My husband and I are debating one of the biggest financial decisions of our lifetime: whether or not to build a super energy efficient home, called a Passive House. The nut of it is that we could buy a similar sized traditional home for about $100,000 less.
Should we spend $100,000 extra for a Passive House?
Dear reader, whether to build this home is an incredibly personal decision my husband and I are in the process of making. Which is why I’m asking for your thoughts. I’ve always turned to the thoughtful and supportive and honest BargainBabe.com community when I have a true financial dilemma. What would you do in my situation?
Cons of building
- The main drawback to our dream of building a Passive House is the cost. Buying land where we want to live (with good schools and an incredibly low tax rate) is expensive compared to other parts of the country. But we know that this particular town has very good housing values and is a desired community in the region. Hence the cost of buying land there. We estimate the cost of buying land *and* building a Passive House in this town to be $550,000.
- For about $450,000 we could get a very nice home in the same town, though it wouldn’t have any of the same energy efficient measures, including namely triple paned windows and 12-inch thick walls crammed with insulation. It would be a traditional 3BR home that would need some work and carry an annual heating and cooling bill of about $3,000. It would have enough space and likely a full basement and perhaps a garage.
- The home we plan to build will be smaller than what we would get if we bought an existing home. Several hundreds square feet less, and we’re not sure if we can afford a garage immediately. We can build one ourselves down the road if need be.
- If you figure the annual savings on heating and cooling is $2,700, and the annual savings on maintenance is $2,000 (we expect minimal maintenance on a new home), that is a yearly savings of $4,700. If we figure the upfront investment is $100,000 greater, our payoff is 21 years and four months. That’s a very long term investment. Lots of things could change in that time.
- On top of the long payback period, the day our home is finished, we will be able to sell it for $425,000. But we’ll have spent $550,000 to buy the land, develop it, and build our dream home. That’s a big hole we’re digging for ourselves.
- If we needed to move, we basically won’t be able to. So much of our money will be tied up in the new home that we’ll need to live there at least 20 years – maybe longer.
- The process of building a home is going to be extremely time consuming (imagine all those permits and approvals we have to get), stressful (dealing with contractors and builders is not something I relish), and require us to make hundreds of decisions that carry major consequences.
Pros of building
- Our hearts are set on building a Passive House. Why? Because they are utterly amazing. Imagine walking into a home that is so airtight, when you close the front door you hear a delicious silence. The air is incredibly fresh, as if you were outside, because fresh air is continually being pumped into your home. You pass by a window and instead of a winter chill, the temperature remains a comfortable 68 degrees. Your windows are so large and present in the design of your home that the outdoor beauty of your garden invites itself into your living rooms. So much natural sunlight means you rarely turn on lights during the day. We want one of these homes, badly.
- Our annual heating and cooling bill will be about $300. How is that even possible? A Passive Home is so well insulated – from the roof, to the walls, windows, and basement – that there are no drafts. No air leaks in or out. When you heat – or cool – a passive house, you barely need to put in any energy to keep the temperature at the desired level. Think of it as an airtight box that holds onto any heat or cool air you put into it.
- On top of the energy savings, we get a new home that doesn’t need any fixing! Our current home is 110 years old and constantly needs fixing. But a new Passive Home is built to last, with cement siding requiring no annual upkeep, a metal roof that lasts 50 years, and new interiors that are level and square.
- We have spent a lot of time in the town where we’d like to build and are confident that we will enjoy living there. Many, many friends have also said good things about the town, too.
- We’ve checked out the schools and they are excellent. The schools where we currently live are poor, which is one of the main reasons why we plan to move.
- The new town is a shorter commute for my husband, which means more time together and less money spent on gas and car maintenance.
- We have found a build-design firm whose work we love. We’ve also done extensive research on them, including talking at length to two previous clients, who both gave outstanding reviews.
- We have the savings to build the home we want, but it will tap every account we have built up over the years. The project will NOT, however, require us to make early withdrawals on our IRAs or 401(k)s.
- We plan to live in the home throughout our retirement, and in some ways, a Passive Home is ideal for retirees. Our heating and cooling bill will be almost nonexistent, so we’ll need less money each month in retirement.