Sell home and build new home to be mortgage free. It cant be that easy can it?

Familyman77

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Had a conversation today with a family member who is thinking of selling his home to build locally in a hope that he could reduce his mortgage or be mortgage free. It came up that every similar house near to his has gone on the market for over €650k . He has a mortgage of €225k so was thinking if he sold for 500k and used the surplus to build again with little or no mortgage. I cant be that easy can it
 

cremeegg

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The costs of buying a site, getting planning, building, development contribution, access, utilities etc should come in at less than the costs of buying a ready built house. It is the builders profit.

Your relatives plan means he has a guaranteed buyer himself.

It is easy to underestimate the costs involved, and the trouble, but there is no reason why he shouldn't make a profit.

500k minus 225 gives 275k. Can he build a new house for that ?

I my opinion it would be possible in my area to buy a site and build including all the on costs and make a good profit. Of course I have no idea in your area. I think the inefficiency in the market is in the price of sites. Sites in my area are up to 80% cheaper now than they were at the height of the market in 2006. Houses are perhaps 10% cheaper.

However planning and the associated costs and difficulties are much greater than in 2006. That puts people off buying sites vs completed houses.

It might be that easy, though there is nothing easy about building a house.
 

noproblem

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Why would he sell for €500k if all similar houses are on the market for €650k? When you say they went on the market, did they sell for that or is it an asking price? How much would a site with PP cost where your relation hopes to live and build? By the way, the cost of building a house has gone up quite substantially of late.
 

ATC110

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In all but the major urban areas the cost of building generally exceeds the market price
 

RedOnion

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I'm assuming he's talking about moving to a completely different area, where sites are cheaper?

There's no way that in an area where houses are selling for 500k+ that he'll buy a 'ready to go' for less than 50k, leaving him to build for 225k. Unless he's involved in the building trade, or already owns the site?
 

Familyman77

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He bought his house 10 years ago for 310k so although the neighbours house is on the market for €650k he thinks it may be over priced so is being conservative in his estimate. Hes looking to purchase a site without planning , Its a rural area so he would need to be a local and have a housing need to qualify for planning and I said I'm not sure about how planners will look at someone who has just sold their home. I suggested he might have to buy with full planning thus he wont get to build the house he wants.
 

Familyman77

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I'm assuming he's talking about moving to a completely different area, where sites are cheaper?

There's no way that in an area where houses are selling for 500k+ that he'll buy a 'ready to go' for less than 50k, leaving him to build for 225k. Unless he's involved in the building trade, or already owns the site?
Hes thinking that even if it cost for example 50k for site and 300k for build - total 350k minus equity from the sale would leave hom with a lower mortgage , in this example a 75k mortgage. Now having said that I do understand the rental costs etc need to be factored aswell.
 

noproblem

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There's an awful lot of iff's and butt's and no real positive plan of action in all of this. He hasn't sold his house but is thinking of unloading it for €150,000.00 less than everyone else, he's thinking of buying a site with no PP in an area of locals only in the planning, i'm guessing he has no architect in mind regarding design, advice, etc. What about a structural engineer for the build, never mind an actual builder? Leaving a city or big town to live elsewhere, eg, a small town or rural area needs a lot of research. Has he got all the safe passes if he wants to manage a self build? Yes, he'll probably manage to live mortgage free, maybe just about, but it'll take a few years off him both mentally and physically unless he knows what he's doing and even then? Will he be happy? Good luck but know what you're letting yourself in for.
 

Familyman77

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There's an awful lot of iff's and butt's and no real positive plan of action in all of this. He hasn't sold his house but is thinking of unloading it for €150,000.00 less than everyone else, he's thinking of buying a site with no PP in an area of locals only in the planning, i'm guessing he has no architect in mind regarding design, advice, etc. What about a structural engineer for the build, never mind an actual builder? Leaving a city or big town to live elsewhere, eg, a small town or rural area needs a lot of research. Has he got all the safe passes if he wants to manage a self build? Yes, he'll probably manage to live mortgage free, maybe just about, but it'll take a few years off him both mentally and physically unless he knows what he's doing and even then? Will he be happy? Good luck but know what you're letting yourself in for.
There are plenty of ifs and buts is true but what has started off as a bit of hyperthetical discussion could potentially have merit. I myself would be from the construction back ground and he is a tradesman himself. Even so it would still be a stressful situation if it wasnt managed by a project manager. I've suggested he opens discussions with the local engineer to firstly see if it is feasible for him to get planning on a site in the local area , then if it were possible to then get his house valued rather than using assumptions from other houses in the area . I said he should use the valuation of the house to then get a lower LTV for his mortgage so it's not wasted money.
 

RedOnion

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How much would he be able to buy a house for in the area he's talking about move to? 300 - 350?

It's high risk trying to buy a site where local needs apply.
 

daithi28

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Some Local Authorities have a clause in their "local needs" definition that you can't own or have owned a house in the rural area for a "x" number of years preceding the planning application for a one-off house. The clause is there to stop people creating a housing need by selling their home.
 
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