For the last few months we’ve been sharing with you about how building is making a comeback due to the lack of properties for sale in our market. More and more lenders are offering loans for building. Lots are in abundance even when residential homes and cabins are the opposite. Contractors are taking on building projects.
For most people, building is an option when you either can’t find exactly what you want or your dream home/cabin is in the wrong location for where you want to be. Because buying is still a little cheaper – and easier – I recommend trying to find something existing that checks your boxes first, but if what you’re looking for just isn’t out there, then that’s when you should consider building.
So what’s the first step in building? Well, before anything else you will want to have a list of “non-negotiables,” items that are must-haves for your home or cabin. Do you want an open floor plan? How many bedrooms? What square footage is acceptable for your new home? Do you need the cabin you’re building to cash flow as an investment, or is this going to be more of a vacation property? Once you have this list nailed down, then you can start looking for the lot where you want it to be built. It’ll help you in the long run if you know before you buy the lot that it can’t be permitted for a 3-bedroom because the field line is too small if you need your home to have 3 bedrooms. It’s going to cost a lot more if you go about it the other way around.
Next, you will need to interview builders as part of the bid process for the construction project. While most people prefer to go it alone, this is one area where working with a real estate agent who has a firm understanding of construction can really be helpful for you. A knowledgeable real estate agent can help pair you with the right builder for the project. If you found the perfect floor plan in a different location, maybe the builder will be available or at least be able to provide the building plans for your home. Your agent can also provide you the names of lenders who offer construction loans. My team and I know a handful of lenders we work well with and are positive about when it comes to new build projects. And we know great builders who do fantastic work, too.
The other area where working with a real estate agent can be beneficial is in helping you save money on the project. If you design it correctly, it’s possible to make the project appraise for a value that’s far higher than the cost of building it will be. This could be a win for you if you are able to use the lot you are purchasing as part of the deal as a down payment on the project.
In next month’s article, I will walk you through the process of how lenders typically set up the loan and offer some tips on things you can do to manage the financing for the project as your home or cabin is being built.