Housing: Build or Buy

I'm 18. Moving out this year. I have two good jobs along with my own business. I live in a small town around 10k population, it's home to me. I'm keeping myself up at night thinking about these two options that I am limiting myself to.

So I have the option of renting to own a place for 35,000. It’s a bit old, built circa 30s or 40s I’d say.

• Wiring is 85% knob and tube
• Pre-existing septic tank and lateral line (old...old tank - not sure if it's even encased as new ones seem to be)
• Insulation in walls is nonexistent to my knowledge, however there is some form of foam wrap I ran across when putting an attic vent back on, it seems to be applied under the current siding.
• Old Windows, at least there are storm windows installed on every window too.
• It has appliances (rather old) but they exist and work.
• I’d like to do some remodeling, rewiring, and possibly even strip the walls and insulate then put drywall up. The place is livable right now, if I were to just move in.

The total cost is unknown, because I would be adding costs on top of the 35k. I would guess a good 10k in remodel and windows along with upgrading appliance cost. There would be no mortgage or loan interest in this situation.



The other option is to purchase this portion of flat land for roughly $5,000. I would be just outside of city limits, and the location has power ran past it to other housing, but no water or sewer. That means some upfront costs for a well and septic system.

• Land Cost of ~$5k
• Utility Hookup Cost $?
• Permits ~2k
• At least $10k in well and septic, I would try doing all the digging myself to reduce cost
• Foundation ~$7.5-10k
• Building with new materials
• 2x6 walls, insulated instead of 2x4 uninsulated
• Build to my desire, smaller sized than the older 35k house - to stay more energy efficient.

I am not sure what the materials cost would be. They would be discounted as I have connections with the local lumber and hardware stores. I am capable or learning and working with a couple general contractor friends who charge a small fee and beer. Dimension of house would be something along 24 x 32 or 28 x 32 with partial or full basement. I would be building conscious of bills and my altered mindset. West side entrance, four corners, living room and basement wood stove for cheaper heating, duct work installed in build process, but no A/C unit installed - possibly no furnace either depending on plumping location and the alternative heating options I go for, used appliances would be purchased first and upgraded as I get the savings.

If I went with this option, I would need to find some money. Likely a loan, somewhere between 20 and 35k. I don't know if any family members are willing to offer one with low interest to me, otherwise I may be forced to obtain credit cards and switch them around to avoid any interest fee after their 180 or 365 day 'interest free' period. I am unable to get a home builders loan due to the qualifications, which are there rightfully so for the average Joe. They also don't want an 18 year old building his own house. I am unsure I would be able to get anything more than a small loan with no collateral. I am not much for co-signing, either.

I apologize for being long with the post, but I wanted to refrain from being vague. Any thoughts, comments, suggestions, or bashing is welcomed. Thank you.

 

You're definitely ambitious.

I have several friends that built their own houses, one did everything including the wiring and plumbing. It's a helluva lot of work. And stress. And drama from the local Powers That Be.

Given your age and financial situation (credit and ability to obtain loans) I would consider moving into the preexisting house and fixing it up. Consider it a launchpad to building your own later.

If you're a super DIY kinda dude then fixing up the fixer-upper is going to be significantly less expensive than what most homeowners have to consider. Putting in new windows, for example.

Best of luck. Major props for wanting to set yourself up like this so early in life. That and a little, "Damn, I haven't seen a house for less than $150k in over a decade."

 

Yes, I feel ambitious. It will wear off, and the idea is to get this shit settled before it passes.

I've given moving into pre-existing place a lot of thought. I'm super DIY as you suggest. I do feel I would get more money out of my buck with new instead of fixing up. The thought does go both ways, and I am open minded on the idea. Thanks for the comments!

 

Something else you should consider is whether or not you're going to be in the area in x years. I wouldn't want to put a lot of time and effort and blood-sweat-tears into a custom build only to realize that at 25 I'm going to move across the country and become a professional lumberjack. The advantages of the pre-existing place are starting to stack up in my mind. You move in, you fix it up, you can sell it for a profit in a couple of years when you decide to change careers, get married, etc.

 

I must say that all of what is being said has gone through my mind. I may add that I have not just recently been debating this; I have been for the past two years and saving for it. Crazy, right?

To address some more points: Yes, I have thought about the what if I move away scenario, I really don't see it happening. I like the cost of living in this area, and I have been very independent for the past 8 years of my life.

New doors, windows, and insulation are some high cost material (insulation not so much, depending on type) - however imagine this: If I am replacing all windows, doors, and ripping out the walls to install insulation (let's face it - if you're a DIY and you want to blow in insulation from small holes there will be a lot of voids, especially in older houses where plaster protrudes on the inside of the wall....the option would have to be farmed out to a professional which would in turn cost more than desired) then I am practically rebuilding the entire house aside from framing and not replacing the old siding. Would it not be more efficient to apply those fees of new material to a new house that is sized proportionally to my own needs rather than a bigger area...this is not rhetorical I'd like to know.

The catch with the 35k house would be selling it, that wouldn't be a possibility until the land is cleared. There's 1.5 acres, and plenty of shit on it that won't be leaving anytime soon (next 10 years).

I could get a current mortgage for a house that exists. I can not however get a mortgage for a house to build. They require 20% down, 10% in savings, all work contracted out, NO DIY work, and the money is given in stages of the build. This would void the idea of making the place watertight and gradually building as I can afford on top of loan payments.

The CC companies love to stick people in debt and never let them out. I don't plan on trying to get the entire loan from CCs. The idea is to use them to finish off what I can't find in alternative loans.

I have been figuring the cost of living for the past year according to my parents house, and two other families house. I then averaged each monthly bill each month and got a good idea of the average utility cost for the three houses. Ours being the smallest made it so I could see what more square footage does, along with different thermostat settings. I have then added 20% onto all bills for overhead cost. Loan payment, Vehicle legal fees - gas - and insurance, groceries and toiletries, gas bill, electricity bill, county trash, phone, internet, home owners insurance, and entertainment. I did include water and sewer bills, which would be dismissed with the new house idea. @$85/mo. for water the $5,000 well system should be paid off in 7.5 years - adding $30 to the electricity bill for the well pump. Septic system should be more time most likely for one person living as they base it on a flat fee then amount of water consumed.

As far as my income, I have reduced it by 20% to account for what-if situations, and still get by the end of the month with cash to go to savings.

I work three good jobs because, to be honest, I would hate working one full time job the next 20-40 years of my life. It kills us, even if it's a field we like in my opinion. I don't want to be the slave to paper the rest of my life like so much of society is. I like to be active, and I also like to use my mind. One job is very physical and mechanical, the other job is with I.T. where I am not moving much at all the four hours I am there. The last one, my own business, is my future employment plan. After I get tired of one or the other job, then I will quit and bump my personal business up with advertisement and more time spent with it. Eventually I would be able to grow it where I could presumably work whenever I want as long as utilities are cheap enough and I am out of debt.

I did not include all costs in my post above. A brand new house, a bit bigger than what I stated, with a fancier set of siding and windows, fully furnished with appliances, would cost around $76,560 assuming around $5,000 in labor. It would include: permits, power tools, utility hookups, septic system, well system, well pressure tank, foundation, framing, roof, shingles, house wrap, siding, wiring, plumbing, insulation, new furnace, new a/c unit, new kitchen appliances, carpet, finished trim work, outlet plates, and paint. I could do without a lot of that for quite some time as long as there is enough heat in the place to keep plumbing from freezing, one working bathroom, and a bed to sleep on at night. Gradually I would build inside walls, add circuits, and so forth.

The more I type the more biased I realize I am towards building new. I am not shutting out one idea or the other. I understand those who feel I am too young to know what I want, and you all rightfully so have your decisions.

 

Well, since you keep mentioning your age:

Where does female companionship fit into this equation?

Because I can tell you from experience that nothing fucks up a big project more than female companionship.

 

Ahem..... ^^^^THIS^^^

 

Plan9 that is true. It fits in as this: if one exists out there, they will have to like me and my beliefs, meaning I am no city boy leaving to see the big world. Don't have desire for that shit. Sure traveling the world and exploring is interesting to me, but not until I am settled in. I will not be falling head over heels for a girl and follow her to some different location. We all die someday, and if my companion goes before me I will be one sad fella.

Borla plumbing would be finished most likely. Who says they know I am living there instead of just adding furniture as I buy it? If issue comes up, I would probably have it to code, and then add onto my wiring as desired. But I don't have much more need for outlets closer that 6' spacing. The basement would be unfinished, and since I would not have a bank on my ass with their specifications, I should be able to get by with saying it's a work in progress and no I do not live here. I do not need an address on the front of my house to sleep inside, that would come later on while bills are sent to a p.o. box or parent's residence with my name.

Yes I do have 20% of a 75k loan, but I have most of it tied up in stocks. I do not plan on taking it out, nor do I want to have to take out a 75k loan for a complete house when I should have the ability to live in a house that is not completely finished, letting them know or not.

However, I do see what you are saying with legal / local laws. I understand the idea may be flawed in that aspect, thank you buddy.

 

Hopefully you'll be changing that in the next few years as well.

 

Yes, it is okay to stay where I am until finished. That is the plan.

Property taxes are covered in tax return.

 

I would just apply my tax return money towards the taxes of property. It's ~$400 for the existing home, and I assume it will be more for the new home. Both are out of city limits, so a tax break is offered - and both places would be assessed as lower value due to the size, location, materials used.

 

Yes and no. I didn't include the property tax because it is not a monthly fee as the rest. I was going to put it [property taxes] in home insurance because that is paid annually too, however I just decided to null the value of property tax in either case. I do know down the road when I want to work less I will get less from tax returns but still be paying property tax. It was just a bridge I figure I'd cross when I get to it where the rest of them are all monthly deductions of my income. Paying taxes on a property isn't bad, no. It is annoying though. I do think it's kind of sad when people realize they NEVER own THEIR house even if it's all paid for. All it takes is a year or two of not paying your taxes, and it's no longer yours. Lol.

 

Yes, I own the house - but I do not own the right to the land my place is on unless I pay that fee. I guess I just look at it from a different view. I do not loathe this, but I do think about it.

I haven't heard of laws prohibiting junk cars on private property. That's pretty shitty, I mean, I like older cars (vehicles) with character. Being in a small town, there is not near as many miles to commute so getting 28mpg vs 14mpg is not as big of a deal. Hell the VW Rabbits got better gas mileage than today's hybrids, somewhere in 40s and 50s. Though horse power is a bit different.