You’ve heard the stories about people who’ve bucked the system when it comes to home buying, striking out and building their home themselves at huge savings. Considering the ever-rising costs of existing homes and lack of affordable housing in many areas, building new can seem very appealing. But you also have to wonder how sustainable the idea is. Is it possible to build a home inexpensively, and what is the cheapest way to build a home?
Shopping for your dream home can be exhausting. It isn’t easy to find a pre-existing home that meets all your needs while checking off every single item on your wish list. In the end, you’re likely going to have to give up some of your must-haves in order to get into a home that works for you.
That’s why some people prefer to take matters into their own hands. While building your own home means you have full control over every aspect that goes into it, that freedom isn’t free.
But with the average sales price of existing homes approaching the $300,000 mark, aspiring homeowners might be wondering if building their own home from scratch could save them a little cash while ensuring they get exactly what they want.
According to HomeAdvisor.com, an online marketplace that connects homeowners with home improvement professionals, the average cost to build a new house is a little over $290,000. But that cost can vary greatly. They go on to report that the average cost of building a house is around $147,000 to as much as $436,000.
And of course, some figures can go well beyond the stars and moon.
All these numbers will depend on a lot of different factors, such as location and the size of the home. However, when you decide to build it yourself, you have the advantage of making all the decisions and being able to look for cost-saving opportunities. Check out our range of Melbourne home builders for your dream house.
If you plan and stick to your budget, you could end up building the house of your dreams for less than what you’d find on the market.
Choose a Starting Point
The process of building your own home on your lot can begin in any one of four places:
With Land You Love
If you own land already or are inheriting some, you’re one step ahead of the dreaming stage if you haven’t found that perfect lot yet, you can work with a Realtor who specializes in land purchases or contact a builder who can help you locate the right spot for your home.
For instance, Paul Schumacher, founder and owner of Schumacher Homes, says two-thirds of their customers already own land or are in the process of acquiring land, plus they will provide Realtor recommendations to the other third.
With An Architect
Depending on your budget and the level of customization you’re looking for, you can hire an architect to transfer ideas from your wishlist to a blueprint. Rob Rutherford, the owner of Nelson Homes in Arrington, Va., says having floor plans drawn by an architect could cost $5,000 to $6,000, while Schumacher says architectural fees can go up to $35,000.
With A Floor Plan
An Internet search yields dozens of companies that sell floor plans that you can bring to a home builder for inspiration or customize for your land. Floor plans that can be used for review, but not for building, cost anywhere from $150 to $500, while complete sets that can be provided to a builder for construction cost from $1,000 to $2,500 or more.
With A Builder
Most home builders offer floor plans of their own that you can have built as designed. Depending on the builder, you can often customize the design to your specifications. Todd Bennett, a regional manager with Lockridge Homes in South Carolina and eastern Georgia, says his company has about 60-floor plans available with a variety of elevations. In contrast, Schumacher Homes and Nelson Homes have hundreds of floor plans.
Study Your Land
The next step in the process of building on your land is for you or your builder to work with a civil engineer to make sure you’re following the regulations for the jurisdiction where your land is located.
You need to know how you’re going to get power to your house, whether you need a well and how you’ll handle sewage.
We always look at the land with our clients to talk about how the house they want to build would fit on the property and how it would be positioned. We need to do that early in the process in case the plans need to be modified and to estimate costs.”
Customize Your Floor Plan
The next step is the fun part: customizing and designing the home to fit your lifestyle.
Schumacher says his company has portfolios of homes on their website that include characteristic architectural elements for specific locations. For example, in Louisiana, the home designs have a French country influence, while the homes in Wilmington, N.C., have a southern coastal style.
We have floor plans that range in size from 1,000 to 6,000 square feet that function as a starting point and then we can customize everything inside and out,” says Schumacher. “A lot of buyers come in with ideas from websites like Houzz and magazines, and we discuss everything they want to do with the home and give them a price quote.”
However, less than one-half per cent of people who build a new home hire an architect.
It’s much more common for people to choose one of our floor plans or to come in with a plan from a service. If they bring one to us, we’ll see if we have something similar that can be modified.
Discover How Long it Takes to Build on Your Lot
Building a new home takes four to six months if your home builder has already built your floor plan. Still, it can take significantly longer if you’re having a completely new design built or if you’re asking for extensive customization. So, if you have a specific time frame for moving, you’re likely to be better off with a semi-custom design rather than a completely custom-designed home.
“If you’re adding space to the house, we can usually turn that around quickly, but something more complicated could take a week or two to price out,” says Schumacher. “We average 122 days from putting in the foundation to finishing our houses, but bigger homes take a little longer.”
Nelson Homes builds modular homes, which can be faster to build, as well as less costly than other new homes. The parts are built off-site, while the foundation for the home is under construction. Once the parts are delivered, says Rutherford, construction takes 45 to 60 days.
Ask Yourself: How Much does it Cost to Build a House on My Land?
The cost of building on your lot depends largely on the home builder you choose, but the general rule is that the more you customize, the more your costs will go up.
Ninety-nine per cent of the time, we use our floor plans, which makes it less costly and easier for our customers. We can modify the plans anyway people want. Our prices average $55 to $75 per square foot.”
Modular home builder Nelson Homes builds from 1,500 to several thousand square feet and, depending on the size, can finish for $80 to $90 per square foot.
On the other hand, Rutherford says many clients bring their floor plans to Nelson Homes. If they can be converted so that the parts can be built in the factory, the clients can save $20,000 or more compared to having the home built entirely on-site. Planning for a new look for your house? Look no further! MJS Construction Group is here to help in your home builders.
The Advantages and Disadvantages of Building or Buying a Home
Buying your first home may seem like a daunting paperwork process, but if you have a competent attorney and a qualified real estate agent, then you should experience a clean deal. Most new homeowners visit their lender of choice for a pre-approved home loan, usually their bank, a few months before going house hunting.
This strategy allows you to calculate your budget for your new home, including the closing costs and other fees involved with buying the property. Once you settle on a house and make your offer, you could be taking residence in your new home as quickly as two months after signing the agreements.
This level of convenience makes buying a home the ideal choice for anyone that relocating to a new state or country and wants to move their family into a house fast.
The biggest drawback about buying a home is the fact that you can’t customize any of the rooms or fixtures – unless you want to spend thousands of dollars on a remodelling job.
Building your home is a far more exciting experience. You get to sit down with the architect and design the home of your dreams. However, this strategy takes a lot longer than buying existing construction, and you may encounter pitfalls with contractors and council members along the way.
Why Size Matters
According to research, building your home is almost 30-per cent cheaper per square foot, when we compare it to buying existing construction. Historical home price data shows that houses built in the 60s have an average floor size of 1,500 square feet, costing around $150 per square foot to purchase.
In contrast, building your home may cost only $100 per square foot, depending on which state and neighbourhood you intend to develop. While this may look like building your home is the far cheaper option in theory, in practice – this is not the case.
Most new homes average 2,500 square feet, meaning that they have lower building costs, but the price of the house will be higher than existing construction due to the increased floor space.
You may think that the additional floor space makes up for the increase in costs. There’s nothing wrong with adopting that strategy, as long as you can afford the house. However, if you are on a budget, you can use this knowledge to your advantage and get an architect to design you a small 1.500-square foot home for 30-per cent less than existing construction.
The Costs Associated with Building Your Home
Buying an existing home, and fixing it up to meet your needs is an excellent idea that many new homeowners choose to capitalize on when purchasing their first home. Fixing up a home adds to its value, leaving you with more equity in the asset.
You have the option to stay in residence or flip it for a profit. Many young couples fix and flip existing homes to make money, living in the house while they make the alterations. However, you’ll be pressed to find a home for under $150,000 that does not require some serious remodelling. If you are the type of person that has no interest in fixer-uppers, and you want to move into your perfect home, ready for use from day one, then a fixer-upper is not for you.
Building a home is a far more extensive preparation process. It’s not as simple as picking a location and pointing to a picture in a magazine. We decided to give you everything you need to know about building a home. Review the list and see if you have what it takes to develop your residence instead of buying existing construction.
Building your home requires you to buy some land. This situation presents a double-edged sword, depending on the circumstances. If you’re trying to develop in California, then you are going to have a hard time finding open lots in areas like San Francisco. Even if you do manage to find a large plot, you can bet your bottom dollar that it will cost a small fortune.
If you’re looking to build a home in these densely populated areas, then you may as well throw your dreams in the dustbin and start searching for existing construction to buy. However, moving to states like Maine make it affordable to purchase land and build your home. Some plots in Maine go for as little as $20,000 for a few acres.
Rural areas will always be cheaper than plots in the suburbs of busy towns – making the right purchase decision is all about filling your needs. Therefore, if you’re working in the tech sector in Silicon Valley, it’s probably a better idea to buy rather than build your home.
However, if you’re out in the country, or you live in a less densely populated part of the country, building your home could offer better value for your money.
If you’re planning on buying existing construction, then purchasing your house is as easy as applying for a pre-approved loan at the bank, and then going house-hunting for something in your price range. However, lenders do not issue mortgages on plots of open land.
As a result, you’ll need to apply for a building loan for a financial institution or lender. These facilities have more in common with a credit line than a mortgage. Banks issue you the loan, and you draw down on it based on your current building expenses, leaving the rest in the account.
You only pay interest on the money you use, and the duration of the loan determines how much time you have to complete your construction. Most building loans come with a 12-month facility for drawdowns before the lender shuts down the account and starts charging you for the money used in the loan period.
Some building loan companies offer moratoriums on their loans. Using this strategy allows you to benefit from no payments to the lender during the loan term. After the period ends, you pay off the loan like you would a mortgage – with monthly payments on the outstanding debt.
You can use the funds for any building-related costs, including pouring a foundation, constructing the frame, and laying the roof. Most lenders require you to submit an invoice from a supplier or contractor before they release the funds into your bank account for use in the construction of your home.
Building loans typically cover amounts used for building on land that already has utilities and sanitation installed. However, if you want to develop on land that has no existing services, then you may need to apply for a raw land loan.
Lenders consider these deals as risky, so prepare to pay up to 50-percent of the cost of the land for your down payment. However, raw land is far cheaper than developed property, and you can probably pick it up for a more affordable price than offsets the more substantial down payment.
If you buy an existing home
The nice thing about old homes is that there’s context to your purchase: You can research the home’s previous sale prices, as well as prices of similar homes in the area (known as comparables, or comps) to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, the odds are decent that the trend will continue, which bodes well for you if you decide to sell later on.
If you build a new home
New house construction, particularly in up-and-coming neighbourhoods, can be more of a gamble. Without a proven track record of lots of comps, there aren’t enough data points to know what could happen down the line. This is also true for all of the latest amenities you might ask the builder to install in your home (think self-cleaning toilets). MJS Construction Group has the best range of home builders Melbourne services to help you create your dream house.
Wrapping Up – The Verdict
We are still on the fence as to whether or not it’s cheaper to build or buy your home. It’s a complicated answer, and the results depend on your goals and ambitions when purchasing your home.
While there are plenty of factors that go into buying or building, studies show that buying is almost always cheaper than building. Research from 2017 shows that the median home price to buy your house was $223,000, while the median cost to build was $289,415.
This figure equates to an average difference of over $66,000 for building versus buying. However, it’s also important to note that building your home means that your floor space could be 30-per cent bigger for the same costs.
The choice of building or buying your home comes down to where you plan on living, and what your expectations are for your home. If you’re living in a crowded suburb, then it’s probably better to buy your house. However, if you’re planning on moving to the country, then a new build might be the best option for your new home.