Buying a Home or Building a Home? (VIDEO)
Buy or build a home?
I have numerous clients who have asked me if it’s cheaper to buy a home or build their own home, so I decided to make a video to answer some of their questions. I have a unique experience and perspective on both buying and building as both a realtor and a developer that most people don’t have.
Check out this video to find out which is better in your situation.
If you’re trying to buy a house at $700,000 and you thought you can build a house instead, the simple answer is NO. Typically on the market, flat land that you could build on without any difficulties (e.g. hillsides) is roughly $300 – $400,000.
Now let’s say your bid is $300/sqft. With a normal sized single family residence at 1,500 sqft – that means the contractor’s cost will be $450,000. And this does not even include the fees for the permits, architect, or engineers. This usually adds up to roughly 10% – 15% of your construction costs.
Now let’s add up all the costs for building a home. 350,000 + 450,000 + 13% of your construction costs for the permitting = $858,500. Consequently, you have spent about $160,000 more to just build a home – plus all the headaches of dealing the contractors, cities, and engineers. On top of that your resale value will be capped at $700-$800,000 if that’s what the neighborhood supports.
So what if I build a $1,000,000 house in the Hollywood Hills? Your land is now going to cost probably around $600,000. Then, to build the same 1,500 sqft home will cost you the same – $450,000. Adding the permitting fee of 13% of the construction costs, your total will be $1,100,800. In the end, the price per sqft for new construction in Hollywood Hills is $850-950/sqft. This makes your resale value $1,275,000 and much more worth it.