Looking to build new home. Finance Question.
I apoligize in head of time for posting here is this is the wrong area to post this to. I am brand new to this forum.
Basically, my girlfriend and I are in the market for a new home. Our MAX budget is 380,000. We havent been able to find a home in the area we want to live(schools, crime, etc.) We have found a plot of land near familly that has been put up for sale due to the death of the owner.
LOOOONNNNGGGG story short, he owes around 180,000 too 200,000 on the property. His only family is his nephew from half way across the country. (i actually feel bad for him for inheriting this mess) There is a piece of crap home on the property we could live in but we dont want to. We want to tear down and build, or donate the house to the local fire department.
Any whoo, If we were able to aquire these 3 acres and run down home for around 190,000, how much would we able to build witht the rest of the money left over? Would we be able to afford more because construction loans are wayyy cheaper? Would living in the bad home for a year increase our chance for a bigger build loan?
Help!
Thanks much.
Z
Replies
Maybe, maybe not.
First of all, buying "distressed" property can get really messy at times. The seller may say you have a deal, but until the bank OKs it it's not worth the paper it's written on. (And be sure you're not inheriting some back taxes or a Superfund site.)
Make sure the property is considered buildable. Just because a house is there now does not mean that TPTB will OK a new house. And even if they OK it, there may be problems like utilities or a septic system that will cost you much more than you expect.
Keep in mind that if you borrow money to buy the place and then tear/burn down the house, you may run afoul of the mortgage. You'd need the bank's OK to do that. (And remember that "the bank" may be some sliced and diced security with 5000 owners.)
Can you build a house for $190K? Yes, a reasonably nice one, in most parts of the country. But costs vary widely from place to place, so no one can guess what you can get for that money where you live (at least without knowing where that is). And there are all sorts of pitfalls building a house too.
Thanks for your response.
The property is not "distressed" Its just really old. We would stipulate wtht he purchase tht all liens on property are to be paid by current owner.
The land is able to be built on. and the septic etc. would all work out with the new building.
We live in wisconsin if that helps. For the amount of home that 380,000 can buy, can i get the smae square footbage by building?
I also would be able to do A LOT of the construction work myself as i am in the industry. I guess what the real question is can I get 3200 sq. ft. with 190,000? Or, can i get a larger loan with putting up the land as collateral? If so, do i have to own the land for a certain amount of time first?
IF you do nearly ALL the work yourself (my wife and I have done so with no troubles) you can easily build almost anywhere for under $20 sq ft IF you are careful and a good shopper.
I'll post some pic later of current build that is coming in at about $13 sq ft, all own labor and that is not included inthe price.
Become a daily visitor to the free and materials section of craigslist, etc.
Dont forget to visit the local Habitat thrift store if you have one nearby.
The last 2 items (and similar shopping venues) are one of the ways to build for low $$.
Maybe not ALL of the work, mostly suct the specialties, plumbing, electrical, basically i want to do everything except the bones of the home.
I would love to see those pictures. Ill take all the advice/help I can get.
How many beers per hour would you work for? HAHA.
Actually, the 'bones' is the easiest and fastest.
Here are some pix.
As an example of shopping, originally had been going to install an dual pane insulated 5 ft by 8 ft plain window in the front that I got free off craigslist (CL) - however, saw the returned special order window here at Lowes marked down from $1600 to $190 (after watching them drop the price by $50 to 100 a week over a 2 month period)
Ceiling fan was $2 at a garage sale, fluorescent light fixtures free off CL, etc. Paint was also free - mixed 15 different cans to get 10 gal of the color we wanted.
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Built in bookcase, all free 'scrap' wood off old pallets, only expense was glue, screws, stain. Back of bookcase is leftover free laminated flooring also from CL.
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Also, consider living in the existing house on the property while you build the new one since you are on 3+ acres.
Then, instead of demolishing, use the old house for a storage shed for those 'treasures' you cannot part with <G>
Some pix of bones
scaffolding took more time to build from scrap wook than it took to do the roof! However, my grandpa died from falling off a ladder while painting house, so no one in family does much ladder work.
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Raising a wall, one of the fastest and 'most fun' parts of the whole building experience.
Believe it or not, all the lumber in the pix is salvaged from old pallets - probably hard to find that type of pallet, need to see what is in your area.
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The property is "distressed"
The property is "distressed" because the owner is basically under water. There's a lot more stress in the condition of the mortgage than in the condition of the property.
Owing 180-200k doesn't mean it's underwater.
It depends on what the appraisers say it's worth. For all we know the property could be worth 500k.
It does mean that it's a probate sale though, due to death.
I'm glad you mentioned septic.
Fees people forget about:
School fees (ours were 5k to add on ~1500sqft)
Septic design and perk test
Utilities
Permit fees
Architect Fees
You can *probably* build one, but it depends where you live and what you want.
Around here (Central Illinois) new construction is running about $125 a square foot. If you have about $180,000 left over after you purchase the property that won't get you much of a house.
If you're going to have 3 acres you might consider doing a prefab "granny flat" or a garage with a room above somewhere convenient on the property.
That would give you a place to live and save up for the main house.
Additionally, depending on your zoning you could rent it out if you don't have an older parent. You'd have to check the zoning though with city/county.
why...you think you need 3200 sq ft
Or, for some of us, how can we possibly get by with under 4000 sq ft. <G>