The 2021 real estate market has been hot and there’s no telling when it will slow down. From high demand to soaring prices, the competition in the Nashville market and throughout the country is only heating up as the year progresses. In 2021’s hot market, homes are selling for tens of thousands of dollars above asking price and building costs have risen due to shortages in lumber and building materials, as well. So when it comes to home building vs buying: what is the right choice in this market? Let’s take a look.

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Home Building: What to Consider

When it comes to building, there is a lengthy list of pros and cons. The average cost to build a 2,600 square foot home is around $423,800 on a national level. While the cost can fluctuate depending on where you are in the US, building a home also involves buying land, securing loans, and finding an architect or builder to bring the design to life. This can take time, but with a little patience and determination, you can have a home specifically designed around your needs and desires.

Buying Land

Choosing the property for your home is crucial, after all, it has to be built somewhere. You can choose to join an existing real estate development to streamline the process, but you could also find your own land to build on. When buying land, you should also consider if there are existing water, sewage, or septic systems on the property. Unimproved property, land without this existing type of infrastructure, is typically cheaper but comes with more items to add to your to-do list.

Associated Costs

• Land and Site Work including permits, impact fees, inspections, and architectural planning
• Foundation including excavation, concrete, walls, and backfill
• Framing, roof frames, trusses, and sheathing
• Major systems such as HVAC, electricity, and plumbing

Once the frame is built, the real fun begins. You will need to consider your finishes for both the exterior and interior of the home. Exterior costs to consider include wall finishes, roofing, windows, and doors. Interior finishes include insulation, and drywall as well as the design pieces such as trims, paint, lighting, flooring cabinets, countertops, and appliances, among others. These costs can vary depending on the brands and materials that you pick. According to the National Association of Homebuilders, the combined cost of exterior and interior costs sits around $116,000.

Pros and Cons of Home Building

Now that you understand the basic costs associated with building a new home, let’s take a look the pros and cons:

Pros

• Customization
  • Building a home allows you have to have full control and customization over the project from start to finish. From building on desired land to choosing finishes, the home will reflect your tastes and be exactly what you wanted.
• Less Competition
  • The real estate market is extremely competitive but with buying land, there is typically less competition than buying an existing home.
• Energy Efficient
  • Similar to the customization aspect, building a new home allows you to choose materials that are more sustainable and energy-efficient.
• Less ongoing maintenance
  • Since the home is new, you will have less ongoing maintenance and fewer maintenance costs initially.

Cons

• Loan
  • Securing a loan to build is often more difficult due to the lack of existing collateral. Because of this, land loans often have higher down payments and higher interest rates in order to protect the lender.
• Costs
  • Building a home comes with numerous costs, and sometimes there are costs that can arise throughout the building process. While you do have an estimate at the beginning of the project, it can be hard to predict what will pop up during the build. However, by working with a quality contractor, they may be able to identify ways to reduce costs through substitution of fixtures, materials and more.
• Time and Effort
  • From working hands-on with contractors to choosing materials for your home, building definitely comes with increased time and effort.
• Landscaping
  • Since you’re building a home on an empty plot, there will not be existing landscaping, which is another cost to factor in.
• More Stress
  • From hiring contractors, architects, and engineers to choosing every single material that goes into the house, building can be stressful.

Buying a Home

When it comes to buying a home, it is much more convenient and can be less costly depending on the location, age, size, and competition. When it comes to buying, it is important to consider that you get what you pay for. However, once you are pre-approved for a mortgage loan, the fun begins.

Pros of Buying

• Time
  • Compared to building, buying a home comes with a faster timeline than a construction project. So if you’re looking to get into a home sooner rather than later, buying would be the way to go.
• Cost
  • Even in a hot market, buying a home is typically cheaper than building. Additionally, obtaining a mortgage loan is less risky with a lower down payment and better interest rate.
• Customize
  • While you do not get to fully customize the home to your exact preferences, you can still make upgrades and renovations after moving in.

Cons

• Time and Effort
  • Searching for a home can be just as exhausting as searching for land. However, working with a real estate agent can make the process easier, quicker, and less-overwhelming.
• Competition and Bidding
  • With the high competition and demand for homes, you could face bidding wars in the process.
• Maintenance
  • Depending on the age and condition of the home, you may run into maintenance issues. To mitigate the risk of major issues upon moving in, we recommend hiring a qualified home inspector to perform an assessment of the property before closing. This will allow you to understand any key problems that you may run into once the home is yours. If there are major issues, this will also allow you to back out before spending thousands of dollars.

Home Building vs Buying: The Choice is Yours

When it comes to making the decision between building and buying, it is clear that both options offer positives and negatives. So the choice really lies in the time, money, and effort that you wish to put into the process.

Owning a home is a monumental life event, and whether you build or buy, it is an occasion worth celebrating. If you want to learn more about the real estate process, the team at Greater Nashville Title is here to help.

There are a lot of questions you may have when looking to buy your first rental property. Where should I buy? Is this a good time to invest in a rental property? What are my legal responsibilities as a landlord? These are important questions to ask before you invest the time and money into a rental property. Property is a big investment and there is a lot for a first-time buyer to learn. Let’s take a look at a very important question when looking at rental properties and deciding how much to charge for rent.  

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What is Rate of Return?  

Rate of return is used to determine the efficacy of an investment. You don’t want to invest so much money into a property if it’s not going to make enough money in return. Rate of return is also called return on investment.   

What is a Good Rate of Return/ROI  

A good rate of return can vary from place to place. This is because of several different factors at play. These factors include the real estate values in your area and how you purchase the property. Many experts can agree though that a good rate of return falls between 8 and 12%. Some very good investments can reach 20% or more. Make sure to check your local market before investing in a property.  

How to Calculate Rate of Return/ROI  

There are a few different formulas to calculate the rate of return based on how you buy the property and the current market. Let’s take a look at a few different formulas.  

The Simple Formula   

• ROI=(Gain from Investment – Cost of Investment)/Cost of Investment  
• This is a general formula, but not always the most accurate. This formula is a good starting point for calculating your ROI.  

Cap Rate Calculation  

• The first formula you need for this is Net Operating Income(NOI) = Rental Income-Operating Expenses  
• Cap Rate = NOI/Purchase Price x 100%  
• The purchase price also includes any closing fees and initial updates that the property needs, such as remodeling.  
• This formula is commonly used by investors paying cash for their properties.  

Cash on Cash Return Formula  

• CoC = (Annual Cash Flow/Total Cash Invested) x 100%  
• Total cash invested would be things like down payments, closing costs, and any updates/remodeling done on the property.  
• Annual cash flow is monthly rent minus mortgage payments times 12.  
• This formula is more complicated to use. It is used when a real estate investor is buying a property using a mortgage rather than paying cash up front.  

Why Does it Matter?  

To have a successful rental property investment, you need to know how much you bring in a month and if that is in line with other properties in your area. With too low of an ROI you won’t be making enough money to justify the cost. In this case, if there are any repairs that are needed you may not have the funds for them. With too high of an ROI you may struggle to find renters who want to pay more than the average costs for the area.  

The rate of return is an important thing to consider when buying an investment/rental property. This goes for both first-time investors and longtime investors. Greater Nashville Title can help you navigate the buying process and help with the legal work of investing.

Buying property doesn’t have to be a difficult process, let us help you. Visit our  website  to learn more today!   

When it comes to purchasing a plot of land or unimproved property, it may sound like a great opportunity for investment. Buying unimproved property is a chance to have a blank slate to create whatever you want. Whether you’re looking for residential, commercial, or investment opportunities, buying unimproved land can come with its own set of benefits and challenges. So if you’re considering making the purchase, here’s what you need to know:

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What is Unimproved Property vs. Improved Property?

Unimproved property is land that currently lacks utilities such as electricity, water, telephone, and in some cases road access. Oftentimes, unimproved land are large, open plots of land that can be used for farming or residential or commercial construction opportunities. Building on unimproved land requires various zoning, easements and other permits. Due to the lack of services, unimproved property is a cost-effective option for purchasing property for your future home, business, or farm.

Improved land refers to land that has utilities and services readily available. These plots have zoning laws in place to control what is and isn’t built on the land and how it can be used. Improved land is more expensive than unimproved property due to its higher earning potential.

Do’s and Don’ts of Purchasing Unimproved Land

Do Pick a Good Location

When it comes to purchasing any land or even a home, location is the most important aspect of the decision. Location will dictate the resale value as well as what the land can be used for. If the land is completely isolated it may not be a wise decision for a business investment.

For residential purchasing, you should explore the areas where you would like to live. When purchasing land to build a home, you should consider the access to work, schools, and grocery shopping to name a few. This means that you’re not only shopping for land to live, you’re also shopping for the community look and feel.

Don’t Skip a Land Survey

A land survey is used to establish the exact property boundaries of the vacant lot. Not only will this remove the headache of where your property lies when dealing with easements, but it will also help you plan out the dimensions for your future home. The cost of the survey is determined by the size of the property, the time it takes to complete, and how much research the professional surveyor has to do with the property boundaries on the map.

Do Establish Easements

An easement is the right to enter or use another person’s property for a specified purpose without possessing it. For example, if you purchase a home that has no direct public road access, but the only way to access the property is by using the private road built by your neighbor, an easement would allow you to use the road to get to and from your home. Easements can be tricky and can vary depending on the situation. We recommend consulting with one of Greater Nashville Title’s real estate lawyers to determine the easement conditions and laying out the negotiation for both you and your neighbor to agree to.

Don’t Forget Your Permit

When building on unimproved property, you’re going to need permits for just about everything. From zoning laws to construction permits, you will need permits in order to protect the land and ensure that your structure is safe. You will apply for various permits throughout the construction process, but rest assured that once all of the paperwork is completed you will have a safe legal investment.

Do Understand the Costs

Real Estate is an expensive investment and while unimproved property may have a lower initial cost, it comes with its own list of necessary expenses. From land surveys, utilities, building costs, zoning restrictions, and permits – the list of costs goes on. While these costs may seem overwhelming, purchasing and building land provides you with the opportunity to create whatever you please.

Don’t Skip the Property Title Search

Title searches and title insurance will protect you from any past defects associated with the land’s title. This will protect you from any liens, encumbrances and other legal complications associated with the property. Before investing in land, we recommend conducting a title search on the property to determine its history. When performing a title search, we will help you determine any defects and provide solutions for how to fix them before the property is yours.

Middle Tennessee’s Real Estate and Title Insurance Experts 

At Greater Nashville Title, we are proud to provide real estate title expertise throughout Middle Tennessee. If you’re looking to purchase unimproved property or would like to know more about the process – we are here to help!

So, you’re looking for a new home and you find yourself daydreaming about moving into one of the “finalists” on your list. It’s definitely an exciting time and you can’t wait to make that big move in your life. But what do you need to do to make sure the home of your dreams doesn’t become a waking nightmare? One of the key people who will help you along in your home buying journey is a home inspector. Did you know that as the homebuyer, you get to pick the home inspector? With that in mind, you shouldn’t trust the job to just anyone! Here are a few timely tips: 

The inspection phase of the homebuyer’s journey is an absolutely crucial step because it is the buyer’s only chance to get a full assessment of the home’s true condition and of any issues before forking out hundreds of thousands of dollars on the property. 

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1. You have the Right to Choose Your Own Inspection Company

Other stakeholders in the transaction may offer you a few home inspectors’ names and they may have great contacts. These references are likely given with the best of intensions, but they can potentially be a conflict of interest. An inspector who was referred by your agent, for example, may be tempted to overlook problems. Unless you have unshakeable trust in the referring party, you should seek out your own inspector. 

2. Look for a Bonded and Insured Inspection Company

You will want to make sure that whoever examines the home is bonded and insured. This is one of the most important questions to ask when you interview home inspectors because if an uninsured inspector is injured during the inspection, they may try to hold you or the homeowner liable.

3. Make Sure Your Home Inspector Doesn’t do Repairs and Renovations

Inspection companies that sell other services such as renovations have conflicts of interest. The fact they sell other services means they are more likely to see problems when there aren’t any. Choose an inspector who only does inspections.

4. Find out What the Home Inspector Does and How Long it Takes

Good home inspectors are thorough: laboring over every little detail. You will want an inspection that looks at every component, including:

• Plumbing
• Electrical
• Structural
• Heating and AC
• Basement and Foundation
• Roof and Attic
• Mold, Radon, Lead, and Asbestos

5. Verify That you Are Present During the Inspection

As the prospective homeowner, you have the right to go to the inspection and ask the home inspector to explain all the different things they are looking for. This will also allow you to take note of any areas that may need revisiting in the future. Also, ask your real estate agent to come along; the best agents will help you get all the information you truly need.

Buying a home is one of the most important decisions and one of the most expensive purchases we make in our lifetimes. It only makes sense to hire the best home inspector possible who meets your exact needs as a homebuyer. When choosing one, always be sure to do your own research, interview potential inspectors, and seek out referrals from your friends and family. By making the needed preparations and educating yourself, you can make an informed decision in this important step in the homebuying process.