Whether you are considering relocating to the area, adding to your real estate portfolio, or becoming a first-time buyer of a piece of paradise on the Emerald Coast, there are four main factors for determining whether to build or to buy existing.
by Chris Burch
Location often dictates whether you can buy an existing property or build a new one, so knowing your priorities is essential. For example, important options to consider when moving to 30A include: size and density of surrounding lots and houses, Gulf front views, proximity to a heavy rental community, purchasing within a gated community, and finally, buying near 30A, US 98, or a beach access. Once you have your location criteria, the next question is, Should I to build on a vacant lot, buy a tear-down, renovate, or buy as-is with no planned improvements?
First is the lot/raw land price. Then, once you have evaluated the price of the vacant land (or tear down home), you must combine all estimated construction expenses including designing & building as well as furnishing costs, which gives you your grand total. Be sure to include items such as realtor commission, lender fees, interest carry cost (if applicable), architectural, engineering, interior design, water and sewer impact fees, builders risk insurance, etc., and finally, hard construction costs.
After calculating this total projected cost, you should run a sanity check to see how it measures up against comparable current market inventory. To do this, compare the current market price per square foot with your “all in” cost per square foot of doing a lot purchase and design build. Ideally, the goal is to have some instant equity when the home is completed. Your real estate agent, architect, or builder should be able to assist in this exercise to see how a new construction project should fare against other current existing properties on the market.
Lastly, do not forget the current construction cost. New construction can vary greatly per square foot, but is much more definable when dealing with a good set of construction documents and owner allowances. Therefore, you must keep in mind that the cost of doing a renovation of an existing home is much more difficult to predict and the cost per square foot is often considerably more expensive to build than it is in new construction. Why? Well, a new build is only built once. Meanwhile, a renovation must first be destroyed/demoed before it is built back. In addition, when taking on a major renovation all furnishings should be removed and stored offsite throughout the construction process. This cost should be factored in as it not only protects the furnishings from damage or loss, but will make it more efficient for your builder and save time.
CURRENT MARKET TRENDS to consider: New construction costs are currently more expensive now than in the last few years due mostly to the supply and demand curve. Labor shortages have contributed to the increase in subcontractor pricing. Material prices fluctuate, but many costs (including materials, permitting, drainage requirements, and other hard costs) have slowly been on the rise in the past few years. These cost increases ultimately get passed through to the end user.
You must also consider the desired quality of your home construction alongside your smart-home. Assuming you have a trusted builder using good materials, there are many quality benefits to building new. These center primarily around technological advancements, which in many cases can highly improve overall build quality. Among some of those advancements are: more efficient heating and cooling systems (HVAC), hot water heating options with tankless gas as the fuel source, more efficient windows and doors, better insulation (open or closed cell foam), improved water proofing techniques, more weather resistant materials that stand up better to UV damage as well as those designed & engineered to withstand 140 mph wind speeds or greater. Other add-on’s might include:
- smart-home technology such as a Nest thermostat to monitor and control your HVAC system
- leak detection systems which notify the home owner of any leaks and automatically shuts off water supply
- cameras which provide live video of your home from your smart phone
- programming your house so all the lights or shades respond with the push of a button
These are becoming more standard in newer construction and are more affordable as well.
If you do not build a custom home, the chance of finding a house to meet all of your needs will likely decrease. However, this does not mean that your ideal property does not exist, but it may not currently be listed on the market. While most properties can be renovated to accommodate your desires, it is simply a matter of additional cost spent after closing on the property. Keep in mind that just because a house is older does not mean that it is not a high-quality home or in need of expensive repair. In some cases, it may even be built better than a newer home.
Clearly, say purchasing an existing property that is move in ready is the fastest way to begin enjoyment or receiving rental income. A new build or renovation will obviously take longer. A light renovation may be a quick and relatively easy process after closing on the property, while a major renovation or home addition may take longer for your architect and engineer to determine the initial construction of the house and take the necessary measures to ensure the new addition(s) match the existing structure. This is sometimes more involved than starting from scratch. In dealing with Walton County Planning Department or with your Home Owners Association, it will generally be much faster to get a renovation project approved than a new build. This is because of any number of issues that currently are in play such as: parking requirements, new drainage requirements, changing flood zone maps, and coastal dune lake setbacks. In addition, approvals having to do with the Choctawhatchee beach mouse & sea turtles may add time to the pre-construction planning and approval time. This again can make some renovation projects a faster and easier route to navigate than new construction.
Also, when it comes to renovating, the home’s current condition matters. The “bones” or structure of a house or condo are much more important than it’s cosmetics. While it may look good & smell like fresh paint, there is still a potential of moisture, mold or wood rot behind the walls. The coastal salt air, intense summer heat, and moist weather is harsh on all structures. Some fare better than others based on the quality & type of exterior materials, workmanship, age of structure, and how well the property has been maintained.
Bottom line: Every house is as different as each individual buyer. Only you can determine those essential important factors (location, time, quality, & cost) that will drive your decision to buy an existing home/condo or design-build all new construction.