Building Your Own Home: Is It Right for You?
Getting ready to retire? Take some time to think about it and make a decision on where you'd like to live. With a little financial planning, you and your partner can have the freedom to choose the location and property that best suits your desired lifestyle.
You might even consider building your own home to ensure that you get exactly what you want. Building can even be more cost-effective than buying in some cases, which can help you stretch your nest egg even further in retirement.
But building a home on your own isn't for everyone as it can come with its own set of challenges. Here are some things to take into consideration beforehand.
Why You'd Consider Building Over Buying
Building a house might sound like more work than buying, and it can be. But it can also pay off in several ways.
- Custom-built homes tend to be cheaper per square foot than existing homes.
- New homes can be more energy-efficient — lowering utility bills in the process.
- You may be able to do some work yourself, which could provide both satisfaction and cost savings.
You can also invest in the upgrades you want instead of inheriting what a past owner did. And when you build from scratch, you could get discounts from suppliers to increase your savings.
Eventually, your new home will need maintenance and repairs. But building from scratch means not worrying about a new roof or replacing the water heater for many years. That gives you time to set aside money and build a home repair fund to use when those expenses eventually come up. A retirement planner calculator could come in handy with your financial planning and help you to decide if building a new home is the right choice for you.
Watch Out for These Potential Pitfalls
Building your own home is an excellent way to create exactly what you want, but certain things take time to develop no matter what. Take, for example, landscaping — existing homes built decades ago may feature established, mature trees and plants on the property. If you build from scratch, you may need to help establish a landscape that could take years to grow in. However, keep in mind that landscaping may come at an additional cost.
Out-of-control costs present another problem. Any cost efficiencies you could theoretically take advantage of when building a home on your own can quickly evaporate if you run into unforeseen problems, such as an expense you didn't budget for or a contractor who charged more than expected. And you may pay more cash out-of-pocket upfront to get the house built. Because of this, there's a lot of value in setting aside some time to go over your budget and finding ways to stick to it. You may even decide to create a contingency budget or set aside money that is allocated specifically to unexpected costs.
There's no guarantee that you can recoup your costs if you decide to sell one day, either. Building an entirely new home means you're creating something unique, without a sales history to help justify a future list price. Just because you spent a certain amount, it doesn't mean the market will value your custom-built home the same way.
What It Takes to Build Instead of Buy
If you're set on building your own home, know that the process looks much different than simply buying an existing house. Here are some questions to answer before you start:
- Will you purchase in a development and have a semi-custom home, or do you want to buy a parcel of land and create an entirely custom-built home?
- Will you need any permits to build? Do you need a loan in addition to a mortgage?
- Can you get a warranty from your builder?
- What's the timeline for the construction process, and where will you live while building your own home?
- Do you plan to connect to city services or does it make more sense to dig a well and install a septic system on the property?
- How large should your new house be? Do you need several rooms for entertaining guests?
- What will the estimated taxes be on the property?
- Should this house have any specific features, such as a ramp instead of stairs by the front porch?
- Do you want to do something special with a particular room? Perhaps a larger kitchen or a home theater setup in your living room?
- Do you have a particular location in mind?
If you're unsure about building your home, reach out to a trusted financial advisor. The right experts can also help you evaluate whether building your own home ahead of an upcoming retirement is the right move to make.