Real Estate Talk:
Buy or build your home?
The advantages and disadvantages of buying or building a home
By Joseph Marovitch
If you’re not a contractor, the idea of building a home is daunting. Who has the time to find a piece of land, in the right location, then design a home, acquire permits, purchase material and build, other than a contractor or developer? Why would you want to? There are plenty of properties for sale that may have the design you are looking for, or are there?
What if there was a property already built, for sale, but in need of upgrading? The property would require enough upgrading that in the end, the house becomes your perfect dream home in the perfect location. What about the cost? What is more expensive, a property you buy below market value but in need of tender loving care, or a property recently upgraded by someone else?
The property upgraded by someone else has that person’s design. The upgraded property price includes the cost of the designer, contractor and builder plus a premium for all the time and effort the seller spent. I always say that when investing a dollar in a property you intend to sell, get back two dollars. Well, if you are the buyer, you are paying that additional one hundred percent on the dollar the seller invested.
The property upgraded by someone else has that person’s design. The upgraded property price includes the cost of the designer, contractor and builder plus a premium for all the time and effort the seller spent.
Granted, there is time and effort involved in purchasing a house that requires upgrading, however, in the end, you have a perfect house that suits your wants and needs and you have spent half the price of buying a recently renovated property that someone else built. Further, when you sell the property, the gain in value is significantly increased, since you saved on the premium you would have otherwise paid for.
The average mark-up for a developer is fifty percent or more. The house you purchased for $500,000, cost the developer $200,000 to $250,000. There are buyers who purchase land in the Laurentians for a dollar per square foot by the lake, build a house for $250,000 and own a beautiful “A” frame log home that otherwise would have cost them $600,000 to $800,000.
In Costa Rica you can purchase an acre of land for $30,000 in a beautiful area from Recap Investment Inc and have a stunning home built for $120,000. If you had to purchase that house already built, the cost would be $300,000 or more.
In the Caribbean and Laurentians, there is still plenty of land to build. In Montreal, there is not.
Certain areas of Montreal are considered expensive with high one-year returns on investment. Some of these areas include part of Outremont, the Golden Square Mile in central Ville Marie, Westmount and NDG. In these areas, property values are high and the return on investment over a one-year period, meaning if you purchase the property and sold it a year later, is higher than most other suburbs of Montreal.
‘Certain areas of Montreal are considered expensive with high one-year returns on investment. Some of these areas include part of Outremont, the Golden Square Mile in central Ville Marie, Westmount and NDG.’
Most buyers do not have the time or inclination to perform major renovations. However, for those buyers who do have the time and inclination, it is certainly worth it. Finding a vacant lot or untouched older home in any of these areas is rare, but if a buyer could find one and build or upgrade the property, it would be like finding a vein of gold in a mountain.
A little effort and expense can go a long way in terms of savings and acquiring the perfect home for you and your family!
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Have a great week!
Next article: A look at commercial leasing – what is involved?
State of the market
According to the Quebec Professional Association of Real Estate Brokers (QPAREB), home sales rose by 10% compared to a year ago in Montreal. The price of homes also rose. The largest gain in sales was condominiums at 23% with single homes at 1%. In August new listed properties fell by 21% compared to last August.
If you have been following the State of The Market column for the past year, note that I have maintained that Montreal is running out of space to build, causing prices in single homes to rise and condominiums, as alternative to single homes, to sell. We are in a seller’s market until Montreal becomes a reseller market only. Buyers still want single homes but due to lack of inventory, buyers must spend more or buy a condo, which will also rise in price.
Keep in mind interest rates are low, the economy is fairly stable and there is no restriction on foreign investment. Investing in Quebec real estate is a great bet for international and local buyers. We are a safe place for capital and a growing market to invest in.
Image: National Institute for Occupational Safety and Health (NIOSH) from USA [Public domain], via Wikimedia Commons
Read also: Other articles by Joseph Marovitch
Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible to, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or email@example.com