a ready-to-move-in property for either commercial or domestic use, the process will be far quicker than if you build the place from scratch.
It’s Easier to Predict Overall Cost
Predictability and real estate don’t often go hand in hand. But you can more easily rely on the process of buying a property that is already built and ready to go.
No Planning Permission Required
Building a property requires jumping through what can seem like a million hoops before you are on your way. Planning permission and town planning aren’t required when you purchase a property that is already standing.
The Cons of Buying a Pre-Built Property
What about the cons of buying a pre-built property?
There Could Be Unexpected Repairs Needed
Properties that haven’t had issues for some years might be subject to damage sooner than you think. Even if your new property passes all its safety inspections, you could wind up making hefty repairs in the near future.
You Get Less Choice
Financially speaking, this isn’t always an issue. But if you plan to make big changes to an already-standing property, this will only add to the cost of your project. And, it might wind up being less financially viable than simply starting from scratch.
The Property May Have a Lower Resale Value
A custom-built home will always have a higher resale value than a home that has been standing for years. This depends, of course, on the quality of the pre-built home. Nevertheless, resale value is an important factor to consider.
Should You Build a House From Scratch? The Pros
Now, let’s consider the other side of things. What’s so great about building your own property from scratch? Should you build a house in 2022…?
Surely building is far more expensive than just buying a house, right??
You’re about to find out how building a property from scratch might actually be cheaper than buying an existing property.
Real Estate Is Becoming More Valuable
If you are looking to make a significant investment, building a property from scratch is sometimes more valuable than buying one. Making stylistic choices that are currently all the rage, for example, will appeal to a luxury real estate market that could benefit you hugely in the long run.
The environment is an impactful factor to consider when you are buying or building a home. Coastal properties, for example, are cause for concern — in twenty, fifty, or a hundred years, your beautiful coastal property could be underwater.
By opting to build a home, you can consult town planning experts to decide where is the best place to build a home for 2022 and beyond.
Resale Value May Remain High
They say you get back what you put in. When it comes to custom built properties, this is definitely true. If you invest in luxury fittings and consult a highly reputable architect, the resale value down the line will reflect that.
The Cons of Building a Property From Scratch
Financially speaking, building a property from scratch incurs a lot of risk. Here are some risks to consider.
There Are Hidden and Additional Costs
If you have ever been involved in a construction project, you know things rarely go as planned.
Weather, supply and demand, workforce issues, and other curveballs can mean your project incurs greater costs.
This means you will have to ensure you have a “buffer” for your building project.
Time Isn’t On Your Side
Particularly since the pandemic, construction projects are taking a long time to complete. You may experience delays in manufacturing equipment and materials, causing you to halt your project. All this costs you money and delays the move-in date even further.
You’ll Need the Right Land and Permits
Frustratingly, acquiring the land and planning permission to build your property in the first place can be the most financially strenuous part of the process. You could meet roadblocks that waste time and money, causing irritation all around.
Should You Build A House in 2022? Can It Actually Save You Money?
Which is more financially viable — building or buying? Should you build a house? Will it actually save you money?
Ultimately, the answer depends on your situation. If you are willing to invest significant amounts of time and money into a real estate project, building from scratch may reap more financial rewards. The resale value of a custom-built property could be higher, and you can avoid costly repairs.
However, if your needs are short-term, and you are willing to invest in repairs on an old building, buying a place may suit your needs. You don’t want to begin a building project only to discover that the extra costs involved put you out of your depth.
If you require more information about real estate investments this year, make sure you consult a real estate expert for further advice!
Are you looking to build a house? Do you think it will save you money? Be sure to leave comments below!
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.