Build your house, buy an existing home or rent?

The dilemma. Should you build your house, buy existing, buy new, or rent.

This site is about building your house but I think it is time to to discuss the options.  I have already discussed other ways to acquire a home in a different vein in another article. Is building a home is the best way for you to go right now.

Renting may not be appealing to a lot of people but there can be compelling reasons to resort to just that.

build your house or rent
MarcelGermain / Travel Photos / CC BY-NC-ND

Building your own house can be much less expensive but  there is not a great deal of difference between the cost of renting and purchasing ready built. When you add in mortgage interest, taxes, insurance and maintenance then renting becomes a little more palatable. For most people owning a house is sort of an enforced savings plan. By making payments they slowly build an equity in their home.

Well maybe. The recent financial crisis in the U.S. reduced many peoples equity to nothing or worse. Many even had their credit ratings spoiled through foreclosure. It’s true that this only happened to people that had made recent purchases or had used the equity in their homes for other purposes. Still homeowners in many areas saw their large cushions in home equity reduced drastically. Certainly many other investments were no better but it serves to illustrate that home ownership is no guarantee of security.

Security or damage deposits for renting are usually much lower than the down payment required to buy a house.

Thirty days notice may be all that is required to move from a rental house. (If you didn’t sign a lease.) To sell a house may take several months and in some markets much longer.

There are inducements to renting. In Edmonton today there is practically a zero vacancy rate but I remember the time landlords were offering a trip to Hawaii if you signed a lease. Perhaps you would prefer to live close to downtown or work in an area where real estate is very expensive. If you don’t drive it might be necessary to have easy access to public transportation and single family accommodation is scarce. If your job requires that you move often, home ownership might be more hassle than it is worth. Clearly renting makes sense if you are not too certain what tomorrow may bring.

build your house or rentThere are downsides to renting. Well maintained and attractive single family homes are often very hard to find in the rental market. Apartments are often cramped and lack adequate parking. There are beautiful apartments available but they are often expensive. There is always the risk of rent increases or abusive landlords. You may not have the same sense of community that you can gain through home ownership.

If you feel like no one knows you are alive, just skip your rent payments for a couple months.

There is a certain pride to ownership and this alone can be a powerful inducement to owning your own home. This is is even more true if you build your house.

You will feel just a little better when you can check that homeowner box on a credit card application. I know I feel really good when somebody comments on how well maintained my home is or on how beautiful the yard and garden is. It is much better than a compliment on my new car. I have more of myself in my home. Owning your own home means you have the freedom to make changes and to personalize your home. Within limits of course.

Purchasing a previously owned home can give you more choice of location. There will be a wider price range which can make it easier to fit you budget. There may be more sizes and styles available than you will find in new homes choices.

You will be able to move in much earlier than you can if you  build your house. Financing will be easier for an existing home.

I went through debt consolidation–now I have just one bill I can’t pay.

Maintaining, renovating or adding to an existing home will give you valuable experience towards building your house in the future

Buying a ready built new home is similar except for the following. It will likely be lacking in anything more than rudimentary landscaping. You will have to supply your own sheds, window coverings, fencing, etc, after purchase. The area may still be under development with resulting dust and noise. Parks and playgrounds might have immature landscaping and be less pleasant to use.

The demographics of the area will not be established. You will have to live with whatever develops.

To build your house has many rewards but requires commitment, knowledge, organization and a lot of your time.

Build your house as you like it
Luxury suite|| UggBoy♥UggGirl || PHOTO || WORLD || TRAVEL || / People Photos / CC BY

There is a long time span from start to move in. Final costs are uncertain. Many skills are required and you may not be able to hire all you need. Planning and study are are essential and can be very time consuming. If you do not have some related experience you should not attempt a project of this magnitude. A good idea is to start with simpler projects such as an addition, a shed, a garage or a cabin to gain experience and some insight.

Or alternately you can just pick a plan that you like, choose the location and hire a general contractor to do all the rest. The advantage is getting what you want in an area of your choosing. Saves a lot of headache but is just as costly as buying ready built.

This blog is about building your own but I am not suggesting that you pound every nail, saw every board yourself. Pick and choose what you feel you can do competently. The more you can do yourself the less the project should cost but don’t overreach yourself. It could cost more in the end.

To find the time to do a large part of the construction youself you should probably be able to take a sabbatical from work or be retired.

On my first build for myself I had planned to wait a couple more years for retirement when pensions would provide a steady income. I was working as a small independent contractor and had just completed a new home project when my sister approached me with an idea. She proposed that she would provide interest free interim financing if I wanted to build immediately and build one for her the next year. The market was good, I had enough equity in my existing house, and I had the skills to build. I couldn’t  turn it down.

I had another stroke of luck when puchasers appeared for my existing house who were willing to a wait 90 days for possession.

I was able to pay myself a modest salary while building and to hire two experienced laborers. I knew I would end up without a mortgage at the end. The situation couldn’t have been much better. We moved in 3 months later but it took me another couple of months to completely finish.

One final caution—to build your house can cause a lot of tension and marital strife. Be sure your relationship can withstand it. Divorce is not a cost you wish to add.

Is It Better to Buy or Rent?   New York Times – U.S.

Rent or buy? Our calculators help you decide  The Globe and mail –  Canada

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>