Many people treat home ownership like it’s a quest they must undertake at any cost. Even if they don’t have directions or a map. It’s something know they must do, even though they don’t exactly know how to do it. Instead of focusing on buying the biggest home you can find, you might want to concentrate on how you’ll make it a happy place to live in. Especially before signing a mortgage.
However, many people underestimate the costs associated with buying a new home.
If you want a new home, the average price for one is at least $362,000. The closing costs for a new home can be at least 2% to 5% of the purchase price.
Accordingly, 5% of 362,000 is $18,100. Then comes the 15 to 30 years of mortgage payments, utility bills, homeowner insurance, property taxes, and so on. But that is some good information for another column.
The point that I am getting at is that, depending on where you plan to live, it might be comfortably affordable for you to buy a plot of land and build your own house.
If you’re thinking of New York City, San Francisco, or Miami, then such costs might be prohibitive.
However, there are many municipal and state programs that will offer you free or discounted land, with conditions, upon which you can build a home. Such opportunities may not be located in your dream city.
Still, its important to appreciate whenever you get what you need in life, as opposed to what you want.
How Much Does It Cost to Build Your Own House?
How much you’ll pay to build a home will depend on a number of factors like:
- Size of land
- Location
- Possible demolition of existing structure costs
- Land excavation fees
- Foundation construction fees
- Utility infrastructure availability
- Construction contractor fees
- Cost of construction supplies
- Architect fees
- Inspection and impact fees
The average cost of land for residential purposes is about $3,000 per acre. Remember that the average house sits on 0.2 acres of space.
The average cost to build a house from scratch is about $289,000. This is just an estimate that does not apply to every situation.
Costly? Perhaps. But the best advantage is that the plumbing, electrical systems, heating systems, and so on, will be brand new. That means you won’t be enacting repairs anytime soon.
This fact will also be attractive to potential buyers a few years down the line.
Still, some of these costs can be mitigated if you don’t have to worry about paying for land.
Marne, Iowa
Marne is located about an hour west of Des Moines. It is small city banking on big ideas to revitalize its image.
The local municipality is giving away 10,000-square-foot plots of land to those who will build a home and settle in the city.
All you have to do is apply and explain why you want to live in Marne.
Lincoln, Kansas
Lincoln is about a three-hour drive west of Kansas City. The city’s Free Home Site Program is offering plots of land ranging from 12,000 to 35,000-square-feet.
Play the Long Game
OK, Marne and Lincoln may not be on the top of your list of places to live. There are many other such programs you can consider.
The point is that you can build a starter home that could be valuable to a buyer in three to five years due to its newness.
One day in the future, I am going to treat myself to a house during the holiday season using such a method.
We don’t always get what we want in life. Not exactly when we want it anyway.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.