Is It Cheaper To Buy Land And Build A House Or Just Buy A House

Cheapest way to buy land and build a house.

When inventory levels are low with too few houses to choose from or in a hot sellers market with multiple buyers all competing for the same house, it is very common for home buyers to ask the question is it cheaper to build a house or buy a house. Whether to purchase an existing home or buy a piece of land and build a new house from the ground up is not a decision to be taken lightly. When you buy a home you are dealing with a known entity ( for the most part) but to build your own home from scratch comes with a special set of challenges the cost of building being just one. This decision is not only guided by personal preferences but also significantly influenced by the cost factors involved.

In this blog post, we will take a look at the pros and cons, see what building a house cost works out to include and whether it would be cheaper to build or buy an existing house. Whether it is indeed cheaper to buy land to build a house compared to purchasing an existing home. The average cost of a home build will depend on many factors, budget, location, the home builder, etc. These costs are also affected by supply and demand, weather, supply chain issues, but when you purchase a home that is already built these factors are the past, the cons of building a house is they are in the future or could be. There are pros and cons of buying a new home and pros and cons of building but whether you build or buy a house, new or newer home either way you're building a home! 

Land Cost When You Build Your Own House 

When considering building a house from the ground up, the first substantial expense you'll encounter is the cost of the land. The price of a parcel can vary immensely based on a range of factors, making it a critical aspect to study in detail. Here, we dissect the various components that influence land cost and why some land is more expensive (sometimes a lot more!) than others. People used to ask what is the cheapest way to buy land and build a house and for many places that is no longer a realistic expectation as land prices have skyrocketed.

Land for Sale sign in field

One way to possibly get cheap land is if there is family owned land where the family members agree that rather than buying a new home a portion of the property would be sold for a minimal amount or deeded over, thus dramatically reducing what building a house would cost. However all of the other restrictions and due diligence would still need to be researched to ensure that you can legally build your own house on the family land. This is likely when it would be cheaper to build a home vs buying... time to ask around the family!

1. Location

a. Proximity to Amenities:

  • Urban areas, with close proximity to amenities like schools, hospitals, and shopping centers, usually have higher land prices compared to rural areas.
  • Parcels near natural attractions like beaches, lakes, or mountains may also command premium prices.

b. Neighborhood Desirability:

  • The reputation and desirability of a neighborhood can significantly influence land prices.
  • Areas with low crime rates, good schools, and well-maintained surroundings usually have higher land values.

2. Size and Topography

a. Parcel Size:

  • Larger parcels of land naturally tend to cost more, but the price per square foot might decrease as the size increases.
  • Smaller plots in premium locations might command higher prices due to the demand and limited availability.

b. Land Topography:

  • The natural landscape of the land affects the cost; flat lands are generally easier to build on and might be priced higher compared to hilly or uneven terrain.
  • Lands with unique features such as waterfronts, may have a higher price tag due to their exclusivity and the views they offer.

3. Zoning Requirements

a. Residential Zoning:

Zoning & Planning

  • Ensure that the land is zoned for residential use; purchasing land zoned for other purposes like commercial or agricultural might involve legal hassles and additional costs for rezoning.

b. Building Restrictions:

  • Understanding the building restrictions in place can influence the cost, as stricter regulations might limit the type of house you can build, potentially affecting the land’s value.
  • Heritage overlays or environmental restrictions can sometimes add complexity and cost to the building process.

4. Utility and Infrastructure Access

a. Utility Connections:

  • Land that already has access to essential utilities like water, sewer, and electricity can be more expensive upfront but can save costs in the long run.

b. Road Access:

  • Ensuring proper road access is vital; lands with well-established road networks might be priced higher compared to those with limited or poor access.

5. Future Developments

a. Future Urban Plans:

  • Investigate the future development plans in the area, as proposed amenities like a new shopping center or highway can increase land values in the future.

b. Market Trends:

  • Keeping an eye on real estate market trends can also be beneficial. Sometimes, purchasing land in an up-and-coming area might be a good investment as it can appreciate in value over time.

Thorough research into the various factors influencing land cost is crucial when considering building a home. A clear understanding of aspects like location desirability, land size and topography, zoning requirements, and infrastructure access can guide you in making an informed decision that aligns with your budget and preferences. Remember, the land is the foundation of your new home, and choosing wisely can pave the way for a successful home-building venture.

Buying Land And Building A House Starts With Clearing & Excavation 

Once you have acquired a parcel of land, the next substantial step in building your home is site preparation. This phase entails making the land suitable to support your future home, and it often involves a series of complex processes that could potentially escalate your project's costs. Let's take a closer look at each of these aspects. We've all seen the massive earth movers with the wheels hanging over the side of the trailer on the highway as they get transported to where they're needed next. You don't have to buy one but chances are the builder will have to rent one once you find a lot to build on. 

Excavator clearing land

The cost of building a home is made up of many different expenses, most of them are not what you immediately think of when it comes to home construction.  When you build a house from scratch the home price has to factor in every cost to build that home and that includes whatever the home builder needs, from materials to permits to equipment rental which means it's not always cheaper than buying an existing home.  The cost of building a house versus buying can be hit with unexpected costs, the home you want to build is not something you'll want to cut corners on or make do with. When you buy the land for a new build be extremely careful and do your due diligence as the cost to build a house if there is an issue with the lot to build on can make it much cheaper to buy an existing one.  

1. Clearing and Excavation

a. Tree and Vegetation Removal

  • Removing trees, shrubs, and other vegetation to create a clean slate for construction. Depending on the density of the vegetation, this process can be labor-intensive and costly. Additionally, you might need permits to remove certain trees, adding to the cost and timeline. Before construction begins, soil testing is essential to understand the land's capacity to bear the structure's weight. Depending on the soil type, additional groundwork might be necessary to stabilize the land. All of this needs to be done to determine whether to build one on the lot you've chosen.

c. Land Grading

  • This process involves leveling the land to prevent water drainage issues. Grading ensures that the foundation is laid on a flat surface, preventing potential structural issues in the future.

d. Excavation

  • Excavation is the process of removing earth to make space for the home's foundation. Depending on the topography, this can be a significant part of the site preparation budget.

2. Utilities and Infrastructure

a. Water and Sewer Connections

  • Establishing water and sewer connections are crucial. In remote areas, setting up a septic system and a well might be necessary, which can be quite expensive. 

b. Electricity and Gas Connections

  • Ensuring your land has access to electricity and gas is another vital component. The cost for this can vary greatly depending on the proximity to existing utility lines. Whether you buy or build a house you are going to need infrastructure and utilities and the cost of building a new home means running power, or gas, water or sewer to one house rather than a whole subdivision which makes building versus buying in this case potentially more expensive.

Power lines

c. Internet and Cable Setup

  • In this digital age, setting up internet and cable connections is almost a necessity. This might involve additional costs, especially if the land is located in a remote area.

d. Road Access

  • Creating or improving road access to your property is another factor to consider. It could involve paving roads or setting up driveways, each adding to the site preparation cost.

3. Legal and Administrative Preparations

a. Permits and Approvals

  • Obtaining the necessary permits and approvals can be both time-consuming and costly. It’s vital to factor in these expenses in your budget.

b. Surveying

  • Hiring a land surveyor to mark the boundaries and analyze the land properly can also be a significant cost during the site preparation phase.

4. Environmental Considerations

a. Erosion Control

  • Implementing erosion control measures is often a prerequisite to prevent land degradation and to comply with local environmental regulations.

b. Wildlife and Habitat Preservation

  • Depending on the location, you might need to consider the impact of construction on local wildlife habitats and take necessary steps to mitigate adverse effects.

The site preparation phase is an intricate and critical step in building a new home, involving numerous processes that can influence the overall cost and timeline of the project. A meticulous approach to understanding and planning for site preparation can pave the way for a smoother and more successful home-building experience. As you venture into this phase, always factor in potential unforeseen challenges and costs to ensure a seamless transition to the actual construction of your dream home.

Should You Buy Land Before The Design and Planning Phase

The design and planning phase is perhaps one of the most exciting parts of building a home, where your dream begins to take a tangible shape. This phase also dictates the aesthetics, functionality, and overall budget of your project. Here, we dive into the various components that constitute the design and planning phase and how each can influence the overall cost and timeline of building your new home. Many home floor plans are available to purchase online but they are not cheap and can be quite expensive. If you buy plans just be aware that not every piece of land is suitable for every floor plan. 

1. Architectural Design

a. Customized Home Plans

  • Opting for a completely custom design allows you the freedom to tailor every aspect of your home according to your preferences and needs. However, it can be more expensive compared to pre-designed or modular home plans.

Contractor holding floor plans

b. Pre-Designed Plans

  • As a more budget-friendly alternative, you can choose from pre-designed home plans that offer a variety of styles and layouts, with limited customization options.

c. Software and Technology

  • Modern architectural software and technology, such as 3D modeling, can sometimes add to the costs but provide a more precise and visual planning process.

2. Interior Design

a. Layout and Space Planning

  • Consideration must be given to the layout and space planning, which encompasses the arrangement of rooms, flow, and functionality of the space.

b. Material and Finish Selection

  • Selection of interior materials and finishes not only affects the aesthetics but also greatly influences the budget. High-end materials and finishes will invariably increase costs.

c. Lighting and Aesthetics

  • Planning for the lighting layout and aesthetic details early on can help in achieving a cohesive look without spiraling costs later on.

3. Landscape Design

a. Garden and Outdoor Spaces

  • Designing outdoor spaces, gardens, and patios should also be considered during the planning phase. Depending on the complexity, it can add substantial costs to the project.

b. Hardscaping

  • Hardscaping, which includes driveways, walkways, and other hard surfaces, should be planned meticulously to complement the home and surroundings.

4. Permitting

a. Local Building Permits

  • Acquiring the necessary local building permits is a critical step. The costs for these permits can vary greatly depending upon the location and the specifics of your project.

b. Inspection Fees

  • Various inspection fees will be required at different stages of construction to ensure compliance with local building codes and regulations.

c. Zoning Regulations

  • Understanding and adhering to zoning regulations is vital. Non-compliance can result in fines and even necessitate alterations to the plans, escalating costs.

5. Project Management

a. Hiring a Contractor or Builder

  • Hiring a reputable contractor or builder is a critical decision. While experienced professionals might charge more, they can potentially save you money in the long run by avoiding costly mistakes and delays. It is imperative that whoever you hire is licensed, certified, bonded and comes with verifiable trusted past clients who you personally speak with and walk through a house they have built. 

b. Timeline and Schedule

  • Developing a realistic timeline and schedule is essential to keep the project on track and manage costs effectively. Delays can result in increased labor and material costs.

Moving day calender

The design and planning phase is a complex yet rewarding stage in the home-building process. This phase sets the tone for the entire project, influencing both the budget and the final outcome. Being well-informed and meticulous in planning can not only help you craft a home that mirrors your vision but also manage your budget more effectively, paving the way for a successful and fulfilling home-building journey. Remember, every detail counts, and careful planning at this stage can result in a smoother construction phase and a home that you cherish for years to come.

Cons Of Buying Land To Build A House Is The Cost Of Building Materials.

  • In the exciting journey of constructing a new home, one of the critical facets to consider is the selection of building materials. These materials not only form the physical foundation of your home but also substantially influence the budget, timeline, and even the environmental impact of your construction project.

    Modern construction offers a plethora of building materials, each with their unique set of properties, costs, and benefits. Traditional materials like concrete and bricks are known for their durability and strength, making them a popular choice for various construction projects. These materials are generally cost-effective and are readily available, making them a go-to choice for many homeowners.

    In recent years, the use of sustainable materials has been gaining traction, with materials such as bamboo, hempcrete, and recycled steel offering environmentally friendly alternatives without compromising on strength and durability. Incorporating such materials can not only reduce the carbon footprint of your home but can sometimes bring cost savings in the long run due to their energy-efficient properties.

    Simultaneously, the choice of materials can greatly affect the aesthetic appeal of your home. For instance, incorporating natural stone and wood can bring a touch of elegance and a timeless beauty to your living space. These materials, while on the pricier side, can add significant value to your home, making it a worthwhile investment for many.

    Moreover, the choice of building materials should be aligned with the local climate and geographical conditions. Materials that offer excellent insulation properties can be a boon in regions with extreme temperatures, potentially saving substantial amounts in energy costs over the years.

    Furthermore, it is essential to consider the availability of chosen materials locally. Transporting materials from far-off locations can add a significant burden on your budget due to high shipping costs. Thus, opting for locally available materials can be a smart strategy to manage costs effectively without compromising on quality.

    When it comes to the interior finishes, the choice of materials like flooring, cabinetry, and countertops again play a vital role in defining the look and the budget of your home. High-end materials like marble and hardwood can elevate the luxury quotient of your home but come with a higher price tag.

    In conclusion, the selection of building materials is a multi-faceted process that demands careful consideration and planning. It's a delicate balance between budget, aesthetics, functionality, and sustainability. Collaborating with experienced architects and builders can help navigate these choices more effectively, ensuring that your home is built with materials that align with your vision, budget, and the long-term durability of your home. As you embark on this phase, take time to research and consult with experts to make informed decisions that will shape your dream home into a reality.

5. Project Duration:

  • Weather Delays: Construction projects can sometimes face delays due to weather, which extends the project duration and potentially increases costs.
  • Unforeseen Complications: Unexpected complications during construction can result in additional expenses.

Comparative Analysis- What Does Building A House Cost?

To gauge if building a home is cheaper, it is essential to make a comparative analysis with the costs of buying a home. Existing homes come with their set of expenses including the following. 

  • Real Estate Costs: Including agent commissions, which typically range between 5-6% of the home's sale price.
  • Renovation and Repairs: Older homes may require significant renovations or repairs, adding to the overall cost.
  • Closing Costs: These include a range of fees such as inspection, appraisal, and loan origination fees.

Benefits of Building a House Versus When You Buy A House

Despite the involved costs, building a house offers several potential benefits including:

House Construction

  1. Customization: The ability to tailor the home according to personal preferences and needs.
  2. Energy Efficiency: New homes can incorporate modern, energy-efficient technologies that can save money in the long run.
  3. Maintenance: Newly constructed homes generally require less maintenance in the initial years compared to older homes.

Determining whether it is cheaper to buy land and build a house compared to purchasing an existing home is a complex equation, influenced by a multitude of variables. The answer often lies in a careful analysis of the specific circumstances, including the land costs, construction expenses, and the potential additional costs associated with buying an existing home.

Moreover, one cannot overlook the non-monetary benefits that come with building a home, such as the joy of having a home that mirrors your taste and the reduced maintenance hassles. In the end, the right choice would be a balanced decision considering both the financial implications and personal preferences. There are other very important factors to consider whether to build or buy and that is the commitment it takes to take on what could be a months long or year long project. How are you with making decisions and will you be able to compromise with your partner/ co-buyer when you disagree? There are literally hundreds of decisions to make when building versus buying a house and regardless of whether it is cheaper to buy or build, it is really important to understand the process of how to build a house yourself. 

We hope this comprehensive guide assists you in making an informed decision on your path to homeownership. Remember, whether building or buying, the journey to owning a home is a significant milestone, deserving careful consideration and celebration.

This post was written by David O'Doherty, a licensed real estate agent since 2007 helping buyers and sellers in Clayton, NC and the Greater Triangle Area of North Carolina. He is committed to providing his clients with exceptional service and personalized attention throughout every step of the real estate process. If you're looking to buy or sell a property in Clayton, NC, or the surrounding areas or have any questions about the local real estate market, don't hesitate to contact David O'Doherty today. Call or Text (919) 601-2268 or email [email protected]

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