Great question. Hind-sight is 20/20. My wife and I asked ourselves the same question in 2004, and we decided to buy an existing home and fix it up. The reason was because when we began going down the path of building we were surprised, maybe even shocked, at the initial out of pocket expenses. You can always go to a mill-builder and the initial expenses are minimal, but like you we wanted some land and space between us and the neighbors. You're not going to find that with a builder that is mass producing homes in a development.

We found a good compromise home on a 2.5 acre lot that is fully wooded. Then we found out that the time and effort over this last 10 years to repair what is already there is significant, let alone updating and modernizing the house. This home was not old, built in 1988 but it was dated in the 1980's style and floor plan. The deck was up to code in 1988, but when we had it rebuilt in 2012 the code standards push the costs to $20k. Add new garage doors, the originals were wood and wood ages and warps, at $5k. Hardwood floor repair, and replacement in some places due to updated codes, $10k. The list goes on and on.

Bottom line for me: If we knew then what we know now, I would have spent the initial $15k for the designer and general contractor fees and built new. The construction loan rolls the land and materials into one loan, and with a reputable builder, the contract is solid and there are no hidden fees, costs overrides are controlled, and you get a new home with a warranty.

Just my 2 cents.