Saturday, February 6, 2016

Buying Land vs Buying a House: Pros and Cons

If you are looking to move anytime soon, it is important to know that your option are not limited to just purchasing an existing home. There are actually a few options you have. The first option was just mentioned, you can buy a house. Another option is to buy a lot in a development community where you get to pick your style, upgrades, etc. Additionally, there is the option to purchase land and build your house from scratch. It is actually more cost-effective than one might think.

With any purchase, buying a house or buying land comes with its share of pros and cons. To help you make the right decision, you’ll have to weigh these factors in terms of how important they are to you.

Buying a House

The first pro of buying an existing house, is that it already exists. For some people the idea of having to choose different styles, finishes, and upgrades is actually nerve racking. The home buying process can be stressful as it is, there is no need to pile on the amount of decisions that need to be made. When you purchase a home, the home is already there, and what you see is what you get.

Another benefit of buying a house is the limited wait you have until you can move in. Typically you are only waiting until the closing date. Once the closing is final, you get the keys and can move right in. If you purchase land, you can’t exactly “move in”. Sure you can camp on your land, but if you are intending to build a house, you have to wait for construction to finalize.

This next pro goes along with the first one and that is ease of purchase. When it comes to buying land, there are a lot of factors that can go into your home build. We’re not talking about what color siding to have on the house either. We’re talking about utility construction. Purchasing a home is much simpler in that you already have an established utility system in place.

The first con of purchasing a house should be of no surprise, and that is that the house can be full of surprises. Your home inspection should typically reveal a lot about the inner workings of the house, but it won’t necessarily cover everything. Even a month down the road you can expect surprises. Surprise! Your water heater broke. Surprise! Your A/C unit just failed. Surprise! Your property taxes were just raised. Surprise! You have a family of skunks living under your deck. If you buy a land and build a home, you probably won’t run into many of those issues right off the bat; except for maybe the skunks moving in.

A pro when buying a house is the value typically appreciates, so you can make money if you sell your house five years down the road. This becomes a con when you realize a new home will have a higher relative resale value, simply because it is newer.

Buying Land

One of the pros of buying land is that you can build your house from scratch. The home you build is entirely yours. It can be based off of a model home or it can be completely custom. You literally get to design your home exactly how you want it. This is a luxury that buying an existing home simply can’t match. Existing home homeowners can make all the renovations they want but they do have some constraints. Building a home from scratch only has one constraint, and that is the budget.

Another pro towards buying land is that it can be used for more than just your home. For example, many people who purchase large parcels of land start their own farm which can provide some extra income. Additionally you can create a wind farm to help create electricity. You can also use your land for hunting game such as deer or other wildlife. When you purchase an existing home, you are typically giving up those benefits, especially if it is part of an existing community.

Typically when buying land and build a home, there are no surprises which is another pro. Buying an existing home, as mentioned, can come with loads of surprises. Older homes might contain toxic asbestos. When you build your own home, you shouldn’t have any surprises, at least not in the short term. Any faulty pieces will most likely be covered under a manufacturer’s or home warranty.

One of the biggest cons of purchasing land and building a home, is that it is typically more expensive. You are in essence purchasing the land and then paying a construction team to construct your home. It is sort of like ordering a value meal at a fast food restaurant, but ordering each item in that meal as an individual piece. Purchasing an existing home is like buying the value meal.

Another major con of purchasing land is the complexity of the purchase. First you have to close on the land. Not a huge deal, but it is a process none-the-less. Then you have to work with builders to actually construct your home. You also have to work with local municipalities to ensure that you have working utilities such as water, gas, electricity, and anything else that your home needs. Zoning requirements will probably need to be obtained as well. In short, it can be a huge ordeal in the beginning, but could pay big dividends in the long run.