Larger Return On Your Investment When You Build A New Florida Home

Whether you are looking for a primary residence or a vacation home in Florida, purchasing a new home is a large investment of both time and money. When shopping for a new Florida home, finding a desirable property in a good neighborhood is of primary importance.

But since the average Florida homeowner only resides in their home for five years before selling, you will also want to consider what type of property will be easiest for you to sell down the road, and will yield the greatest amount of return on your initial investment.

A tale of two homes

There are two choices when it comes to residential real estate purchases: you can purchase an existing resale home, or you can purchase a brand-new home. There are several variables that go along with each of these options, such as the age of an existing home and whether you purchase a new home pre or post-construction. Many of these variables will have a large effect on the resale value of a home, so you should carefully research all of your options before you buy.

So let's say you have completed your research and have narrowed your choices down to two homes. One is an existing home, built in 1990, and the other is a pre-construction custom home. They are approximately the same size, and both are in good neighborhoods. The existing home does not have any apparent repair issues, and will require only minor renovations and redecorating. The existing home is listed at $200,000, and the pre-construction home will cost a total of $250,000 including the home site.

On the surface, the existing home may seem to be the better bargain. It is of the right size and in a desirable neighborhood, plus it costs $50,000 less. But in order to determine which home will yield the highest return on your investment, and thus will end up being the ultimate "best buy", we will need to examine a few of those variables mentioned earlier.

Are you really saving $50,000 by purchasing the existing home?

Let's start by taking a look at those asking prices. On the existing home, you may be able to negotiate with the seller and bring them down a few thousand dollars. So after bargaining a bit, you now have a purchase price of $195,000.

But bear in mind, it is possible to negotiate with a builder as well. There are actually two ways that you can save money on a brand-new home. First, you can purchase your home during the winter time. The low-season for Florida real estate runs from November through April. If you are able to time your purchase for some time during these months, you will likely be able to negotiate a lower sale price or additional options and features at no charge. The amount a builder is willing to take off the sale price of a home during the low-season varies from builder to builder, but for our purposes here let's say you are also able to negotiate a $5,000 price reduction. So now your pre-construction home has a sale price of $245,000.

The second way you can negotiate a better sale price on a pre-construction home is to purchase your home directly from the builder rather than using a realtor. A realtor charges the builder a 3-6% commission for bringing a buyer to the table. If you purchase directly through the builder, they are saving roughly $7,500-$15,000 on a $250,000 home, and will often pass these savings along to you.

So at this point, you could have a sale price somewhere between $230,000 and $245,000. That is still $35-50,000 more than the existing home, but this is where some other factors come into play.

The X factors

You may not think a home build in 1990 would have any major problems. After all, the home is only 16 years-old. But the average roof in Florida lasts no more than fifteen years. Air-conditioning units and heat pumps need to be replaced every 5-10 years, and sixteen years is more than enough time for a home to suffer insect damage, leaks, and wood rot. All of this amounts to thousands of dollars in potential repairs.

It is always wise to have a home inspected by a professional before you buy, but no matter how qualified an inspector is, they can't always detect every potentially expensive problem. You never really know how well the home has been maintained, or what lies behind the drywall.

When you purchase a custom home, everything is brand-new. There is no need to worry about expensive repairs, because even if something does go wrong, it will be covered by the builder's warranty.

As for the remodeling issues on the existing home, even if they are minor they will require additional time and money. With a custom home, you choose your own floor plan paint, tile and cabinetry colors, and lighting fixtures.

Finally, when you purchase a new home at a pre-construction price, you often earn an immediate return on your investment since the value of the home will usually go up before it is even completed.

And when it comes time to sell, newer homes are in higher demand, even in a buyer's market. So ultimately, purchasing a brand-new home will earn you a much higher return on your initial investment than an existing home.