Your Guide to Smart Investment: Should You Buy or Build a House?
Who doesn’t love a brand new home, especially if it’s customized just for you?
The problem is, it seems like everything personalized comes with a higher cost. Plus, you need to wait for several months before moving in, unlike when you buy an existing house, which is typically less expensive and takes less time waiting.
A house is a major financial decision you should make. Depending on your goal, you may go for buying or building. But investment-wise, which is better?
Buying Vs. Building a House: Advantages and Disadvantages
Advantages of Buying an Existing House
The National Association of Home Builders (NAHB) records suggest that buying an existing house is often cheaper. There is also an opportunity to negotiate when purchasing an existing property – an option that is rarely available in a build. Depending on your mortgage terms, you may gain significant savings from paying multiple payments at the same time while you move.
In other words, you don’t have to pay for your rent, utility bills, and construction expenses at once while waiting for your construction to be completed. Whereas when you buy a move-in ready house, that’s all you have to pay. You can delay unnecessary repairs or renovations until you get settled.
Buying an existing property may be necessary for people on a tight schedule. This includes those who are relocating for a new job or whose children are starting a new school.
3. Quicker Process
Though buying an established house involves numerous processes, such as viewing homes, financing, home inspections, making offers, and closing, you can move in right away once everything is complete.
4. It can come with extra amenities
An existing house may already have a garden or swimming pool, which you have to pay at a high cost in a new build.
Disadvantages of Buying an existing House
1. Repairs and renovations
You may need to perform repairs or renovations: electricity, mold remediation, etc. Depending on how extensive the renovations are, you may end up paying more like you built a new home. In general, repairs and renovations should be minimal when buying an existing home.
That is why most experts advise that you have the property inspected by professionals beforehand. They also agree that you should include the cost of future repairs and renovations when considering the total cost of the house.
2. More expensive insurance
Homeowners insurance on a newer property is typically less expensive than with older homes because it’s new and up to current standards. Depending on the location and condition of older houses, insurance may be more costly and difficult to secure.
3. Less energy-efficient
Older homes may be less energy-efficient than newer buildings, considering their older building materials, insulation, and other functionalities. This can lead to higher monthly bills. In addition, you never know when you will have to replace the water heater or if the pipes will clog in the following months. All of these require additional cost to the amount of the house you paid.
Advantages of Building a New Home
1. Lower maintenance
Since new homes meet current standards and have updated technology, you won’t have to worry about major repairs or heavy maintenance in the first few years. In short, no leaky roofs, clogged drains, or failing HVAC systems. Additionally, home builders offer a warranty if something goes out of order.
Constructing a house from the ground up lets you personalize it to suit your tastes and lifestyle. These could be the cabinets, flooring, lighting, sinks, layout, paint colors, etc.
3. Lower energy costs
New houses feature the latest energy-efficient systems and materials, resulting in lower monthly bills.
4. Starting fresh
You get to enjoy your new house and start fresh as first owners – with the new finishes, fixtures, and everything that comes with it.
Disadvantages of Building a House
1. Harder to negotiate a price
Many homeowners can buy an existing house lower than the original price. Unfortunately, it’s different when constructing a new home.
2. Longer timeframe
One of the biggest drawbacks of constructing a new house is the long wait time to be completed before moving in. According to the census, it takes an average of seven months to complete house construction, not counting the planning and approval processes. It means that you have to pay for the cost of rent until you can move to your newly-built home.
3. Unexpected expenses
On top of the building cost itself, there are hidden charges you will possibly incur during the construction. Some of these are land preparations (if you’re buying land), builder fees, moving costs, landscape, window coverings, etc.
Stress is part of building a house, along with the excitement of choosing your wall color, tiles, roof, etc. Also, there are times when owners are disappointed and frustrated with the outcome or the construction timeframe. That’s why homeowners are advised to maintain good communication with their builders.
The Bottom Line
Even if you plan to build or buy an existing home early on, you may end up doing otherwise. Both have benefits and drawbacks, so it comes down to your unique situation. Building a house may be the only way to achieve your dreams of customized features, but it comes with a higher cost, more energy and effort, and a high investment return.
Buying an existing house may be less expensive and come in handy, allowing you to move forward quickly. However, you may have to deal with its current situation, which you do not want.
The key is to stick to a plan that you can afford. Avoid getting a house with a monthly payment of over 25% of your take-home pay.
The best way to save money or cut additional expenses is to talk to qualified and experienced professionals, whether a general contractor or a real estate agent.