Is it better to build a new home or buy and renovate an existing home? This is a question that home buyers and real estate investors are asking with greater frequency. It seems that from a dollars and cents perspective it’s wiser to build something new as opposed to purchasing something that is already there.
Counting the Cost of Building Versus Remodeling
In many parts of U.S. and Canada, you can construct a new home for less than what it costs to purchase a home that’s 10 or 20 years old. If you are looking at the home as an investment opportunity, building from the ground up does seem to have better cash flow options in the long run. However, there are short-term considerations that both investors and owners need to consider when determining whether to build new or to remodel.
Do You Have the Time to Wait?
When you purchase a home that’s already built, you can move in tomorrow. However, in many parts of the U.S. and Canada, it can take about a year to build a home. And that’s if everything, including the weather, goes according to plan.
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If you are a real estate investor looking to sell the property, you are going to need to wait at least a year before you see any cash flow. If you are a homeowner building a new residence, you are going to have a year with double expenses as you cover where you currently live and expenses for the new build.
Can You Take the Risk?
Building a house from scratch is strife with uncertainties. Conversely, when you renovate or add to an existing property, you are dealing with a known quantity. Investors run the risk of the market taking a drastic turn during the year or more it takes to build the house.
They could find that by the time the house is complete, it’s worth a fraction of the value of their investment. In the meantime, you have invested substantial amounts of cash for the land, building materials, labor, and holding costs. That same amount of capital could be spread over multiple existing properties that are quickly remodeled and are generating cash flow.
The Pros and Cons of Buying a New House
However, if you are going to walk away happy with what you buy, you need to be your own advocate and make sure that you are asking the right questions.
There’s no denying the desirability of moving into a place that no one has lived in before. Everything is clean, pristine, and brand-new. The surprises from a resell home are not there. However, not all builders are equal.
You have as good of a chance coming across an experienced developer with a good reputation as you do with one who has a less proven track record. Look beyond the pictures on their website and advocate for yourself by getting more information to make sure that you are making the right choice.
This may require a little footwork, checking out the homes they have completed and talking to home buyers who have worked with the builder. Doing your due diligence means making sure that they do not have any major complaints filed against them.
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For example, whether you’re online for Edmonton homes for sale or homes in California, the internet should have some information and reviews on the finished product.
On the positive side, when you buy new construction, it means that you have some control over things like the color of the siding and trim. However, you will not have the same wiggle room for negotiation as you do when purchasing a preowned home. When you buy new construction, the price you see is typically the price you are going to pay.
Buying a new home means fewer maintenance costs for the first few years. It doesn’t mean that you re not going to have repairs. However, many of the systems that might break down are covered by warranty.
Buying New, Buying Used, or Remodeling. Which One Is Better?
At the end of the day, it’s going to be up to your preferences. As an investor, are you looking for a quick return on your money? As a homeowner, do you want to be able to customize everything? Regardless of the choice you make, the more research you do, the happier you will be with your decision.
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