Worried About Building a New Home

[Swetch]

[SIZE=-1]My wife and I wanted to build a new home on some land we bought several years ago in PA.[/SIZE][SIZE=-1]
[/SIZE]
[SIZE=-1][SIZE=-1]Though we have floor plans and elevation drawings[/SIZE], we had trouble finding an honest/reliable builder and so we gave up on the idea of building. Now we have come to a cross road... either build on it or sell it (because it has $3k+ in property taxes annually). We estimate the cost of building the home at $1.3M. With the land included, it would be a total cost of $1.6M. The house would be just over 5k square foot with a "colonial" style front porch and a 3 car garage and screened rear porch.[/SIZE][SIZE=-1][SIZE=-1]

Since we are less than 5 years from retirement (then at age 58), we are unsure if it makes much sense to build a home that we may not live in for very long and we're worried about the potential loss if we sold it after 10 years. Having watched the housing market in our area for the last several years, I haven't seen any homes sold within 1 to 6 years after completion that have sold for anywhere near the original price. The examples of homes that fit this criteria were between $800k and $975k and these appear to have sold for roughly $150k to $175k less than the original price. So it seems to me that we could be setting ourselves up to lose over $300k (perhaps as much as $400k) on our potential $1.6M build if we chose to move to a more tax-friendly state in 2031.

[/SIZE][/SIZE][SIZE=-1][SIZE=-1] I guess new homes are like new cars... you lose big money driving it off the lot.[/SIZE][/SIZE]

[SIZE=-1][SIZE=-1]Do you think I'm right about the potential loss we could face? [/SIZE][/SIZE]

 

[REWahoo]

I'm still stuck on why you'd want to build a 5,000 sq ft retirement home. What are you going to do with all that room?

 

[ivinsfan]

I'm still stuck on why you'd want to build a 5,000 sq ft retirement home. What are you going to do with all that room?

I want to hear that story too, I could just say "Don't do it, heck no don't do it"

but I'm in the mood for a good story..

 

[H2ODude]

Good friend and former colleague had same issue. Bought land he divided into lots, saved largest and best for himself. He's sold most of the lots but cost to build what he wanted was way more than buying from the current market something that came close. Sold the lot. Moved closer to town (work) and loves the shorter commute and convenience.

 

[aja8888]

I'm still stuck on why you'd want to build a 5,000 sq ft retirement home. What are you going to do with all that room?

Between DW and I (and the small dog), we are wondering why we bought a 2,000 sq. ft. home. Now that we have thrown/given away most of the "stuff" we carried around for decades, 1,500 square feet seems more attractive to us.

BIL nearby has about 5K sq. feet and they haven't been in the upstairs rooms in years.

 

[pb4uski]

I wouldn't do it. Your needs change.

A dear friend demolished and rebuilt a beautiful year-round lakfront home just as he retired. They now split their time between that property and a very nice condo in Florida. He concedes that had he known that they would be snowbirding that he would have rebuilt something a lot more modest.

Similar here. We demolished and rebuilt a year before we retired but after a few winters in retirement we started snowbirding.... if I knew then what I know now I would have rebuilt, but more modestly. For example, I probably would have just used rockwool rather than spary-foam insulation, would probably not have bothered to have heat in the garage, etc.

 

[Ronstar]

I'm still stuck on why you'd want to build a 5,000 sq ft retirement home. What are you going to do with all that room?

It makes sense if 4000 sf of it is garage/workshop.

 

[DenverGuy42]

Upon the kids moving out of the house - my wife and I went from a 3,500 sq/ft three level house with 11 rooms in a HCOL area to a 905 sq/ft single level condo with 2 beds, 1 bath and a great room (kitchen+family room) in a MCOL area.

It was perfect. Got rid of a ton of stuff - gave away mostly to family friends - and downsized considerably.

A year later we bought a small (furnished) cabin in the mountains- 720 sq/ft. One bed, one bath, kitchen and big family room. Idea was to split time between the two.

Was able to pay cash for both.

We've been living 100% in the cabin since the first week of march due to covid - 720 sq/ft sounds small, but it works well.

If I personally were so close to retirement, the last thing I'd want to do is build a house (that's a nightmare in itself), and have the house be 5,000 sq/ft. I had one of those once - on a few acres. The time I spent cleaning, maintaining, taking care of the yard and so on was huge.

No grass to cut in the mountains, condo takes care of itself, cleaning is a snap, very little to maintain (and you can always find a handy man in the hills).

 

[pb4uski]

I personally wouldn't want to go that small, but IMO you have the right idea... less is more. We have about 2,400 sf at the lake and 1,450 sf in our Florida condo and those sizes are great for us. The 2,400 sounds big but 400 sf is a bonus room over the garage (the she-cave) and the main house is 1,000 sf for each floor and we spend the vast majority of our time on the main floor.

 

[davebarnes]

1. Sell the land.
2. Move to a neighborhood with:
a. high Walk Score (80+)
b. hospital nearby (within <15 miles)
3. Consider fewer sqft. Think 2000. Go ahead and build. You are only 53.
4. Get a yard with low maintenance.

P.S. PM me and I will show you how to spend $1M+ on a 2000 sqft house.

 

[RobbieB]

I wouldn't do it, not in these covid times. Sickness and lockdowns could make a storm more destructive because protective work was not done. Delays caused by the above would make the cost increase.

 

[socca]

[SIZE=-1][SIZE=-1]Do you think I'm right about the potential loss we could face? [/SIZE][/SIZE]

It's impossible for anyone to provide you with a useful answer, because RE is highly local and who knows what the future holds for your proposed house in the area in which you're planning to build?

For the kind of money you have available to spend, there are many already-built very nice homes to choose from. A huge advantage: the ability to perform comprehensive due-diligence on the house, neighborhood, city (if any), region, state, country, etc.

Good luck!

 

[Teacher Terry]

We also downsized in retirement to 1400 Sq ft.

 

[COcheesehead]

A new build will almost always cost more, but you also get what you want.
We just went through a similar exercise and we decided to build. The cost outlay didn’t change our retirement numbers much and our goal wasn’t to be the richest
person in the cemetery.
Now as we watch it being built we are glad we decided to move forward even with Covid.

 

[pjm-7]

My budget is considerably smaller than yours. My recent house purchase had a lot of what I wanted. It had a couple of pluses that were not in my original list (namely a new solar system). I also had some minuses that I can have corrected, primarily blah landscaping. That is currently being corrected this week with a local landscape contractor.

Buy something that hits most of the boxes and put the funds into making it what you want.

 

[SnowBound]

Question. Are you building it as:

1) You are acting as the General Contractor (saving 20% of the construction cost plus increasing the odds of a heart attack)?

2) You are hiring a General Contractor, so likely will be over budget (spending more than you will ever get back)?

 

[Arizona1]

With that high of taxes just on the land maybe it’s hard to sell large houses for what you put in them because of the tax bill.
Our retirement home ( motorhome) is 350 square feet.

 

[jollystomper]

I have no qualms about building something that size from a usage standpoint. If you want it and can afford it, go for it.

I am concerned about your planned time to live in it. If you want to live in it to enjoy it, sake, and not as an investment (where you worry whether or not you'll make money on it if you sell), then do it. But, in my view, I would not entertain buying or building a house with the expectation of having to move in your time frame and making a profit on it. I see a house as a place to live in and enjoy, and I may never leave or might have to sell not at an optimal time. So for building but intending to move in a few/several years, I would not do it.

 

[mountainsoft]

[SIZE=-1]Now we have come to a cross road... either build on it or sell it (because it has $3k+ in property taxes annually). We estimate the cost of building the home at $1.3M. With the land included, it would be a total cost of $1.6M. The house would be just over 5k square foot[/SIZE][SIZE=-1]

Taxes are $3K per year now. What are they going to be after you add a $1.3M home? It sounds like a real money pit.

Unless you have a house full of kids, or other live-in family members, I can't imagine why you need 5K square feet. We "upsized" to 1456 sq/ft and it's more room than my wife and I will ever need. To each their own, I guess.

If it's your dream property and you have the money to blow, I guess go for it. But you're already talking about selling it before you've even built it, which leads me to believe this isn't a lifelong dream.

Personally, I would sell the property and find someplace cheaper to live with a smaller house.[/SIZE]

 

[DrRoy]

We have had our 2600 ft2 house since 1998. For years we had a plan to build a retirement home and even bought land. The cost would have been around $750K. Eventually, we decided that the cost was too high, sold the land, and we have spend about 20% of the above amount on several remodeling projects that we really love and are quite satisfied.

 

[mrfeh]

I wouldn't do it, but not for the reasons you specify.

I just could never spend 7 figures on a 5000 square foot house for 2 people. I would consider that a huge waste of money.

 

[phil1ben]

My opinion is different than the others. I cannot judge whether you are spending too much on a home unless all of your assets and income are analyzed so I pass no judgment. If "you can afford it" I see no problem in building a 5000 square foot home or even a 10,000 square foot home.

One thing you need to ask yourself is whether this home will ever be sold. If not, then does it really matter if you would lose money on a sale?

In my opinion we are only on this earth so long and it is important to enjoy your time here. If you can afford it and it will bring you joy go ahead. We have built ourselves five homes so far (I am 60). For us, our homes bring us joy.

Regarding building, I provide this advice which you are free to ignore:

1. Bid the job. Send the architects plans and specs to multiple builders if you can. If you are buying in a development with only one builder you do not have this ability. However, then his price is somewhat dictated by the market.

2. Pay very close attention to the specifications of the house. God is in the details and you must evaluate every item that is included and is an option. Understand what you are buying. This is necessary and time-consuming. For example how many paint colors are included and what is the cost of an extra color?

3. Despite our experience and best efforts, we always add 20% to the final bid for options we may later choose and changes we might request.

4. Don't forget the cost of Builders All Risk Insurance, Furniture, floor covering, wall covering, design costs, permit fees, etc.....

5. Try to get the builder to agree in advance for the cost of options you have not yet made a final decision on. Once you pay him, he has you and has no incentive to keep costs down on an option. Perhaps agree that options will cost 10% above his cost and have him provide receipts.

6. Understand what the builder/GC is building himself or hiring a subcontractor to complete. Some GCs sub out the entire job. We stay away from those builders because we want our GC onsite.

7. If you will not be at the site a few days per week, have the builder install cameras so you can see what is being done (and not being done) each day.

8. Make your payments coincide with work that is done and in place. Don't let the GC get too far ahead of you. Be careful of the size of the first few payments when nothing is done and he has your money.

9. Understand what it will cost to maintain your home including what real estate taxes will be after construction.

10. Perform periodic title searches to confirm no contractor has placed a mechanics lien on your property. Require the GC to sign lien waivers. If you need to spend a few thousand dollars on an attorney to help you then go ahead. A small price to pay to avert a big headache.

The above are just a few concepts. We have three homes each larger than the one you are contemplating. Our family and particularly our children enjoy visiting them. We cannot think of a better way to spend our money which we understand differs greatly from many on this site. I just wanted to provide the other side of the argument. All the Best.

 

[Bamaman]

We just sold our 5200 square foot home in March and downsized to 3905 square feet with a triple car garage. But the cost of this 12 year old house in like new condition was only 20% of what you're proposing to spend in PA.

Unless you've ever built a home and have a great contractor, I would never suggest anyone take on such a large project--especially in these times. Such building puts a strain on marriages, too.

We're very fortunate in the South to have homes available for very favorable prices. We're still in a cost basis market versus a demand driven market as far as prices go. And it's also nice to be out in the county where property taxes are only $1100 per year.

We would only consider purchasing a house that's already built. Fortunately we're cash buyers and can wait for a fair price on any home purchased.

 

[eytonxav]

I'd sell the land and put it towards another home in a more tax friendly state when you are ready. Having downsized from a big mega-mansion to 2400 sq ft, I can appreciate those that like a bit bigger house, but I do not yearn for 5K ft2. My only complaint about our current home is the lot is too small and so is the garage. If I could double the size of both of those, with one additional large closet, I'd be a happy camper.

 

[ivinsfan]

I don't know what size home you would be leaving but plan on spending a bunch of money decorating and finishing the inside of the new house.

Does you build number include landscaping?