Build your dream Home for less
Have you ever dreamed of building your New home or Holiday home and saving 25% of the true value.
If you buy your land at the right price and employ the services of an experienced quality home builder your home should be worth at least 25% more than what you have paid out.
For example if you buy a home that is not new you are purchasing the home plus the sellers equity, If you break this down and I will illustrate an example for you, this is what you are buying.
Example: A You buy a 3 bedroom home for £189,000 the market value seller has a £141,750 mortgage to pay off lets say you are a great negotiator and you buy the home for £180,000 in theory you should walk in to the property with an immediate £9,000.00 equity stake holding in the home.
Seller pays off their outstanding mortgage £141,750 leaves them with a £38,250.00 less closing costs, estate agency fees, solicitors etc, etc £3,000.00. £35,000 clear equity. You have really bought their £35,000 equity but it should of been £44,000 but you negotiated some of the owners equity from them at purchase, £9,000.00
So providing the valuation is right you have £9,000.00 clear equity plus what ever deposit you needed to put in to finance the purchase, lets assume in this present market 20% £36,000 +£9,000.00 you should be sitting on a clear £45,000,00 equity in the home less the mortgage.
Now when you consider an alternative example.
Example: B You have £36,000 as a deposit why not use this to a better advantage and increase your equity with this. Buy a piece of land for say £50,000 and negotiate a discount on the land at say 10% £45,000 you should only be buying land that has a positive immediate equity upon purchase, in other words the land should be valued at say at least £54,000 if you get this part of the equation right you have secured a 20% £9,000,00 profit with out building anything.
Following me so far ? If you use this equation for working out what kind of value the home you should build on this land it is usually the norm 1/3 land costs and 2/3 home cost to build. So you don’t want to be spending more than £117,000 in building your home unless you are considering a long term stay, Now you have a total investment of £162,000 £45,000 for the land plus £117,000 plus closing costs and fees £5,000.00 Total £167,000.
This is were it gets exciting if you have hustled and negotiated such a great deal why give up some of the profits by entrusting the wrong Builder who can shatter your dreams overnight. Lets look at the value first at this stage.
The home now should be worth £208,750.00 were did I come up with this magical figure you may ask. Well for a start the builder will not be working for free and usually will be working on an 18% to 25% profit margin 18% is £21,060.00 and 25% is £29,250 of the cost to build £117,000. this is what the builder would at least be selling for and hoping for more if he is a savvy builder buying land in the Right areas.
So now you have a home worth £208,750.00 less your investment of £162,000 this means that you have walked in to an immediate equity position of £46,750.00 plus you have got a brand new home which is much easier to sell or you have acquired the land for free ? Can you see the better investment, the safest and the obvious more attractive one.
If you own a parcel of empty Land why not use it as a savings account, if it is build able land with planning consent it becomes more valuable so long as you build, I have seen a lot of people become upset when they have let the planning permission lapse after 5 years and find out the new regulations have now added 30% to 40% on the cost of build and even in some cases councils have over allocated their build numbers and planning permission is refused a second time around.
If you want assistance in achieving your plans and dreams I can help you, I am an experienced developer with 28 years experience I have built thousands of homes and been involved in very large commercial Design & Build projects,Commercial Hotel & Leisure. I will save some of my charges on material discounts and make sure it gets done on time and within budget.
If you want to build I cover North Wales to Stafford and can be your project Manager or complete facilitator. Please give us a call and ask for David.