If you have been house hunting for quite some time and still can’t find the home that ticks all the boxes, have you thought about building?
Whilst it’s not for everyone, building your own home might end up being the only way to get the home you’re after.
There are many different ways you can approach it and there’s a lot to consider, but here are the three main options if you’re thinking about building a new home.
Option 1 – Buy vacant land and build
The level of interest at the Mr Fluffy auctions, as well as land releases at Moncrieff and Throsby, show Canberrans are drawn to the idea of building a new home on a vacant block of land.
There’s something exciting about starting with a blank parcel of land and building a home that specifically suits you and your lifestyle. You could choose to buy in a new area (with the option of a house and land package) or purchase a vacant block in an established area through the Mr Fluffy auctions.
Buying vacant land can be a good option if you don’t want the hassle and cost of knocking down an existing home. However, since a tenant is unlikely to rent a vacant block land, you will need to cover all the holding costs yourself whilst you get ready to commence construction.
Option 2 – Buy an old house to knock down and rebuild
This is a popular strategy for those who want to live in a more established area – where block sizes are good and you can find an existing house near the end of its economic life.
The benefit of buying an existing home to knock down is that you can rent it out whilst you get things organized for the build. The rent will not generally be enough to cover the holding costs, but it can ease the financial pressure during this planning phase.
With some clients the ‘planning phase’ can last up a few years. You need time to finalise a house plan, source and engage the right builder, negotiate a contract, as well as potentially save more money to help you build the home of your dreams. With others, it much faster. It really comes down to your personal situation.
If you like the idea of this option, you need to ensure the purchase price comprises mainly the land value only – otherwise you’ll pay a premium for a house you’re going to demolish anyway.
Option 3 – Knock down your current home and rebuild
If you absolutely love the suburb you’re already in and your current block is large enough to build the home you want, maybe a knock-down rebuild of your current home might be the way to go.
Whether this makes sense financially will depend on the estimated value of your house – i.e. what is the building worth, without consideration of the land? If your current home is still worth a sizeable value, this will be lost when the home is demolished. This means that if your current home is not that old or you’ve not long ago renovated the kitchen, knocking it down could be the equivalent of throwing money away.
We’ve seen this strategy work best when clients purchase an old home in an established area, on a large block. Sometimes they will make small improvements themselves when they first move in (to make it more homely) but they don’t undertake any large projects that risk overcapitalizing on the home. Then five or so years later – when land prices have increased and clients have reduced the debt on their home loan – they find themselves in a good position to consider a knock-down rebuild on their current block of land.
Whilst one of the above options may appeal more to you than others, your financial situation will also play a role in which one is going to suit best. Give us a call if you want to have a chat about your own situation. We’ll see what we can do to help you get started.
