Property Investments - should you build or buy and renovate?
Category Property Advice
As professionals in the high-end real estate sector, we know all too well the different sorts of needs and desires homeowners have when looking for their ideal property, whether it is to live in or as an investment. One of the most common questions when starting the process of buying property is whether or not you should hunt for a pre-existing home that has been renovated, or start from scratch and build your home yourself?
Regardless of your preferences, this sort of decision hinges on an amalgamation of factors. We take a closer look at the pros and cons of both and provide insight into situations that could arise. Ultimately, the decision should always be what suits your needs the best.
Most established suburbs like Bryanston, Sandton and Riverclub have already built homes so finding vacant land is difficult. These homes usually have the advantage of being located closer to schools, hospitals, and places of convenience. If you're dead set on building your home from the ground up then keep in mind that you are more likely to find vacant land further away from these sorts of amenities. This is the sacrifice you may need to make. Adding to that, as the area starts to develop and grow, your home will likely increase in value and demand over time. This presents homeowners with a healthy return on investment should you decide to keep as a long-term investment and then sell.
Examples of this are how Midrand developed over ten years and potentially how Lanseria will grow in the future.
The downside to this could be less security, more workarounds with renovating, and the added time it takes.
Buying an already renovated home
Buying a prebuilt, well-renovated home presents investors with the option to rent this property out quickly or move in and keep the property as a long-term investment. You are then able to make minor changes to this property over time.
On the flip side, established, renovated homes of varying ages may not always be as energy-efficient as the current times demand. They could be fitted with older model geysers that waste energy or they may not be adequately designed to encompass solar solutions. A new development gives you the freedom to design an energy-efficient home, whereas a preexisting property will require costly upgrades to match the same efficiency.
Buying a pre-existing home generally saves time and money
When a home is purchased, a typical transfer and registration period can range from 2 to 4 months depending on the situation. This is a relatively short and smooth period before moving into your dream home and starting your life. For developments, this period can range anywhere from a few months to a couple of years depending on the people you contract and the arrival of unforeseen costs that can crop up from any angle.
Factors such as needing to rent an additional home while renovations are being done add to the cost factor. Homeowners may need to plan a financial budget of at least a few years if they are planning on building a home from scratch.
Avoiding transfer fees - is it worth it?
Despite the fact that building from the ground up is generally more expensive, there are a few advantages in place. For example, since there was no previous owner, you won't have to worry about paying for transfer fees or any other legal process that comes from buying an established home.
On the other hand, building from scratch requires a sizeable upfront downpayment to cover a number of building factors. Owing to the fact that building a home is a riskier investment for banks, your deposit percentage will be a lot higher than that of a pre-built home.
Analysing the cost factor
Irrespective of whether you go for new developments or an existing home structure, there are always external cost factors that need to be taken into account. These include location, the features and amenities of the home, and most importantly, the state of the market.
According to Property Trends (Prop24 report from Q4 of 2021), the nationwide average price of freehold homes is R1,374,637 with sectional titles coming in just below at R1,041,509. While it's clear that vacant land is cheaper on average, one still needs to keep in mind the overall costs incurred with the development overall.
Financial institutions have averaged out the cost of building a conventional suburban home to R10,000 per sq/m and R25,000 per sq/m for more upmarket homes with luxury finishes.
With respect to the above-mentioned challenges and hidden costs, it's important to remember that every individual's needs are different. Whether you choose to purchase a home or develop it from scratch, it is always important to talk to an experienced Property Practitioner at Hamilton's to receive a more personalised overview of the costs and risks involved.
It is always important to make this decision based on the options you have available to you.
Read our previous article here: https://www.hamiltons.co.za/news/5-trending-must-have-accessories-for-your-phone/
Contact Hamiltons Property Portfolio for all your buying or selling requirements:
Gauteng: 011 463 0155
Western Cape: 021 418-0328
Garden Route: 044 050 3295
Eastern Cape: 076 927 7787
Or email reception@hamiltons.co.za
Author: Lisa