Thinking of building a new home?

Whether you are thinking about building a new home on a piece of land or tearing down your existing home and building a brand new home, there are things you need to know. The way to think through the financials is to take a look at your baseline cost. In todays market, the cost of building a house is anywhere from $150.00 to $235.00 per square foot. This price depends on what finishes you are going to select. Before you start to consider building a new home on your existing lot (removing your existing home), you must find out how much your current home will sell for in todays market. For example, if your current home is worth $600,000 and you are planning to build a 4,000 square foot luxury home (not including the basement)  at $200 per square foot, you should expect to spend around $800,000. Often, there are costs a home owner fails to consider when estimating the cost of construction including the architects, contractors fee, municipal permit fees, temporary fencing fees, disposal and hauling fees, and landscaping costs. Also, you need to live somewhere in the year that your house in under construction. You can add another $35,000 (at $3,000 a month) for rent, assuming the project will be finished within 1 year. There is also the time (how much your time is worth) that you will be spending for the project. Once you have a detailed budget for your new home, you may have a better idea of what the tear down and new home will cost, which will help you find out where you are financially after you build your dream home. If you can afford the cost of the building and you’ve lived in the neighborhood for 10-20 years, you will enjoy the benefit of your new home. That has a value to it and may not be monetary. In the end, when you sell the home, it should be of a construction type and quality similar to homes in the neighborhood to reap the benefits of the newer, larger, more modern homes. Builders have a general guide for tearing down in some neighborhoods. The land cost is about 1/3 of the final cost of the house. For example, if the land costs $600,000, the builder figures he needs to sell the home for $1.8 million. Typically, the profit is 10-15 percent, so the house would cost about $800,000. The builder also has to carry the cost of the land and hopes to sell the house quickly. Also, you have to add the realtor fees and transfer and recordation taxes to the final sell price. Please let me know if you have any questions about any information I have provided, thanks!

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