patrick.net

Generally no, it doesn't make sense.

Most of the cost of a house in coastal CA is the land, not the building. But inland where land is much cheaper it might work out.

Given what I heard on NPR this morning, you might want to make sure any land you buy is at least 30 feet above sea level.

Dan8267,
Do you have a link to the NPR report. Thanks

Building a new house will almost always be more expensive than buying existing.

The advantage is that you don't have to compromise as much. You get a house designed exactly how you want it.

I'm building a new house in the spring. It will cost around $200/sf for construction, $50k for site prep, $50k in architect fees. That's on top of land cost.

If I was going for best bang for my buck, I'd spend my million on any one of the nice million dollar waterfront properties around here. Instead I'm spending $300k on land and$700k on construction.

Generally no, it doesn't make sense.

Most of the cost of a house in coastal CA is the land, not the building. But inland where land is much cheaper it might work out.

Patrick, out of curiosity, how do you square this reality with your oft repeated mantra that the "fundamental" or "true" value of property is what someone could rent it for, given that the current rental value of raw, coastal land is approximately zero, and the rental value of raw, inland land is also approximately zero?

Dan8267 says

Given what I heard on NPR this morning, you might want to make sure any land you buy is at least 30 feet above sea level.

Oh no I'm doooo(gurgle gurgle gurgle)med!

Land is in the mountains and it is a family inheritance, so it doesn't cost me much. I checked a few construction options. I'm even thinking modular or paneled building. I also found some company based in Canada and their 'packages" are not that expensive. My problem is that the houses around me sell for $160-$170 per sq ft, so my 'project' cannot cost $200/sf
I wonder if it is even feasible to have a decent (not fancy) house for less than that.

If we are going to have an inflation, and I believe we will, construction costs and materials would even cost more.

Another issue is loan. I know nothing about construction loans and if it would be possible to convert it easily to regular 30-year fixed afterwords.

Any suggestions from people who did it, highly appreciated.

CDon says

given that the current rental value of raw, coastal land is approximately zero, and the rental value of raw, inland land is also approximately zero?

the rental value of land depends on its zoning and allowed development, not its current state of development.

Anyone w/ an informed opinion on manufactured homes, esp. current double/triple wides? I'm in a situation where it would be possible, given zoning. Cost /sq ft, unexpected expenses, etc.? Thanks!

HEY YOU says

Dan8267,

Do you have a link to the NPR report. Thanks

No. It was on WLRN at around 7:30 a.m. So, according to http://www.wlrn.org/radio/schedule-913-fm, it should be something from Morning Edition, but I couldn't find anything that matched it.

It was a panel discussion and it touched a lot of issues regarding climate change along with listener calls.

CDon says

Patrick, out of curiosity, how do you square this reality with your oft repeated mantra that the "fundamental" or "true" value of property is what someone could rent it for, given that the current rental value of raw, coastal land is approximately zero, and the rental value of raw, inland land is also approximately zero?

The raw coastal land has a very high rental value, which you can prove by offering to rent it to a developer for 100 years.

GraooGra says

Land is in the mountains and it is a family inheritance, so it doesn't cost me much. I checked a few construction options. I'm even thinking modular or paneled building. I also found some company based in Canada and their 'packages" are not that expensive. My problem is that the houses around me sell for $160-$170 per sq ft, so my 'project' cannot cost $200/sf

I wonder if it is even feasible to have a decent (not fancy) house for less than that.

If we are going to have an inflation, and I believe we will, construction costs and materials would even cost more.

Another issue is loan. I know nothing about construction loans and if it would be possible to convert it easily to regular 30-year fixed afterwords.

Any suggestions from people who did it, highly appreciated.

You can do low end finishes for $100-150/sf.

Financing sucks. 20-25% down, plus you have to be qualify for the mortgage + current housing costs during construction.

I got pre approved for a $1m construction loan, but that required demonstrating that I could come up with $320k (25% down + 10% of building costs).

GraooGra says

Any suggestions from people who did it, highly appreciated

Check with house movers (if there are any in reasonable distance) and see what they have on their lot. Sometimes you luck out. Financing a house move is very difficult.

CDon says

Patrick, out of curiosity, how do you square this reality with your oft repeated mantra that the "fundamental" or "true" value of property is what someone could rent it for, given that the current rental value of raw, coastal land is approximately zero, and the rental value of raw, inland land is also approximately zero?

The raw coastal land has a very high rental value, which you can prove by offering to rent it to a developer for 100 years.

Correct. But you see however the problem when a buyer tries to use the "what does it rent for" analysis when the property is underutilized - say either as raw land, or land with a real shit shack of a house, when all the neighbors have palacial estates.

So, the buyer who sees the shit shack and does the "what does the shit shack rent for" analysis is continually and correctly outbid by the buyer looking to build a palacial estate.

Likewise, you could also say the buyer who does the "what does the shit shack rent for" he will be continually and correctly outbid by even the renter on a 99 year ground lease who can tear down the shit shack and build the palacial estate he can use/rent for its useful life.

Either way, understand that when it comes to particularly valuable property, when you are telling people to use the "what does it rent for" analysis to determine its "true value", you are setting them up for failure if the property in question is underutilized.

The better analysis would be not "what does IT rent for" but "what does the best use of that land" rent for.

The only time where a straight rent vs buy is possible is when we're talking about a building that you can't realistically modify in a meaningful way. Condos are a good example.

People are different; one guy sees a property with an acre of trees in the back and thinks it'd be a great place for his kids to play. Another guy sees the same acre and thinks it's a giant waste and it should be cleared and subdivided into 8 lots.

Dan8267 says

Given what I heard on NPR this morning, you might want to make sure any land you buy is at least 30 feet above sea level.

My standard is 100 feet. That should protect you from most tsunamis.

Where did you get the $200/sqft figure? Labor and materials cost more in California.

Have you dealt with contractors before?

Is the land semi-developed? Does it have power/water/sewage? How is the permitting process with the city/county?

Have you looked into modular construction?

CDon says

So, the buyer who sees the shit shack and does the "what does the shit shack rent for" analysis is continually and correctly outbid by the buyer looking to build a palacial estate.

You got that right. It happens all the time in my hood. As an example a house renting for $1300 max (probably closer to $1000) sold for $400k about a year ago. Now there is a nice $600k structure on that lot.

-- Where did you get the $200/sqft figure? Labor and materials cost more in California.
...
I was just talking to people around the area. I did not contact any specific general contractor. It is still too early in that process.

--

Have you dealt with contractors before?

Only petty projects, remodeling. Nothing like building a brand new home.

--

Is the land semi-developed? Does it have power/water/sewage?

It needs civil engineering work. I learned from neighbors (there are people around who built in the past) that putting an utility meter costs about $35K.
The land was bought and stayed w/family and it was never developed. Now it is mine and I want to do something with it.

--

How is the permitting process with the city/county?

I'm just waiting for my title to arrive and I plan to go to the city hall and ask all these questions.

Have you looked into modular construction?

I contacted 3 firms and I talked to them and they also told me about $200/sf. So far, I have their prices and pics of their models. I didn't touch them. I need to check with my senses. They look good on these photos but I have a feeling that they might feel like cheap mobile homes. I try to avoid these. I don't need fancy but I need decent.
So somewhere in the middle ground.

I have a definite winner which is not completely modular, they send you "packaged" parts and pieces and you need to find a builder which would assemble this for you. They are not turn-key. You can lock them but you need interior finishes.

If you know what you are doing you can build for under $100/sq foot. But you really have to know what you are doing.

Land however is very expensive in desirable areas so might not be worth it there.

FortWayne says

If you know what you are doing you can build for under $100/sq foot. But you really have to know what you are doing.

Land however is very expensive in desirable areas so might not be worth it there.

My bad luck I'm not in construction business. I can only read about it, learn, do my due diligence, get recommendations, bids, check on the progress and be realistic about it.