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Why are new lake homes SO expensive!

Posted by Jeff Thomas on February 27, 2019
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I get this question a lot!! The price range that has the largest prospective buyers is the below the $500k range. The lower you go the more people interested. Once we have looked at the properties in this range everyone always asks the question of why are builders/developers not building in the price range that has so many buyers. Below I try to explain…

When you start looking at houses newly built on the lake you will find that the price is typically over and in most cases well over $600,000. Why is this? Why are developers not building houses in the price range that is so hot (less than $500,000)? Lets break it down. A lot in one of the areas that developers are building is going to run $150,000-200,000. Building costs are $120-150 per sq ft. Most houses are 3000+ sq ft. At 3000sf and using the lowest price per sq ft the house will cost $360,000, add the lot at $150,000, add a dock (at least $30k and can go over $100k), and you are at $540,000. Now we need to add in a developers profit (approx. 20% or $108,000) and real estate commissions (6%) and we are at $686,880. Keep in mind that we used the lowest price per sq ft at $120/sf which means limited to no stone, limited hardscaping, builder grade finishings, sheetrock vs wood interior, limited outdoor spaces, etc. Price per square foot can go well over even the $150sf if you start upgrading….which most desire.

As you can see from the above, a house has to be $650,000+ to make it profitable for a developer to build a house on the lake. In addition, the houses in this range are selling so why would they not build houses that provide the largest possible profit margin!!

Your options for acquiring a lake house for less than the above are: 1) build your own (hopefully) saving the profit of the developer, 2) buy an existing home and renovate, or 3) buy a lake house as is and enjoy it as is until you can afford to renovate it.

I built my last home using a different philosophy. We decided to build a house that only has the space we need and will use. The house is 1800 sf. We did use high quality building techniques and finishes. The difference here is that we were building for ourselves, not for others and we did not have to include a profit margin. This approach is not practical for many and building a house can test an individual and many relationships. That being said, building your own home IS a way to save a lot of money.

Feel free to call me about any of this and I will be glad to share what knowledge I have gained through my experiences helping buyers, managing rentals, owning multiple lake homes and building on the lake.

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