Is It Cheaper To Buy Or Build A House?

The PropertyClub Team
Jul 3rd 2020
Building vs. Buying a House- Deciding on the right option for you can be challenging. Do you prefer to go with the cheaper option or the comfort of a bespoke home? This guide will walk you through the pros and cons of both.

When it comes to getting a new home, it’s normal to be picky. After all, you’re going to be living in it for years to come. To a point, a person’s preferences can make a massive difference in the house they choose as well as the way they go about finding the perfect place to call home. 

In many cases, people who feel like their local real estate market isn’t serving them choose to build their own homes. At times, building your own home can be the only way to make sure that the house you get is the house you want. Of course, the price can become a serious deciding factor in this dialogue. 

So, let’s talk about the potential of buying a home and what it could mean for you. Is it truly the better option? Is it cheaper than building a house? This guide will give you the answers you’re looking for when it comes to this classic real estate dilemma. 

So What’s Cheaper, Buying or Building A House?

The overall answer to this is relatively simple. Generally speaking, it’s going to be cheaper to buy a house that’s already on the market. This is because you need to buy the land, the materials, and the labor when you choose to build your own home. 

Building A House vs. Buying: The Costs Explained

The average vale of a house in the United States is around $288,000. Building a house typically costs between $150,000 and $450,000, not including the price of the land. That alone means that building your home is an extremely pricey endeavor.

The $150,000 price tag usually is ascribed to smaller homes made of cheap materials rather than a standard home. The more common price tags you’ll see are upwards of $250,000 without the price of the land factored in. Building your house also can mean additional costs that you didn’t realize would occur—such as landscaping, special licensing, and more.  

Location also plays a significant role in how much you can expect your home build to cost. For example, if you choose to try to build a house in the outskirts of New York City, you can expect the price of labor and costs to exceed $400,000 easily. 

Why Might You Prefer to Build A House?

Building a house is not something people take lightly. If you are looking to build a house, it’s usually for a reason. Weighing out the pros and cons of building your own home is a serious issue. 

Some of the bigger perks of building your own home include:

  • Custom Designs- A home that’s built by you is a home that’s literally made for you. This means you get all the features you want and none of the ones you hate.
  • New Home Goodness- Being the first to live in a home means you don’t have to deal with wear and tear. It also means that your resale will probably be higher. 
  • Cost Recouping- When you sell your home, you’ll be able to recover most of the money you paid for your building. 
  • Up to Code- Older houses are less likely to be totally up to code than newer ones. Depending on local laws, old houses may be able to be “grandfathered in,” or you might be forced to get the building up to code. This can cost extra money. 
  • Lower Bills- New homes are usually outfitted with energy-saving devices and materials, making them more cost-efficient than older models. 
  • No HOA- If you build your own home, chances are high that you won’t be part of a Homeowner’s Association. This means that you will be able to avoid HOA fees and nosy groups. 

Why Might You Prefer to Buy A House?

Buying a house is the typical go-to for people who want to own a home, and for good reason. It’s a convenient way to get a place of your own. Plenty of homes already exist, and truthfully, there are parts of the country where you really can’t build a new home. 

Some of the more common reasons people decide to buy a home include:

  • Convenience- It’s a lot easier to buy a house than build one, especially if you are considering getting a home in a city area. Buying a house involves less paperwork, less design work, as well as fewer zoning issues. If you’re looking for an easy way to get a new home, buying is it. 
  • Price- Prices on homes are negotiable since there will likely be parts of your new home that you won’t like. With building a home, you don’t have as much negotiation power. Moreover, it’s generally cheaper to buy a home that’s already built. 
  • Quick Move-In- It takes an average of 7 months to build a house. That means that people who are building a home will need to rent a place during the interim. If you buy a house, you can move in right after closing. 
  • Less Stress- Building a house is notoriously stressful. Between arguing with contractors, worrying about the layout, and trying to find the right materials, it’s a nightmare for most of us. Buying is just easier overall.
  • Easy Upgrades- If you want to buy a house, upgrading it is usually easier and cheaper. You also have the added perk of doing them at your own pace.

What About Manufactured Homes?

Building a house from scratch is undoubtedly going to be a pricey endeavor, especially when it comes to doing it the traditional way. Materials that are bought individually get a markup, and often have to be prepped in order to be used, which adds extra costs on top of everything. 

That’s why many people are avoiding the traditional way of getting homes in favor of manufactured homes. Manufactured homes, also known as mobile homes, are known for being affordable. They are premade, which means that you don’t have to worry about hiring a construction crew. They also are moveable, so you can take your home with you as you see fit.

Is It Cheaper To Build A House Or Buy A Manufactured Home?

If building a home is comparatively expensive in the traditional sense of the word, then it’s safe to say that it will be even more noticeably expensive when compared to a mobile home. The numbers alone say it all:

  • The average home costs around $288,000.
  •  The average manufactured home costs $62,000. 
  • Building a home can cost anywhere from $150,000 to $450,000.

Manufactured homes are the cheapest way to become a homeowner, and because of that, they’re gaining a lot of respect these days. 

Do Manufactured Homes Retain Their Value?

It all depends on the type of manufactured home that you have. Some mobile homes can appreciate in value over time, while others don’t. If you are looking to have a home appreciate in value, your best bet is to buy or build a traditional home instead.

If you are looking at your manufactured home as an investment piece, you need to do your research. Even then, there’s a chance that your manufactured homes’ value will plummet. That said, these homes are still a good option for people who are short on cash.

Which Is A Better Investment, Buying A House Or Building One?

This all depends on a wide range of factors, as well as the house that you want to build. Trying to figure out which makes a better investment can be challenging. However, looking at these factors can make it easier:

  • Your Location- An area that doesn’t have many homes for sale, or is currently undergoing a massive revamp might do better with a built-up home. On the other hand, in areas with a hot real estate market, buying makes a lot more sense.
  • House Quality- An old, dilapidated house won’t hold value as well as a newer home. This is especially true if the houses near you are more modern than the one you’re looking to get. If you have to choose between a beat-up old home and building your own, the answer should be clear, which is better.
  • Codes- If you are concerned about building codes, it’s good to take a look at whether you will need upgrades to a prebuilt home to make it legal. Building your own home means everything will be up to code. 
  • Exit Plan- Are you looking to “fix and flip?” Or, are you looking for a long-term home purchase? Each one will have its perks and pitfalls. You need to choose the plan that works with your ideas.
  • Timeframe- The amount of time it takes to build a home isn’t something you should overlook. A prebuilt home can be flipped almost immediately. Meanwhile, it can take a year or two to build your home and put it on the market. 

General Tips For Choosing Your Investment Mode

Though there is no clear-cut way to choose whether it’s better to buy or build a home that you view as an investment, there are some general pieces of advice that can help guide you towards the right decision. These tips generally ring true:

  • Historic homes are known for retaining value but are higher maintenance. They can be a good investment for the right person.
  • Mobile homes do not perform as well as investment pieces. They are the only type of housing that’s prone to losing value over time.
  • Building your own home means that you can customize it, which, in turn, makes it more likely to hold value. Cookie-cutter homes have a limit on how much more they can increase. Building a unique house will work in your favor as an investment property. 
  • Location is king- Good neighborhoods will always work well as investment areas.

Conclusion

Though there are definite exceptions to the rule, it’s safe to say that buying a home is cheaper than building it on your own. If you are struggling to afford your own place, getting a manufactured home is the best way to own a home on your income. 

Even if you are looking at traditional homes, buying is still going to be cheaper. Building a brand new house, on the other hand, will offer you more in terms of customization and investment value. So, it’s all up to you.