Buy & remodel a fixer-upper house, or build a custom home?

Question

In general, would it be more advantageous to buy a cheap "fixer-upper" house and completely remodel it as a custom type house, or to buy land and start your own custom home from scratch? Pros and cons of both options?

By the way, this would be for a house you'd probably spend most of your life in.

Answer 1

The house-flipping answer is intriguing and might be a way to leverage the cost of building a dream home from the ground up.

Regardless, though, I'd start my own from scratch and here's why
1) With a fixer-upper, you are almost always going to find something (many things, even) that you didn't anticipate being wrong with the place.
2) Building codes have generally become more rigid and specific. If you live in a jurisdiction that requires even remodels to be built to code, you might have a lot of added expense.

When you build new, you can fit rather than retrofit. BIG difference. You have the option of building in new technology that can save you money - especially if you want to live in this house forever. Architectural design that takes advantage of orientation to the sun, active and passive solar energy installations, minimal use of wood, insulation, earth-friendly materials, energy-wise appliances and water-miserly plumbing fixtures can all make the net cost of your new house a better deal that trying to retrofit.

Answer 2

I would do a combination of the two. Buy the fixer-upper and put enough into to get it up to decent level. Then I would"flip out" of it in five years or so and use the profits to move up to a better or newer home. (Get a 2 unit so you can get some rental income from it that first five years.)

Do the same thing again after another 5 years or so and you can be in the new home of your dreams for the initial cost of the fixer-upper. After 2 or 3 "flips" your dream home will be yours without a mortgage.

As for building from the ground up. Here again I would get the starter home first and use the equity in it in 5 years (by loan) to get the land and build the dream home that way. By the time the new house is ready to move into, the fixer upper should have even more value in it when you sell out of it. Doing it this way you will still have a mortgage, but not as large as building right now.

Answer 3

My husband and I did both of these...

Fixer Upper:
Pros: You can get started earlier, and if you are handy and smart, there is money to be made. You can take your time with improvements.
Cons: It's hard work. There are always unexpected repairs. It's hard to know when to stop fixing up. You have to live there while you remodel.

New House:
Pros: It's new! It's custom! It's just what you've always wanted!
Cons: It's harder work. You can't live there until it's finished. It can feel overwhelming. 99% of people who build run over budget. You have to make many decisions quickly--you can't "wait and see." You have to pay to live somewhere else while you pay to build. There is a timeline--building loans have a time limit.

In the end, if you are talented, you will probably end up both ways with a beautiful home and some equity. Your choice should depend upon how much know-how you really have, how much experience you have, how well you budget, the real-estate market in your area, how well you set and reach goals, and how much time you have.

Best of luck!

Answer 4

Info on buiding a new home: Depending on the area you live in and the building codes, you can be your own sub contractor. Find a plan you like, take the plan to a local big box do it yourself store and tell them you need a building package price list. This will give you somewhere to start.In 2001 I built a 3 bedroom 2 bath 1401 sq ft home for $40,000 the same house that a contractor built was going for 130,000.

Answer 5

UMMMMM DO YOU NOT KNOW THAT REAL ESTATE IS NOT GOING WELL? Maybe you need to buy a house because you live under a rock