Build Wealth by Building Your Own Custom House
I’ve been talking about how you’ll save 10-15% or more by building a new custom home rather than buying a new house that a builder built on spec., so here’s how the numbers work:
In Chicago, when a builder sells a house to you that they built, they have to pay about 7% commissions and closing costs right off the top. If they made only a 7% profit for all their investment, that’s 14% that’s already 14% you’d save by building yourself the same house.
Believe me, the builder is shooting for much more than a 7% profit. Think about it, the builder had to purchase the lot, design the house, build it and sell it. For a smaller house in the city, this process will take a year’s time anyway and they’ll have to invest their own cash (probably about 30% of total costs) to get the construction loan.
If they build the same house for you, they don’t need to take out a loan, there is no construction or market risk for them, so they’ll be happy to do it for a smaller profit.
You save the closing costs, a good chunk of the builders profit and the financing is going be cheaper for you because a loan for your primary residence is less risky for the lender than a spec house. you are getting exactly the custom house you want and you get it at wholesale.
If you do it right, you’ll have built yourself instant equity the day you move in. This equity bump is the game changer that builds wealth for you independent of any market appreciation.
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