Why buy if I can build?

Question

I have enough funds to buy and build a home to sell or rent/refinance. Why should I not do this?

Corby Goade · Answer

With the cost of labor and materials right now, the chances that you could buy land and build for less than you could just pick up an existing home aren't great. Factor in holding costs, delays, permitting issues, etc and you are most likely not going to end up ahead.

If you have experience as a builder, that's a different story, but I wouldn't start with a new build.

If you have experience as a builder, that's a different story, but I wouldn't start with a new build.

Victor Yum · Answer

I am in DFW and have been looking for almost 2 years now to try to get one more rental.  The new build market is every bit as competitive as existing home, inventory of new build is pretty much non-existent.  With the rate been up, all the news are reporting there's a lot of cancellation on new build.  I will try to get out there these couple weeks to figure out if this is true or not.

Andrew Garcia · Answer

Hi @Britt Smith, as the others have said, there is a shortage of materials and labor. You would likely need to wait 12-18 months to actually get in the home.

If you have a great builder that is building a subdivision, they can generally get done within 3 months and they are much cheaper than spec homes.

Hope this helps! Let me know if I can be of any assistance.

Scott E. · Answer

There are some people out there still doing spec builds (I'm one of those people). But you need to be a very experienced developer to pull this off, and even then you will expose yourself to significant risk in this rising rate environment where labor and material prices are still sky high.

Start smaller.

Justin R. · Answer

Time and Risk.

Time = money lost while not collecting rent.

Risk = Uncovering the unknowns (Labor/material cost, permits, inspections, contractors)

Patrick Liska · Answer

If you can build a new house for less then you can purchase one, then there is nothing wrong with that. The positive of building the house is that everything will be new and you can figure you may have about 15 years before you would have to replace any appliances and depending on the roof used about 30 years. The positive for purchasing a house is that you do not have to wait for the house to be built, and start collecting rent right away. so a new house you will be spending money while the house is getting built ( construction loan, taxes, insurance,utilities) until you can rent it. Purchased property you will start collecting rent which will cover your mortgage, taxes and insurance ( utilities if you pay, no utilities if tenant pays) but you may have maintenance issues that may have to be payed along the way.

Britt Smith · Answer

Thanks! You guys are awesome!

Why buy if I can build?

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