Real Estate Investor · Manassas, VA · Member since 2009 · 17 posts · 0 votes
I keep reading that this is the case (that buying is less expensive than building in the current market), but real estate in my area is expensive. I live just outside D.C., and homes in the suburbs of Northern Virginia are quite pricey. Looking at properties currently on the market in my town (Manassas) shows the average cost/sq ft to be just above $150. There's an undeveloped plot for sale for $69k right in town that has been sitting for a long time and I was considering putting in a low offer or asking for seller financing. It's already got access to city water and sewer. I hear people talking about new home development costing somewhere between $80-125 sq/ft including dirt - then again, the dirt around here is pretty expensive as well. Any thoughts on whether that figure is feasible in this area?
I don't know NOVA specifically, but I grew up in that area, and I would *guess* that you're looking at $100-150 per square to build, NOT INCLUDING land costs.
The bigger question is what kind of experience and network do you have? Would you GC the project yourself? If not, add about 10% to the cost. Do you have trusted subs who can do the work for a good price? If not, expect to be paying on the higher end of that price range. Do you know how to source materials for a good price? If not, that will impact costs as well.
In other words, you may find that you can build cheaper than you can buy, but you may find otherwise, depending on your experience and your network.
As for the land cost, if you're building 1000 sf house, that $70K could be a significant percentage of the cost (it adds $70/sf) and it could be MUCH cheaper to buy; but if you're building a 5000 sf house, that $70K could be relatively inconsequential in the total cost of the property (it would only add $14/sf to the cost).
I don't know NOVA specifically, but I grew up in that area, and I would *guess* that you're looking at $100-150 per square to build, NOT INCLUDING land costs.
The bigger question is what kind of experience and network do you have? Would you GC the project yourself? If not, add about 10% to the cost. Do you have trusted subs who can do the work for a good price? If not, expect to be paying on the higher end of that price range. Do you know how to source materials for a good price? If not, that will impact costs as well.
In other words, you may find that you can build cheaper than you can buy, but you may find otherwise, depending on your experience and your network.
As for the land cost, if you're building 1000 sf house, that $70K could be a significant percentage of the cost (it adds $70/sf) and it could be MUCH cheaper to buy; but if you're building a 5000 sf house, that $70K could be relatively inconsequential in the total cost of the property (it would only add $14/sf to the cost).
Jay Staudt Welcome to BP. It's all relative to your market and the neighborhood as to whether or not the $69,000 for a lot is a good deal or not. Regarding your question, first off, what properties are 'on the market' for is irrelevant. What you need to find out is what homes are "selling" for.
What is the neighborhood like? What are the ages and size of homes in the area? Is there anything that would affect the value of the lot (power lines, environmental issues, drainage, etc.?) Are there any CC&R's on the lot that set size of home, style, etc.? What is the zoning? Also, has there ever been a home on the property? (if so, you might be able to get credit for the permits that were paid)
Once you can answer those questions, you'll be in a better position to decide on whether or not it's a good deal. We just built a spec house on a lot that we bought for $175k (which included permits, utilities were at the property as there had been a home there that had burned down) We built a 2350 sq. ft. house and sold if for $675,000.
That's a good point - I would probably build on the smaller side, square footage-wise, which would make the dirt costs far higher as a percentage of the overall project. And I know relatively little about the construction process (which is in and of itself a reason not to get involved with building), so I'd have to hire an outside GC or custom builder to do the job. What part of NoVA are you from?
It's a little bit frustrating that the prices people in other parts of the country are paying for SFR's will barely get you a 1-bedroom condo around here, but I guess that comes with the territory - living in an area with a very stable job market and per capita income on the higher side does have its benefits. Having the city so close by has made it very easy to rent - I've never had more than a month-long vacancy in five years of being a landlord, and that's if I spend the majority of that time getting the place ready for new tenants.
Karen M. thanks for the reply. The lot is in a residential subdivision, no HOA, currently wooded and has never had a home on it before. The range of ages of homes in the neighborhood varies widely, with the earliest I've seen being early-mid 1950's all the way up through the 80's, 90's, and a few homes built within the last 10 years. It could probably be considered one of the nicer areas in town. This lot was just never developed for some reason. I went over and took a look at it last week and there is a stream that runs through the property, but it also runs through the adjacent lots, which are all built on. I'm a little wary that there might be some underlying reason why a home has never been built there, but looking at it myself I didn't see any glaring signs that that might be the case.
Jay Staudt Usually when there's one lot left in a development, there's a reason why it wasn't built on. However; not always. The 'stream' that runs through the property was just that, a stream, when the lots originally were created. Now, it could very well be an environmentally sensitive area, there may be fairy shrimp, etc. Until you delve into it more, you won't know. Plus.... answer all the questions I posed for you to establish actual value.
Jay Staudt Have you met with any home builders in your area? You can find out pretty quickly how much it would cost to build a new home by having a local builder give you a bid for one of his spec houses on that lot.
Actually, not NOVA, but the metro area in general. Grew up in Baltimore, went to school at College Park, lived in Silver Spring/Rockville/Gaithersburg for several years after school.
And may be moving back to the area in the next couple years... :)
Another indicator would be the cost of equivelant brand new homes compared to existing homes.In my area, it is still easily cheaper to buy than build. My insurance coverages tend to be around 30 percent higher in the estimate for replacement cost than what I paid. Granted, that accounts for demo of the existing structure, but it does not account for the cost of the land which is typically a little more than demo costs.
Thanks Karen M. and Ryan Richard, more research is clearly needed. There are a few custom builders I know of in the area who I can talk to about it.
J Scott right on, congrats on your team winning the big game (if you haven't become a Falcons fan, that is)... moving back to invest, to retire, or for some other reason?
J Scott right on, congrats on your team winning the big game (if you haven't become a Falcons fan, that is)... moving back to invest, to retire, or for some other reason?
I moved from Maryland to San Francisco, so I was happy with either outcome of the game!
Likely moving back so my kids will have decent schools to attend, and get a little closer to family and friends. We're planning to stay in RE, but will probably focus a little more on development and larger-scale projects. Atlanta has a great single family market, but there bigger stuff isn't supported down here right now. Hopefully we'll have a chance to try some new stuff!
What part of NOVA are you in?
Have you considered looking more on the Maryland side? Montgomery County has some great areas that are more reasonably priced than NOVA...
Study your local real estate market well. Know what is the price going on building a house in your area. It's important to evaluate any existing home carefully in your neighborhood and to have thorough inspections completed before signing a contract.
Check out modular built homes. The last one I built was a 3300 sq foot center hall colonial with 9' first floor ceilings, a wood burning fireplace, 2x6 exterior wall construction & R-19 in the walls, all low-e glass...it cost me $106K delivered & set, on a new 31'x52' foundation that cost $25K. This one was done in 2009 and could've been sold for $425K, two years earlier about 600K. This same house would have cost $300k to have a builder like my self build, weather stick or modular. I think modular costs are around low $30's per sq foot over all. For a novice, gc'ing a modular that comes 85% done is alot easier to handle. I bought from Superior Builders / Muncy Homes in Muncy PA. For kicks and giggles call them for a price. They only sell factory direct to a licensed builder, but in NJ, for a $200 fee anyone with out a criminal record can get a new home builder license, no tests or anything like that. Maybe Virginia is an easy state to get a builder's license, too.